The Merchants Of Venice or A Tale of Two Cities?: The Courts find against Italian Regional Social Security Concessions

This case arose from a decision of the Italian authorities to extend an existing regional aid scheme – a social security concession for the south of Italy – to the cities of Chioggia and Venice in the north, an area partly eligible for regional aid on the basis of Article 107(3)(c). This measure was not notified to the Commission in advance and, following an investigative procedure, the Commission reached a decision requiring the recovery of aid with some exceptions. The recovery decision was contested before the General Court. On admissibility, the Court accepted that belonging to a closed class of actual beneficiaries of an aid scheme affected by the obligation to repay aid was sufficient. On substance, the applicants argued, inter alia, that the contested measures were compensations for the additional costs arising from their location in the Venice lagoon (not State aid), that the Commission had failed to take account of the situation of undertakings other than selected municipal companies, and infringed Article 107(3)(c) in relation to regional aid. The substantive claims were rejected by the General Court. The applicants also challenged the legality of the recovery order, arguing that the measure was a mere extension in time and territory of a measure dating back to the 1970s. This was not accepted by the General Court, which, accordingly, dismissed the actions. The applicants appealed the General Court's judgment before the ECJ. By cross appeal, the Commission, sought the annulment of the judgment on admissibility. The ECJ upheld the General Court's ruling on the standing of the applicants, though it found that the General Court had erred in law in finding that it was not for the national authorities to verify in each individual case whether the conditions for the existence of aid were met. The ECJ dismissed the main appeals of the applicants against the judgment of the General Court and confirmed the order for the recovery of the unlawful aid.