European Union: ECJ: Clarification On Withdrawing State Aid From Companies Deemed "Undertaking In Difficulty"

Last Updated: July 27 2017
Article by Philipp Werner

Most Read Contributor in United States, September 2019

In Short

The Situation: On July 6, 2017, the European Court of Justice ruled that a Member State could not request reimbursement of aid that had been granted to an undertaking in compliance with the General Block Exemption Regulation solely because that undertaking later became the subject of collective insolvency proceedings.

The Result: This ruling clarifies the concepts of "undertaking in difficulty" and "collective insolvency proceedings" and their interplay with the old General Block Exemption Regulation.

Looking Ahead: This judgment has important practical consequences for future cases under the new General Block Exemption Regulation.

The notion of "undertaking in difficulty" is a key element in State aid law because undertakings in difficulty can receive State aid only under the restrictive conditions for so-called rescue and restructuring aid. Any other form of State aid is excluded, even when competing companies that are not in difficulty can receive such aid. Accordingly, the General Block Exemption Regulation (Regulation No 800/2008, "old GBER"), which sets out the conditions under which aid is deemed compatible with the internal market and can therefore benefit from an exemption from the obligation to notify, explicitly excludes undertakings in difficulty from its scope in Article 1(6)c. Other State aid instruments contain similar provisions, in particular the new General Block Exemption Regulation (Regulation No 651/2014, "new GBER") in Article 1(4)(c).

Therefore, Article 1(7)c of the old GBER states that a company that "fulfils the criteria under its domestic law for being the subject of collective insolvency proceedings" will be considered to be an undertaking in difficulty for the purposes of Article 1(6)c. The new GBER contains the same definition in Article 2(18)(c).

The Issue

In the case at hand, Nerea, an Italian small and medium-sized enterprise, had been granted aid in compliance with the old GBER. In 2012, Nerea received an advance and, in 2013, requested that the other half of the aid be settled. This demand was denied on the grounds that Nerea no longer satisfied the conditions for eligibility, as it had applied for the opening of an arrangement with creditors as a going concern, a request granted by a local Italian court.

The authorities argued that such an arrangement constituted a type of collective insolvency proceeding, which excluded Nerea from receiving financial assistance in accordance with Article 1(7)c of the old GBER. Thus, in 2015, the Regione Marche withdrew the aid granted and requested the reimbursement of the advance, plus interest. Nerea brought an action before the referring court, which decided to stay the proceedings and to refer two questions to the court for a preliminary ruling.

The first question considered whether a procedure that was opened at the request of the economic operator could qualify as a "collective insolvency proceeding" under the old GBER. The second question pertained to the notion of "undertaking in difficulty" for the purposes of Article 1(6)c of the old GBER, and asked when that condition should be appraised for the granting of aid.

Both questions are also relevant for future cases under the new GBER.

The Outcome

Regarding the first question, the European Court of Justice ("ECJ") noted that Article 1(7)c of the old GBER refers to national law to determine the relevant conditions under which a company is subjected to collective insolvency proceedings. However, the ECJ insisted that there are no specific dispositions in the GBER to establish a distinction between procedures that are the result of a request from economic operators and those that economic operators are subjected to by the authorities of their Member State. Therefore, the ECJ concluded that the notion of "collective insolvency proceedings" covers all relevant procedures, regardless of where the initiative originated.

As to the second question, the ECJ asserted that even though the old GBER excludes firms in difficulty from its scope, this assessment must be conducted when the legal right to receive the aid is conferred on the beneficiary. The ECJ also stressed that, in practice, Member States do not have to appraise the financial situation of applicants but, simply, to refrain from granting assistance to those that are the object of collective insolvency proceedings at the moment when their eligibility is being considered.

In this case, if the referring court confirms that Nerea fulfilled the conditions of the old GBER when the aid was granted—meaning that it was not subjected to collective insolvency proceedings—then it should not be considered to be a firm in difficulty for the purposes of Article 1(6)c. Hence, even if Nerea has subsequently become a firm in difficulty, the aid that was given cannot be withdrawn solely on those grounds, and neither can the authorities demand the reimbursement of the advance.

Two Key Takeaways

  1. The notion of "undertaking in difficulty" follows national law: If an economic operator is the object of collective insolvency proceedings in its Member State, then it is considered to be an undertaking in difficulty for the purposes of European law.
  2. Undertakings in difficulty cannot receive any State aid other than rescue and restructuring aid. Whether or not an economic operator is to be considered as an undertaking in difficulty should be assessed when eligibility for State aid is considered. Later changes in the economic situation of the undertaking are irrelevant.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions