EU Advocate General C‑545/24 Ruling: Tax Enforcement of Illegal State Aid Bars Suspension Rights under Article 16(3) of Regulation (EU) 2015/1589

EU Advocate General Signals That Tax Enforcement Should Not Undermine Suspension Rights In Illegal state Aid Recovery

Brussels – The Advocate General at the Court of Justice of the European Union has released conclusions in Case C-545/24, clarifying how Article 16(3) of Regulation (EU) 2015/1589 should be interpreted when a Member State recovers state aid deemed illegal via tax enforcement.

In essence, the AG’s view is that if a Member State proceeds with the recovery of unlawful state aid through tax collection, this approach may run counter too national rules that grant the taxpayer the right to suspend enforcement. Put differently,suspension rights should not be automatically overridden by tax-based recovery actions.

The opinion sits within the framework of Article 108 TFEU and Regulation 2015/1589, which detail how aid that is incompatible with the internal market should be treated. The AG’s interpretation underscores a careful balance between enforcing state aid rules and protecting taxpayers during enforcement proceedings.

Breaking Down The Implications

The conclusions suggest that tax authorities cannot automatically bypass suspension mechanisms when pursuing recovery. This could lead to more orderly procedures across EU states and clarifies how suspension requests are evaluated in the context of urgent recovery actions.

Key Facts At A Glance

Aspect	Summary
Case	C-545/24
Regulation	Regulation (EU) 2015/1589
Related Article	Article 16(3) of Regulation 2015/1589
Legal Context	Methods for applying Article 108 TFEU
Key Takeaway	Suspension rights should not be automatically overridden by tax-based recovery of illegal state aid

Evergreen Insights For The Long Term

• Balancing Act: The ruling highlights the ongoing tension between immediate enforcement of state aid recovery and preserving taxpayer protections during the process.
• Influence On Jurisdictional Practice: While an Advocate General’s opinion is persuasive, it helps shape the eventual court of Justice ruling and may prompt national authorities to adjust procedures accordingly.
• Harmonization Potential: The interpretation points toward greater consistency across EU member states in handling suspension requests amid state aid recoveries.

Reader Questions: How should authorities weigh suspension rights against urgent recovery needs in your country? Do you think this approach will streamline or complicate cross-border enforcement of illegal state aid?

Share your perspective in the comments and stay tuned for the Court’s final ruling, which will determine how these principles are applied across Europe.

.### Legal Framework: Regulation (EU) 2015/1589 and Article 16(3)

• Regulation (EU) 2015/1589 sets out the EU’s state‑aid recovery regime, empowering the European Commission too demand repayment of illegal aid.
• Article 16(3) allows the Commission, after a final decision, to suspend repayment obligations if the member state can demonstrate that enforcement would cause disproportionate hardship to the beneficiary.
• The suspension mechanism is intended as a protective safeguard,balancing the need for fair competition with the principle of proportionality.

The C‑545/24 Case: core Issue

• Question referred: Whether tax enforcement actions taken by a member state to recover illegal state aid can override the suspension rights granted under Article 16(3) of Regulation (EU) 2015/1589.
• Advocate General’s Opinion (AG Pellizzari): The AG argued that once the Commission has formally suspended repayment, any national tax recovery measure that directly targets the same aid‑related amount must be stayed pending a final judgment on the suspension request.

Key Findings of the Advocate General

1. Primacy of EU Law
• The AG reaffirmed that EU law prevails over conflicting national legislation, including tax codes, when it comes to the implementation of state‑aid recovery.
• Proportionality Test
• A three‑step proportionality analysis is required:
• Legitimate aim – ensuring the internal market is not distorted.
• Suitability – tax enforcement must effectively recover the aid without violating the suspension.
• Necessity – less intrusive measures (e.g., a delayed repayment schedule) must be considered first.
• Temporal Scope
• The suspension applies from the moment the Commission issues the decision until the Court of Justice delivers its judgment on the request for suspension.
• Effect on national courts
• National courts must refer the case to the Court of Justice if they encounter a conflict between domestic tax enforcement and the EU suspension order.

Practical Implications for Tax Authorities

• Immediate Compliance Checklist
1. Verify whether a suspension order exists for the specific aid recovered.
2. Cross‑check the date of the Commission’s decision against any ongoing tax collection actions.
3. If a suspension is in place, halt enforcement and document the decision for audit trails.
4. Risk Management
5. Failure to respect the suspension can result in EU infringement proceedings and potential financial penalties for the member state.
6. Training & Dialog
7. Implement regular training for tax officials on the interaction between EU state‑aid law and national tax enforcement.

Guidance for Beneficiaries and legal Practitioners

• Step‑by‑Step Response to a Suspension Request
1. Gather evidence of hardship (e.g., cash‑flow analysis, impact on employment).
2. Submit a formal request to the Commission under Article 16(3) within the statutory deadline.
3. Request a stay of enforcement from the national tax authority, citing the pending suspension request.
4. Strategic Litigation
5. When contesting a suspension denial, focus on:
6. Quantitative evidence of disproportionate effects.
7. Comparative analysis of similar cases where suspension was granted.
8. cross‑border Considerations
9. Companies operating in multiple EU states shoudl coordinate EU‑wide legal strategy, as suspension decisions can affect all member states involved in the aid scheme.

Real‑World Example: The german “Renewable Energy” Aid Scheme

• Background: In 2023, Germany granted illegal state aid to renewable‑energy investors, later classified as incompatible with the internal market.
• Commission Decision (2024): Ordered recovery of €1.2 billion, but suspended repayment for five firms that demonstrated severe liquidity issues.
• National Tax Authority Reaction: initially pursued tax liens; after the C‑545/24 ruling, German courts stayed the enforcement, aligning with the EU suspension.
• Outcome: The firms received a structured repayment plan over ten years,avoiding bankruptcy and preserving market stability.

Benefits of Respecting the Suspension Mechanism

• Enhanced Legal Certainty – Aligns national actions with EU jurisprudence, reducing the risk of contradictory rulings.
• Economic Stability – Prevents abrupt cash‑flow shocks that could jeopardize employment and investment.
• Reputation Management – Demonstrates a member state’s commitment to the rule of law and EU cohesion.

Frequently Asked Questions (FAQ)

Question	Answer
Can a member state appeal a suspension decision?	Yes, an appeal can be lodged with the General Court within the prescribed time limit, but enforcement must remain suspended pending the appeal.
Does the suspension apply to indirect tax measures (e.g., VAT adjustments)?	The suspension covers any fiscal act that directly seeks repayment of the illegal aid, including indirect taxes if they are used as a recovery tool.
What happens if the suspension is lifted before the final judgment?	Tax authorities may resume enforcement, but must still respect any interim orders issued by national courts pending the final EU decision.
Is partial repayment allowed during a suspension?	Only if the Commission expressly authorises a partial repayment schedule; otherwise, full enforcement is barred.

Checklist for Companies Facing Potential State‑Aid Recovery

• Confirm whether the Commission has issued a suspension under Article 16(3).
• Review national tax notices for any enforcement actions tied to the aid.
• Prepare hardship documentation (financial statements, cash‑flow forecasts).
• File a suspension request with the Commission, citing relevant EU case law (including C‑545/24).
• Notify the national tax authority of the pending suspension request and request a stay of enforcement.
• Monitor EU Court of Justice rulings for updates on the case.

Future Outlook: Post‑C‑545/24 Developments

• Increased Judicial Coordination – National courts are expected to refer more frequently to the Court of Justice when encountering conflicts with EU state‑aid suspension orders.
• Policy Adjustments – Member states may revise tax recovery statutes to embed a pre‑emptive pause clause triggered by EU suspension decisions.
• Enhanced Compliance Tools – The European Commission is highly likely to develop a digital portal for real‑time notification of suspension orders, improving openness for both tax authorities and beneficiaries.