New Appeal: Does the Circuit Court have jurisdiction to determine what constitutes unlawful state aid?

In this determination, Dún Laoghaire Rathdown County Council v West Wood Club Limited, the Supreme Court granted West Wood leave to appeal on, among other questions:

Does the Circuit Court have jurisdiction to decide whether it constitutes unlawful state aid, where the Council collects commercial rates for West Wood’s leisure facilities, where those rates contribute to the costs of running the Council’s leisure facilities, and where the Council’s facilities  compete with those provided by West Wood?

 

Background

West Wood operates commercial leisure facilities within the area over which the Council sets and collects commercial rates. The Council also provides leisure facilities.

The Council issued Circuit Court proceedings against West Wood for the non-payment of rates for the years 2011, 12 & 13 (over €420,000). West Wood entered a defence claiming that the Council’s collection of rates from it, which contributes to the running costs of the Council’s leisure facilities, amounts to unlawful state aid. West Wood also submitted a counter claim for damages. The Circuit Court held that it did not have jurisdiction to make a determination on the issue of state aid.

On appeal, the High Court held:

a. The Circuit Court has jurisdiction to determine whether the rates amount to State aid.

b. The Circuit Court does not, however, have jurisdiction to determine the compatibility of the aid (if it is found to be such) with the internal market.

c. As a matter of fact, it seems to be common case that if it is State aid, it has not been notified to the Commission and to that extent a finding of a breach of Article 108(3) of the Treaty would follow.

d. However, the court must bear in mind that where the issue relates to the payment of a tax, the obligation to notify the Commission can only be relied upon by the taxpayer if their own tax payment forms an integral part of the unlawful aid.

e. If the exemption of the plaintiff’s own enterprises is established, and was unlawful, it is not a remedy for that particular illegality to grant exemption to the defendant – that would only compound the breach of the rules.

f. Separate considerations seem to apply to the counterclaim as framed in these proceedings. EU law does not require that damages be available as against the recipient of unlawful State aid. Therefore the question of damages is governed by national law, including national rules as to the monetary jurisdiction of different courts. It may be that the counterclaim could, at least to some extent, be described as being against the plaintiff in its capacity as collector of the rates rather than as recipient, but the defendant has not particularised its general claim that the rates, combined with other State funding, amount to State aid. The obligation on national courts to provide a remedy for a breach of EU law does not, it seems to me, extend to breaching national procedural rules (here, rules relating to jurisdiction) where that is not necessary under the principles of equivalence and effectiveness.

g. The defendant’s claim exceeds the jurisdiction of the Circuit Court in relation to damages. While an argument may be open that under national rules the monetary limit does not apply to a counterclaim, this issue was not addressed before me and I am proceeding on the basis that, in the normal course of events, the limit does apply. My view, therefore, would be that the Circuit Court does not have jurisdiction to entertain the counterclaim.

The High Court referred three questions to the Court of Appeal, which were answered as:

Question 1: Does the Circuit Court have jurisdiction, in proceedings issued for the purpose of the recovery of rates, to determine whether the collection of rates and expenditure of the proceeds thereof amounts to State Aid which should have been notified to the European Commission pursuant to Articles 107 – 109 of the Treaty of the Functioning of the European Union?
Answer: Yes, but only where the defence raises an issue which involves a clear error on the face of the proceedings or there is no doubt as to the illegality of the decision in the sense explained and described by the Supreme Court in Dublin City Council v. Williams [2010] IESC 7, [2010] 1 I.R. 810. The time limits prescribed by Ord. 84 also apply by analogy to any such defence or counter-claim, save that, where necessary, consideration should be given to an extension of time where the defendant establishes that it only had a real interest in the matter from the date the plaintiff commenced the present proceedings.

Question 2: Is the issue raised by the defendant, as a matter of law, a challenge to the validity of the rate itself and thus a matter to be dealt with by way of judicial review only?
Answer: No. The Circuit Court enjoys no jurisdiction to pronounce upon the general validity of the rate struck by a rating authority. While it may nonetheless entertain a defence in the limited circumstances indicated in the answer to Question 1, any such defence is, even if successfully established, personal to that defendant and does not involve any general ruling as to the validity of the rate.

Question 3: If the Circuit Court has jurisdiction in such proceedings, and were to hold that the plaintiff is entitled to judgment for the amount of the rates unpaid but also that the collection of the rates in the circumstances amounts to a State Aid which has not been notified to the European Commission, would it have jurisdiction to award to the defendant damages in an amount equal to the amount of the judgment granted to the plaintiff or in any amount in order to ameliorate the effect of the (ex hypothesi) unlawful actions of the plaintiff?’
Answer: In view of the answers just given to Question 1 and Question 2, it would be premature and unnecessary to answer this question.

 

Supreme Court

West Wood applied to the Supreme Court for leave for a further appeal. The Court determined that West Wood raised a question of law of general interest and granted it leave to appeal on the following questions:

i. Does the Circuit Court have jurisdiction, in proceedings issued for the purpose of the recovery of rates, to determine whether the collection of rates and expenditure of the proceeds thereof amounts to State Aid which should have been notified to the European Commission pursuant to Articles 107 – 109 of the Treaty of the Functioning of the European Union?

ii. Is the issue raised by the defendant, as a matter of law, a challenge to the validity of the rate itself and thus a matter to be dealt with by way of judicial review only?

iii. If the Circuit Court has jurisdiction in such proceedings, and were to hold that the plaintiff is entitled to judgment for the amount of the rates unpaid but also that the collection of the rates in the circumstances amounts to a State Aid which has not been notified to the European Commission, would it have jurisdiction to award to the defendant damages in an amount equal to the amount of the judgment granted to the plaintiff or in any amount in order to ameliorate the effect of the (ex hypothesi) unlawful actions of the plaintiff?

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