Update: Commission refers Ireland to the ECJ for failure to recover Apple #StateAid

Confirming earlier reports (see European Commission on the brink of legal action against Ireland over Apple’s #StateAid), the European Commission has referred the Republic of Ireland for its failure to recover €13bn of State Aid from Apple.

The deadline for Ireland to implement the Commission’s decision of 30 August 2016 on Apple’s tax treatment was 3 January 2017, in accordance with Article 16(3) of Council Regulation 2015/1589 which lays down detailed rules for the application of Article 108 TFEU in relation to State Aid.

As a matter of principle, EU State Aid rules require that illegal State aid is recovered in order to remove the distortion of competition created by the aid. More than one year after the Commission’s decision, Ireland has still not recovered any of the illegal aid.

Although the Commission acknowledges that the case is complex and that Ireland has made progress on the calculation of the exact amount of the illegal aid granted to Apple, this initial calculation phase is not scheduled to be completed by March 2018 at the very earliest.  Until the illegal aid is recovered, Apple, the Commission judges, continues to benefit from an illegal advantage which is distorting the EU’s Internal Market.

Commissioner Margrethe Vestager in her comments in a Commission press conference said:

Ireland has to recover up to 13 billion euros in illegal State aid from Apple. However, more than one year after the Commission adopted this decision, Ireland has still not recovered the money, also not in part. We, of course, understand that recovery in certain cases may be more complex than in others, and we are always ready to assist. But Member States need to make sufficient progress to restore competition. That is why we have today decided to refer Ireland to the EU Court for failing to implement our decision.

In a statement, the Irish Government said it was fully committed to recovering the “alleged Apple state aid” and had committed significant resources to ensuring that this objective was achieved. adding:

“It is extremely regrettable that the Commission has taken this action, especially in relation to a case with such a large scale recovery amount. Ireland has made significant progress on this complex issue and is close to the establishment of an escrow fund, in compliance with all relevant Irish constitutional and European Union law,” it said. “The work on the establishment of the escrow fund to deal with the unprecedented recovery amount will continue, notwithstanding the fact that Commission has taken this wholly unnecessary step.”

If a Member State does not implement a State Aid recovery decision, the Commission may refer the matter to the Court of Justice under Article 108(2) TFEU which allows the Commission to directly refer cases to the ECJ for violations of State aid rules.

In 2014 it referred France to the ECJ for failure to recover some €220m in state aid from shipping company SNCM after France had failed to act for 6 months following the expiry of the Commission’s Recovery Notice. The ECJ ordered France to recover the money in a judgement issued on 1 March 2017 (see Case T-366/13
France v Commission and T-454/13 SNCM v Commission).

If a Member State does not comply with the judgment, the Commission may ask the Court to impose penalty payments under Article 260 TFEU.