On 12 November 2015, the Court of Justice of the European Union ("ECJ") handed down a judgment on a reference for a preliminary ruling from the Münster Regional Court in case C-505/14, Klausner Holz Niedersachsen GmbH v Land Nordrhein Westfalen. The case concerns the application of the EU state aid rules in national court proceedings following a definitive judgment of a national court.

In 2007, Klausner Group, of which the applicant is part, had concluded a contract for the supply of wood with the Forestry Administration of the Land of North Rhine – Westphalia (the "Land"). In 2009, the Land rescinded the contract and ceased to supply wood to Klausner Holz. The Münster Regional Court issued a declaratory judgment holding that the contracts at issue remained in force, which was confirmed on appeal. The judgment on appeal was definitive, or res judicata.

The applicant then brought a new action against the Land before the referring court, seeking payment of damages and the execution of the contract. The referring court took the view that the contracts at issue constituted state aid which was implemented in breach of the third sentence of Article 108(3) TFEU. However, it regarded itself as prevented from drawing the consequences of the breach because of the declaratory judgment, which is res judicata, by which it was held that the contracts at issue remained in force. The referring court therefore decided to stay the proceedings and refer a question to the ECJ.

In its judgment, the ECJ reiterates that the national court should interpret the provisions of national law in such a way that they can be applied in a manner which contributes to the implementation of EU law. Therefore, the ECJ states that the referring court should examine the possibility of ordering a measure such as the temporary suspension of the contracts at issue until the adoption of the Commission decision closing the procedure. Indeed, this would enable that court to satisfy its obligations under the third sentence of Article 108(3) TFEU without actually ruling on the validity of the contracts at issue. Furthermore, the referring court should ascertain whether the rule of national law enshrining the principle of res judicata extends only to the legal claims on which the court has ruled and therefore does not preclude a court from ruling, in a later dispute, on points of law on which there is no ruling in that definitive decision. Indeed, in the proceedings which led to the declaratory judgment in first instance and the definitive judgment on appeal, the question of state aid was not examined.

The ECJ then states that, if such a measure or interpretation should prove not to be possible, attention should be drawn to the importance of the principle of effectiveness. According to the principle of effectiveness, national procedural rules, such as the principle of res judicata, should not be framed in such a way as to make it in practice impossible or excessively difficult to exercise the rights conferred by EU law. The ECJ concludes that if, in a case such as the case at issue, the principle of res judicata were to take precedence over the application of the state aid rules, both the state authorities and recipients of state aid would be able to circumvent the prohibition laid down in the third sentence of Article 108(3) TFEU by obtaining, without relying on EU state aid law, a declaratory judgment whose effect would enable them, definitively, to continue to implement the aid in question over a number of years.

Therefore, the ECJ considers, in circumstances such as those at issue in the main proceedings (where a court in earlier proceedings did not consider the state aid aspect of the case), that EU law precludes a national court from giving effect (on the basis of the principle of res judicata) to a contract which constitutes state aid and was implemented in breach of the third sentence of Article 108(3) TFEU.

This case is interesting in that it clearly asserts the primacy of EU State aid rules and the effectiveness thereof, even over the principle of res judicata under national law.

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