EC refers Germany to Court of Justice: illegal aid

State aid: Commission refers Germany to Court of Justice for failure to recover illegal aid to Kahla

The European Commission has decided to refer Germany to the Court of Justice for failure to comply with a Commission decision of 30 October 2002. That decision ruled that aid given by the German Land of Thuringia to German porcelain manufacturer Kahla Porzellan GmbH and its successor company Kahla/Thüringen Porzellan GmbH was incompatible with the EC Treaty because it was liable to distort competition within the Single Market and must be recovered from the beneficiaries (see IP/02/1588). More than two years after the decision was adopted, it has not been fully implemented by Germany. The Commission has therefore decided to apply to the Court in order to have its decision enforced.

Neelie Kroes, Competition Commissioner, said “I will take a very strict line with Member States that fail to comply with Commission decisions on state aid. Taking a firm stand is the only way of ensuring the credibility of our state aid policy.”

More than two years after the Commission decision, Germany has still not fully complied: € 3.3 million plus interest is yet to be recovered from the still trading successor company Kahla/Thüringen Porzellan GmbH. Kahla Porzellan GmbH has been in bankruptcy since 1993.

The Commission has carefully considered the reasons put forward by the German authorities for refusing to take further recovery action, but considers that these reasons are not acceptable. To restore competition to the market, the Commission is therefore insisting on a complete and effective enforcement of the decision.

Background

On 30 October 2002 the European Commission adopted a negative decision on aid given to Kahla Porzellan GmbH and its successor company Kahla/Thüringen Porzellan GmbH by the German Land of Thuringia. The Commission was informed of these measures through a complaint lodged by competitors.

After a formal investigation, the Commission concluded that the ‘ad hoc’ aid in favour of the two porcelain makers constituted state aid incompatible with the EC Treaty. The Commission therefore decided that the German authorities must recover the illegally granted aid, which amounted to € 15.7 million. Due to earlier repayments, some € 6.4 million plus interest remained to be recovered at the time of the decision.

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