The penalty payment
Arguments of the parties
68The Commission takes the view that the Hellenic Republic’s alleged failure to fulfil obligations is ongoing as at the time of the examination of the facts by the Court.
69It proposes that the failure to comply with the judgment establishing the failure to fulfil obligations should be penalised, in particular by the payment of a periodic penalty payment, on the basis of Communication SEC(2005) 1658 of 12December 2005, entitled ‘Application of Article [260 TFEU]’ (OJ 2007 C126, p.15; ‘the 2005 Communication’), the Communication on the modification of the calculation method for lump sum payments and daily penalty payments proposed by the Commission in infringement proceedings before the Court of Justice (OJ 2019 C70, p.1), and its Communication entitled ‘Updating of data used to calculate lump sum and penalty payments to be proposed by the Commission to the Court of Justice of the European Union in infringement proceedings’ (OJ 2019 C309, p.1). The Commission notes that, according to the formula referred to in the 2005 Communication, the daily penalty payment is to be equal to the initial flat-rate amount of EUR3116 multiplied by the coefficient for seriousness, the coefficient for duration and the ‘n’ factor.
70As regards the coefficient for seriousness, the Commission argues that the provisions of the FEU Treaty on State aid which have been infringed in the present case are fundamental. That institution highlights the detrimental effect which the unrecovered unlawful and incompatible aid had on the market on which Larco carries on its activities. Taking into account the characteristics of that market, the Commission takes the view that the adverse effect of the unrecovered aid on competition affects undertakings not only in Greece but also more widely in the European Union.
71As to whether there are aggravating or mitigating circumstances, the Commission, first, draws attention to repeated failures by the Hellenic Republic in the field of State aid and, second, takes the view that there are no mitigating circumstances in the present case. Consequently, it proposes applying a coefficient for seriousness of 7 on the scale of 1 to 20 established in the 2005 Communication.
72In so far as concerns the duration of the infringement, the Commission claims that, as at the date on which it decided to bring proceedings before the Court in the present case– namely, 27November 2019– the duration of the infringement, the starting point of which is set at the date of delivery of the judgment establishing the failure to fulfil obligations– that is, 9November 2017– was 24months, so that a coefficient for duration of 2.4 on the scale of 1 to 3, also established in that communication, is to be applied.
73As regards the defendant Member State’s ability to pay and, more specifically, the ‘n’ factor, the Commission observes that, in its judgment of 14November 2018, Commission v Greece (C‑93/17, EU:C:2018:903), the Court held that, since the voting system within the Council of the European Union had changed since 1April 2017, the ‘n’ factor could no longer take into account the number of votes of the Member State concerned in the Council, and that the gross domestic product (GDP) of the Member States was to be relied upon as the predominant factor.
74According to the Commission, it is necessary to retain the institutional weight in the European Union of the Member State concerned as an essential element in the calculation of the ‘n’ factor, for the purposes of imposing penalties which are both proportionate and sufficiently dissuasive. In its view, the taking into account of GDP alone considerably increases the gap between the Member States in respect of that factor. The Commission submits that the method of calculating the ‘n’ factor must be based not solely on demographic or economic weight, but also on the fact that each Member State has an intrinsic value within the institutional framework of the European Union. Therefore, in order to maintain a balance between the ability to pay and the institutional weight in the European Union of a Member State, the ‘n’ factor should be calculated on the basis of, first, the GDP and, second, the number of European Parliament seats allocated to the Member State concerned. Consequently, the Commission takes the view that that ‘n’ factor should be set at 0.51 for the Hellenic Republic.
75That being so, the use of GDP and the number of European Parliament seats, without any adjustment, would result in a reference value significantly lower than the value resulting from the application of the previous method of calculating the ‘n’ factor. Thus, for the purposes of calculating the standard flat-rate amount for the periodic penalty payment, the Commission proposes that an adjustment factor of 4.5 be used in order to ensure that the amounts of the penalties proposed by the Commission to the Court of Justice remain proportionate and sufficiently dissuasive.
76Lastly, as regards the frequency of the periodic penalty payment, the Commission takes the view that it should be daily and half-yearly. It argues that, in the present case, daily penalty payments must be free of any degressivity.
77The Hellenic Republic contends that there is no need to impose financial penalties in the present case, on the ground that considerable progress was made by the very adoption of Law No4664/2020 and putting Larco under special administration. Furthermore, that Member State states that that special administration is intended, as a whole, to ensure the expeditious liquidation of Larco, either through the sale of its assets by the special administrator in such a way as to obtain the highest possible price, or, in the event that the sale of 75% of the assets is not completed within a period of 12months, by making it subject to the ordinary insolvency procedure.
78The Hellenic Republic takes the view that, should the Court consider that a periodic penalty payment must nevertheless be imposed, the amount of the penalty payment sought by the Commission is not adapted to the particular circumstances of the case and does not comply with the principle of proportionality.
79As regards the seriousness of the infringement, the Hellenic Republic submits, in the first place, that account should be taken, first, of the measures taken at that stage and, second, of the fact that, in the present case, the amount to be recovered, together with interest, calculated up to 14May 2020, amounts to EUR160million, whereas in the case giving rise to the judgment of 14November 2018, Commission v Greece (C‑93/17, EU:C:2018:903), the amount to be recovered was EUR670million. In that context, having regard to the time that would be necessary to bring about substantial progress in the Larco liquidation procedure, that Member State requests that the periodic penalty payment be set on a six-monthly basis.
80In the second place, the Hellenic Republic contends that it is unlikely that that aid had serious repercussions for the level playing field within the European Union or was the cause of distortions of competition.
81In the third place, that Member State submits that, as regards the alleged recurrence of its unlawful conduct in the field of State aid, in the case which gave rise to the judgment of 14November 2018, Commission v Greece (C‑93/17, EU:C:2018:903), the Greek authorities had taken the necessary measures to complete the recovery procedure by liquidating the assets of the company concerned.
82Consequently, the Hellenic Republic takes the view that it is not appropriate to apply a coefficient for seriousness in excess of 1 in the present case.
83As regards the coefficient for duration, the Hellenic Republic considers that it should not exceed 1.
84Lastly, as regards the ability to pay and, more particularly, the ‘n’ factor, like the Commission, the Hellenic Republic takes the view that, for the purposes of calculating the value of that factor, account should be taken not only of economic weight, but also of the institutional weight in the European Union of the Member State concerned. Account should therefore be taken of the number of European Parliament seats allocated to that Member State.
Findings of the Court
85As a preliminary point, it must be recalled that the procedure laid down in Article260(2) TFEU is aimed at inducing a defaulting Member State to comply with a judgment establishing a failure to fulfil obligations, thereby ensuring that EU law is in fact applied, and the measures provided for by that provision, namely a lump sum and a penalty payment, are both intended to achieve this objective (judgment of 12March 2020, Commission v Italy (Unlawful aid granted to the hotel industry in Sardinia), C‑576/18, not published, EU:C:2020:202, paragraph134 and the case-law cited).
86It should also be recalled that, in each case, it is for the Court to determine, in the light of the circumstances of the case before it and according to the degree of persuasion and deterrence which appears to it to be required, the financial penalties appropriate, in particular, for preventing the recurrence of similar infringements of EU law (judgment of 14November 2018, Commission v Greece, C‑93/17, not published, EU:C:2018:903, paragraph107 and the case-law cited).
87According to the settled case-law of the Court, the imposition of a penalty payment is, in principle, justified only in so far as the failure to comply with an earlier judgment of the Court continues up to the time of the Court’s examination of the facts (judgment of 12March 2020, Commission v Italy (Unlawful aid granted to the hotel industry in Sardinia), C‑576/18, not published, EU:C:2020:202, paragraph137 and the case-law cited).
88In order to determine whether the failure to fulfil obligations of which the defendant stands criticised continued up until the Court’s examination of the facts, it is necessary to consider the measures which were adopted, according to the defendant Member State, after the period prescribed in the letter of formal notice (see, to that effect, judgments of 11December 2012, Commission v Spain, C‑610/10, EU:C:2012:781, paragraph98, and of 17September 2015, Commission v Italy, C‑367/14, not published, EU:C:2015:611, paragraph89).
89In the present case, the Hellenic Republic claims that Larco remains under special administration and that the two tendering procedures whereby the sale of Larco’s assets could be carried out were to be completed on 8July 2021.
90However, it is sufficient to note that the Hellenic Republic has failed to establish that, at the time of the Court’s examination of the facts of the case, it had taken all measures necessary to comply with the judgment establishing the failure to fulfil obligations.
91In the light of the foregoing, it must be held that the failure to fulfil obligations of which the Hellenic Republic is criticised continued up until the examination of the facts by the Court.
92In those circumstances, an order imposing a periodic penalty payment on the Hellenic Republic is an appropriate financial means by which to encourage the Hellenic Republic to take the measures necessary to put an end to the infringement established and to ensure full compliance with the judgment establishing failure to fulfil obligations.
93According to settled case-law, the periodic penalty payment must be decided upon according to the degree of persuasion needed in order for the Member State which has failed to comply with a judgment establishing a breach of obligations to alter its conduct and bring to an end the conduct established (see, to that effect, judgment of 12March 2020, Commission v Italy (Unlawful aid granted to the hotel industry in Sardinia), C‑576/18, not published, EU:C:2020:202, paragraph147 and the case-law cited).
94In exercising its discretion, it is for the Court to set the penalty payment at a level that is both appropriate to the circumstances and proportionate to the infringement established and to the ability to pay of the Member State concerned (judgments of 11December 2012, Commission v Spain, C‑610/10, EU:C:2012:781, paragraph118 and the case-law cited; of 22February 2018, Commission v Greece, C‑328/16, EU:C:2018:98, paragraph90 and the case-law cited; and of 12March 2020, Commission v Italy (Unlawful aid granted to the hotel industry in Sardinia), C‑576/18, not published, EU:C:2020:202, paragraph148 and the case-law cited).
95The Commission’s proposals regarding the periodic penalty payment cannot bind the Court and are merely a useful point of reference. Similarly, guidelines such as those set out in the Commission’s communications are not binding on the Court but rather contribute to ensuring that the Commission’s own actions are transparent, foreseeable and consistent with legal certainty when that institution makes proposals to the Court. In proceedings under Article260(2) TFEU relating to a failure to fulfil obligations on the part of a Member State that has persisted notwithstanding the fact that that same failure to fulfil obligations has already been established in a first judgment delivered under Article258 TFEU or Article108(2) TFEU, the Court must remain free to set the penalty payment to be imposed in an amount and in a form that the Court considers appropriate for the purposes of inducing that Member State to bring to an end its failure to comply with the obligations arising under that first judgment of the Court (see judgment of 14November 2018, Commission v Greece, C‑93/17, EU:C:2018:903, paragraph119 and the case-law cited).
96For the purposes of determining the amount of a penalty payment, the basic criteria which must be taken into consideration in order to ensure that that payment has coercive effect and that EU law is applied uniformly and effectively are, in principle, the seriousness of the infringement, its duration and the ability to pay of the Member State in question. In applying those criteria, regard must be had, in particular, to the effects on public and private interests of the failure to comply and to how urgent it is for the Member State concerned to be induced to fulfil its obligations (judgment of 12March 2020, Commission v Italy (Unlawful aid granted to the hotel industry in Sardinia), C‑576/18, not published, EU:C:2020:202, paragraph149 and the case-law cited).
97In the first place, as regards the seriousness of the infringement, the fundamental nature of the provisions of the FEU Treaty on State aid should be recalled (judgment of 12March 2020, Commission v Italy (unlawful aid to the hotel sector in Sardinia), C‑576/18, not published, EU:C:2020:202, paragraph150 and the case-law cited).
98The rules which are the subject of Decision 2014/539 and the judgment establishing the failure to fulfil obligations are the expression of one of the essential missions conferred on the European Union by virtue of Article3(3) TEU, that is the establishment of the internal market and Protocol (No27) on the internal market and competition, which, in accordance with Article51 TEU, is an integral part of the Treaties and under which the internal market concludes a system guaranteeing that competition is not distorted.
99The importance of the EU rules infringed in a case such as this is reflected, in particular, in the fact that repayment of aid declared unlawful and incompatible with the internal market eliminates the distortion of competition caused by the competitive advantage afforded by the aid and that, by repaying the aid, the recipient forfeits the advantage which it had enjoyed over its competitors on the market (see, to that effect, judgment of 12March 2020, Commission v Italy (unlawful aid to the hotel sector in Sardinia), C‑576/18, not published, EU:C:2020:202, paragraph151 and the case-law cited).
100As regards the infringement found in the present case, it should be noted, first, that, notwithstanding the fact that the Hellenic Republic took measures to recover the State aid at issue, it has not recovered that aid in full. That being so, in the light of the rule, recalled in paragraph94 of the present judgment, that the penalty payment must be appropriate to the circumstances and proportionate to the infringement established, account must be taken of the fact that, although Larco remained the tenant of the Larymna smelting plant and mining complex, following the arbitration award made on 24September 2020 and rectified on 8October 2020, the arbitration panel recognised the Greek State’s right of ownership over those assets.
101Second, it should be noted that the amount of the unrecovered aid is a considerable sum. That amount, together with interest, amounted, on 14May 2020, to EUR160million.
102Third, account must be taken of the fact that the market in which Larco operates, in particular the ferronickel market, is cross-border. Consequently, the unlawful and incompatible aid which has not been recovered has a detrimental effect on the market, which is not confined to the territory of the Hellenic Republic.
103Lastly, it must be held that there is a repetition of the conduct infringing the State aid rules by that Member State. The Hellenic Republic has been declared to have failed to fulfil obligations, first, in actions under Article108(2) TFEU for failure to implement decisions ordering the recovery of aid in the cases which gave rise to the judgments of 1March 2012, Commission v Greece (C‑354/10, not published, EU:C:2012:109), of 28June 2012, Commission v Greece (C‑485/10, not published, EU:C:2012:395), of 17October 2013, Commission v Greece (C‑263/12, not published, EU:C:2013:673), of 9November 2017, Commission v Greece (C‑481/16, not published, EU:C:2017:845), and of 17January 2018, Commission v Greece (C‑363/16, EU:C:2018:12), and, second, in an action under Article228(2), third paragraph, EC in the case which gave rise to the judgment of 7July 2009, Commission v Greece (C‑369/07, EU:C:2009:428).
104It must be held that, in the present case, the infringement of the rules of the FEU Treaty on State aid is very serious.
105As regards, in the second place, the duration of the infringement, it should be borne in mind that that duration must be assessed by reference to the date on which the Court assesses the facts and not the date on which proceedings are brought before it by the Commission (judgment of 12March 2020, Commission v Italy (unlawful aid to the hotel sector in Sardinia), C‑576/18, not published, EU:C:2020:202, paragraph156 and the case-law cited).
106In those circumstances, as the Hellenic Republic has been unable to prove that it has put an end to its failure to fulfil its obligations to comply in full with the judgment establishing the failure to fulfil obligations, it must be held that that infringement has continued for more than four years after the date of delivery of that judgment, which is a considerable period of time.
107In the third place, as regards the ability to pay of the Member State concerned, it is clear from the settled case-law of the Court that it is necessary to take account of recent trends in that Member State’s GDP at the time of the Court’s examination of the facts (judgments of 11December 2012, Commission v Spain, C‑610/10, EU:C:2012:781, paragraph131; of 12March 2020, Commission v Italy (unlawful aid to the hotel sector in Sardinia), C‑576/18, not published, EU:C:2020:202, paragraph158 and the case-law cited; and of 25February 2021, Commission v Spain (Personal Data Directive– Criminal Law), C‑658/19, EU:C:2021:138, paragraph83 and the case-law cited).
108In order to ensure that penalties are proportionate and dissuasive, the Commission proposes to take into account, in addition to the GDP of the Member State concerned, the latter’s institutional weight in the European Union expressed by the number of votes that that Member State has within the European Parliament. The Commission also takes the view that an adjustment coefficient of 4.5 should be used to ensure that the penalties are proportionate and dissuasive.
109In that regard, it should be recalled, as is apparent from paragraph95 of the present judgment, that the Commission’s proposals concerning the periodic penalty payment cannot bind the Court and are merely a useful point of reference.
110Since the mathematical variables used by the Commission to calculate the amount of penalty payments, which are indicative rules setting out the approach which the Commission proposes to follow, they help to ensure that it acts in a manner which is transparent, foreseeable and consistent with legal certainty and are designed to achieve proportionality in the amounts of the penalty payments to be proposed by it (see, to that effect, judgment of 4July 2000, Commission v Greece, C‑387/97, EU:C:2000:356, paragraphs86 and 87).
111In that context, first, it is clear from the case-law subsequent to 1April 2017, the date from which the old system of weighted votes determining the number of votes of Member States in the Council no longer applies, that for the purposes of assessing the ability to pay of the Member State in question, the Court takes into account the GDP of that Member State as the predominant factor (see, to that effect, judgment of 14November 2018, Commission v Greece, C‑93/17, EU:C:2018:903, paragraphs141 and 142).
112Second, as regards the taking into account of the institutional weight in the European Union of the Member State concerned in order to ensure that the penalties are proportionate and dissuasive, it should be recalled, first, that it is clear from the settled case-law of the Court referred to in paragraph94 of the present judgment that the proportionality of financial penalties is assessed in the light of the failure to fulfil obligations established and the ability to pay of the Member State concerned.
113Second, it must be held, as the Advocate General observes in point35 of his Opinion, that the objective of setting penalties that are sufficiently dissuasive does not necessarily require that account be taken of the institutional weight in the European Union of the Member State concerned.
114As the Advocate General observes, in essence, in point29 of his Opinion, the institutional weight in the European Union of the Member State concerned is independent of the characteristics of the infringement at issue.
115Therefore, taking into account the institutional weight of the Member State concerned is not essential to ensuring sufficient deterrence and inducing that Member State to change its current or future conduct in relation to the grant of State aid.
116In those circumstances, without prejudice to the possibility for the Commission to propose financial penalties which are based on multiple criteria, with a view, in particular, to allowing a reasonable gap between the various Member States to be maintained, it is necessary to rely on the GDP of the Hellenic Republic as the predominant factor for the purposes of assessing its ability to pay, without taking account of the institutional weight of the Hellenic Republic expressed by the number of votes that that Member State has within the European Parliament for the purposes of setting sufficiently dissuasive and proportionate sanctions.
117Moreover, as to the Commission’s proposal to use an adjustment coefficient of 4.5, the Commission has failed to establish the objective criteria on the basis of which it fixed the value of that coefficient.
118As regards the frequency of the periodic penalty payment, the Commission submits that this should be daily.
119However, account must be taken of the specific character of the operations for recovery of the aid in question.
120In that connection, account must be taken of the fact that the Greek authorities have taken certain measures which could serve as a basis for complying with the judgment establishing the failure to fulfil obligations. However, the consequences of those measures may not be noticed immediately. It therefore appears that full compliance with Decision 2014/539 and, accordingly, the judgment establishing the failure to fulfil obligations cannot be achieved in short order.
121It follows that any finding that the infringement has come to an end could be made only after a reasonable period allowing an overall assessment to be made of the results obtained.
122Therefore, it is appropriate to impose a six-monthly penalty payment to enable the Commission to assess the progress of the measures implementing the judgment establishing the failure to fulfil obligations, having regard to the situation prevailing at the end of the period concerned.
123In the light of the foregoing and of the Court’s discretion under Article260(3) TFEU, the Hellenic Republic must be ordered to pay to the Commission a periodic penalty payment of EUR4368000 for each six-month period of delay in implementing the measures necessary to comply with the judgment establishing the failure to fulfil obligations, from the date of delivery of the present judgment until full compliance with the judgment establishing the failure to fulfil obligations.
The lump sum
Arguments of the parties
124The Commission proposes that the Court determine the amount of the lump sum by multiplying a daily amount by the number of days on which the infringement continues.
125For calculation of the lump sum, that institution proposes that the same coefficient for seriousness and the same ‘n’ factor as those put forward in respect of periodic penalty payments should be applied. It fixes the basic flat-rate amount, however, at EUR1039 per day. In contrast with the calculation of the periodic penalty payment, a coefficient for duration is not applied, given that the duration of the infringement has already been taken into account by multiplying the daily amount by the number of days the infringement persists.
126The Commission thus proposes that the amount of the lump sum should be equal to the basic flat-rate amount of EUR1039 multiplied by the coefficient for seriousness (7) and the ‘n’ factor (0.51), or the sum of EUR3709.23, which is itself multiplied by the number of days between delivery of the judgment establishing the failure to fulfil obligations and the date on which the Member State complied with its obligations or, failing that, the date of delivery of the present judgment.
127The Hellenic Republic contends that the lump sum proposed by the Commission is not appropriate to the particular circumstances and does not comply with the principle of proportionality.
Findings of the Court
128As a preliminary point it should be recalled that, in exercising the discretion conferred on it in such matters, the Court is empowered to impose a penalty payment and a lump sum payment cumulatively (judgment of 12March 2020, Commission v Italy (unlawful aid to the hotel sector in Sardinia), C‑576/18, not published, EU:C:2020:202, paragraph163 and the case-law cited).
129The imposition of a lump sum payment and the fixing of that sum must depend in each individual case on all the relevant factors relating both to the characteristics of the failure to fulfil obligations established and to the conduct of the Member State involved in the procedure initiated under Article260 TFEU. In that regard, the latter provision confers a wide discretion on the Court in deciding whether to impose such a penalty and, if it decides to do so, in determining the amount (judgment of 12March 2020, Commission v Italy (unlawful aid to the hotel sector in Sardinia), C‑576/18, not published, EU:C:2020:202, paragraph164 and the case-law cited).
130In the present case, all the legal and factual circumstances culminating in the breach of obligations established indicate that, if the future repetition of similar infringements of EU law is to be effectively prevented, a dissuasive measure must be adopted, such as a lump sum payment.
131In those circumstances, it is for the Court, in the exercise of its discretion, to fix the lump sum in an amount appropriate to the circumstances and proportionate to the infringement (judgment of 14November 2018, Commission v Greece, C‑93/17, EU:C:2018:903, paragraph156 and the case-law cited).
132Relevant considerations in this respect include factors such as the seriousness of the infringement and the length of time for which the infringement has persisted since the delivery of the judgment establishing it (judgment of 14November 2018, Commission v Greece, C‑93/17, EU:C:2018:903, paragraph157 and the case-law cited).
133The circumstances of the present case which must be taken into account are apparent, in particular, from the grounds set out in paragraphs97 to 117 of the present judgment regarding the seriousness and the duration of the infringement and the ability to pay of the Member State in question.
134In the light of all the foregoing, the Court considers that proper account of the circumstances of the present case will be taken by setting the amount of the lump sum which the Hellenic Republic will have to pay at EUR5500000.
135The Hellenic Republic must therefore be ordered to pay to the Commission a lump sum of EUR5500000.