Commission Refers Austria To ECJ Over Illegal State Aid

by Ulrika Lomas, Tax-News.com, Brussels

15 July 2009

The European Commission has decided to refer Austria to the European Court of Justice under EC Treaty state aid rules for failure to comply with a Commission decision of April 30, 2008. The Commission had requested Austria to recover an estimated EUR41.5m of illegal aid (plus interest) from the Austrian insurance group Grazer Wechselseitige (GRAWE), in the context of the privatisation of Bank Burgenland.

Competition Commissioner Neelie Kroes said: "The Commission deals very strictly with Member States that fail to implement its state aid decisions. This is crucial to avoid unfair distortions of competition."

In March 2006, following a public tender, Land Burgenland sold the state-owned Bank Burgenland to GRAWE for EUR100.3m. However, a Ukrainian/Austrian consortium had made a higher bid at EUR155m.

In the absence of an objective justification for accepting a significantly lower price for the sale of Bank Burgenland, the Commission considered that the price difference between the two offers gave an unfair advantage to GRAWE over its competitors and constituted incompatible state aid that needed to be recovered. The recovery of the aid was to be based on the nominal price difference between the two bids, amounting to EUR54.7m. As the final bids differed in a number of points, Austria had to determine the exact aid amount by adjusting this nominal value difference accordingly. Following lengthy exchanges between the Commission and the Austrian authorities, and based on calculations made by Austria, the recovery amount was fixed at EUR41.5m, plus interest.

The Commission considered that Austria should have taken all the necessary measures to implement the decision within four months from the adoption of the decision. However, more than one year after the adoption of the decision, Austria has failed to adopt any measure to recover the aid from GRAWE. Moreover, although the recovery amount of EUR41.5m had been based on calculations made by Austria, the Austrian authorities recently called into question this amount.

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