The beneficiary of illegal state aid does not have a right to be
notified of action taken by, or on behalf of, the European Commission
in relation to the unlawful aid which has the effect of interrupting
the limitation period of 10 years which limits the Commission's powers
to order recovery of unlawful aid.

The European Court of Justice (the "ECJ") has confirmed the Court of
First Instance's ruling that the European Commission's decision of July
2000 to order the recovery of state aid that had been granted illegally
to the Scott Paper Company ("Scott") was correct.

Background

In 1987 state aid was granted by the French government to Scott in
relation to the establishment of a factory. Local authorities sold land
at preferential terms and the calculation of the water treatment levy
was also calculated at a favoured rate.

The Commission found the aid to be illegal and ordered its recovery.
Scott brought an action against this decision claiming that the
Commission had breached the temporal application of the state aid
rules. Scott alleged that the Commission had erred in considering that
the limitation period could be interrupted by an action which had not
been notified to the beneficiary of the unlawful aid. Scott was
unsuccessful in the CFI and brought the appeal to the ECJ.

The powers of the Commission to recover unlawful state aid is
subject to a limitation period of 10 years which begins on the day on
which the unlawful aid is awarded to the beneficiary. Any action taken
by the Commission or by a Member State, acting at the request of the
Commission, with regard to the unlawful aid, interrupts this limitation
period.

The question put to the Court was whether the Commission had
interrupted the limitation period in the manner required by law. In
this case the Commission had acted by requesting information from the
Member State in relation to the aid. The request for information had
not been notified to the beneficiary of the aid, Scott, and therefore
Scott was not aware that the limitation period had been broken.

Judgement

The ECJ held that the rules should not be interpreted to mean that
an action, such as the request for information, is required to be
notified to the beneficiary of the aid for the limitation period to be
interrupted.

The beneficiary of illegal state aid may have a practical interest
in being informed of action taken by the Commission which is capable of
interrupting the limitation period, however such notification is not a
prerequisite for proper interruption to have been made.

The procedure in relation to recovery of illegal state aid takes
place primarily between the Commission and the Member state in
question. It is a procedure which is initiated against the Member
State, not the beneficiary, and therefore the beneficiary does not have
the status of party to the procedure.

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