logo-image
GCR Know How. State Aid 2018. Ukraine
Автор: Ігор Свечкар, Сергій Глущенко
Джерело: GCR Know How. State Aid 2018
Завантажити

National state aid control - competent authorities

1.

Which national authority or body is responsible for the oversight of state aid in your country, in particular the identification of new aid measures and their notification to the European Commission, the monitoring of existing aid measures for compliance with EU state aid rules and decisions, the submission of annual reports on existing aid schemes to the European Commission and cooperation more generally with the European Commission on state aid matters? 

The Antimonopoly Committee of Ukraine (AMC) is responsible for monitoring of compliance with state aid laws.

State aid rules became effective in Ukraine only recently – in 2017 – and both relevant legislation and AMC’s practice are still in the stage of formation. The AMC has established a dedicated State Aid Unit with 21 employees (end of 2017). On numerous occasions AMC officers have pointed to the fact that its current capacity is insufficient to enforce state aid rules effectively and more people will be hired and trained for this purpose.

2.

Does any authority monitor the national legislative process to identify potential aid measures? Does this independent authority have sufficient powers to prevent the legislature or government from adopting aid measures that do not comply with EU state aid rules?

The AMC constantly monitors the national legislative process to identify potential aid measures. Its current powers, however, appear to be insufficient to prevent the legislature or government from adopting measures that do not comply with the state aid rules.

In particular, should the AMC discover any potentially incompatible measure while monitoring legislation, its remedies are limited to non-binding recommendations addressed to the Cabinet of Ministers of Ukraine (CMU) to bring the measure in line with the state aid rules. This is one of the reasons why earlier this year the AMC has proposed changes to the legislation (under review by the Parliament now) requiring that the relevant AMC’s opinion accompanies bills to be passed by the Parliament.

3.

What are the competences of the national authority responsible for state aid control, and what is the legal basis for these powers in domestic law? Does this authority have the power to grant interim measures in addition to any interim relief that may be available in the national courts? 

The AMC has full set of investigatory, enforcement and supervisory powers, including the power to:

•   assess and consider state aid notifications;

•   monitor state support measures and recover unlawful state aid incompatible with competition; and

•   launch state aid case and order interim measures.

While the Ukrainian state aid legislation does not expressly empower the AMC to enforce compliance with its information requests to undertakings, the right of the authority to impose fines for failure to provide information or provision of misleading information is envisaged by relevant provisions of the Ukrainian competition law.

4.

Aside from the role played by the European Commission and national courts in enforcing EU state aid rules, does the national authority responsible for state aid control accept complaints made by competitors, other interested parties, or other third parties regarding potentially unlawful and incompatible aid measures?

Any interested party may inform the AMC of an alleged unlawful aid and an alleged misuse of aid by submitting a complaint. For this purpose, the interested party needs to submit a formal ‘application’ (complaint) to the AMC showing that its interests might be affected by granting of the aid and provide all requisite information. 

If a complaint is incomplete or unsubstantiated, the AMC will suspend its review inviting the complainant to submit further information. Failure to address the AMC request within the established deadline will result in rejection of the application. In this case, however, the information submitted by the complainant may still lead to further investigation by the authority on its own initiative.

The AMC reviews complaints within 30 calendars days, unless additional information is requested (in which case the review may take up to 90 calendar days).

5.

Does the national authority responsible for state aid regularly cooperate or exchange information with the state aid authorities in other member states? If so, are there formal structures to facilitate this cooperation and information exchange, or does this occur on a purely ad hoc basis?

Under article 263 of the EU–Ukraine Association Agreement (Association Agreement), each party shall notify annually the other party the total amount, types and the sectoral distribution of state aid which may affect trade between the parties. Upon request by a party, the other party shall provide further information on any state aid scheme and particular individual cases of state aid affecting trade between the parties. 

We are not aware of any cases where the AMC would exchange information with the authorities in other EU member states (either with reference to the mentioned provisions of the Association Agreement or otherwise).

6.

Which body represents your country in state aid proceedings before the EU courts? 

There is no mechanism allowing the AMC to initiate proceedings before the EU courts.

Interestingly, though, under article 264 of the Association Agreement, while interpreting the national state aid legislation, the Ukrainian authorities (including courts) should nonetheless be bound by the relevant jurisprudence of the Court of Justice of the European Union, as well as relevant secondary legislation, frameworks, guidelines and other administrative acts in force in the European Union.

7.

Is there a national register or other central source of data on national aid measures? Are the various state aid reports, complaints, decisions, etc, published?

There is a national state aid register available at: http://pdd.amc.gov.ua/main/home/amkuforms (only in Ukrainian). Apart from maintaining the register of state aid, this is the place where the AMC also publishes its decisions (including on opening state aid case).

National substantive and procedural rules

8.

Describe any recent developments in substantive or procedural rules under domestic law relating to state aid.

The main national legislation, which has implemented the European-style state aid rules, includes the Association Agreement and the Law of Ukraine on State Aid to Undertakings No. 1555-VII of 1 July 2014 (the State Aid Law).

The Association Agreement sets out the fundamental principles underlying the approximation of the Ukrainian legislation and practice in convergence with the EU acquis.

The State Aid Law includes the general principle of incompatibility of state aid with competition, as well as framework rules on the assessment of various state support measures, de minimis threshold, powers and functions of the AMC, notification procedures for existing and new state aid, investigation of unlawful and misused aid, limitation periods, monitoring issues and judicial review. The State Aid Law became fully effective on 2 August 2017. The main upcoming deadlines established in the State Aid Law are as follows:

  • 2 August 2018: deadline to notify existing state aid measures; and
  • 2 August 2022: deadline to align existing state aid measures with state aid rules.

 

Notably, the Association Agreement and the State Aid Law lay down only the basic rules and leave the details to secondary legislation. The secondary legislation developed so far includes:

  • The Procedure on Conducting Monitoring of State Aid to Undertakings approved by the Regulation of the AMC No. 43-pII of 28 December 2015 (AMC Monitoring Procedure). It sets out the rules on how the AMC monitors state aid and deliver annual reports.
  • The Procedure on Submission of Information on Existing State Aid to Undertakings to the AMC approved by the Regulation of the AMC No. 43-pII of 28 December 2015 (AMC Procedure on Existing State Aid). It sets out the rules and forms on how the AMC collects information on existing state aid, reviews submissions and issue recommendations.
  • The Procedure on Keeping of, and Access to, the State Aid Register approved by the Regulation of the AMC No. 43-pII of 28 December 2015 (AMC Procedure on State Aid Register). It clarifies the way the AMC maintains the state aid register and provides access to it.
  • The Procedure of the AMC on Rules for Review of Cases on State Aid to Undertakings No. 8-pII of 12 April 2016 (AMC Procedure on State Aid Cases). It sets the rules on how the AMC issues information requests and investigates cases of unlawful or misused state aid, the rights of the parties, access to files, timeline, etc.
  • The Procedure of the AMC on Rules for Preparation of Notifications on New Aid and Re-Examination of Existing State Aid 2-pII of 2 March 2016 (AMC Procedure on Notification of State Aid). It sets detailed rules on how the new state aid measures should be notified and reviewed by the AMC.
  • The Resolution of the CMU on Approval of the Rules for Recovery of Unlawful Aid Incompatible with Competition No. 468 of 4 July 2017 (CMU Resolution on Recovery of State Aid). It lays down the detailed procedure for the recovery of unlawful state aid found by the AMC to be incompatible with competition.
  • The Resolution of the CMU on Criteria for Approval of State Aid for Professional Training No. 11 of 11 January 2018;
  • The Resolution of the CMU on Criteria for Approval of State Aid for Employment of Certain Categories of Workers and Creation of New Jobs No. 33 of 31 January 2018;
  • The Resolution of the CMU on Criteria for Approval of State Aid for Reorganisation and Restructuring No. 36 of 31 January 2018;
  • The Resolution of the CMU on Criteria for Approval of State Aid for Research and Development No. 118 of 7 February 2018;
  • The Resolution of the CMU on Criteria for Approval of State Aid for Regional Development and Support of SMEs No. 57 of 7 February 2018.
  • The Resolution of the CMU on the List of Services of General Economic Interest No. 420 of 23 May 2018.

Several other secondary legal acts are in the pipeline, including:

  • The Draft Resolution of the Cabinet Ministers of Ukraine on General Criteria for Assessment of Compatibility of State Aid (CMU Draft Resolution on General Criteria), which will establish the requirements, terms, conditions (purpose, categories, thresholds of state aid, etc) and other necessary legal elements for the assessment of compatibility of state aid not intended for horizontal and sectoral purposes.
  • The Draft Resolutions of the Cabinet Ministers of Ukraine on Criteria for Approval of State Aid for Environmental Protection.
  • The Draft Law of Ukraine on Amendments to Some Laws of Ukraine to Bring them into Compliance with State Aid Laws, which will align more than 15 laws of Ukraine with state aid legislation, including the aforesaid criteria.

Full-fledged and operational state aid regulation will also be supplemented by secondary legislation on sectoral aid, the procedure on the revocation of decisions on clearance of new state aid by the AMC, etc.

9.

Is there a specific legislative or administrative scheme under national law relating to the application or enforcement of EU state aid rules? 

Please refer to the response to question 8.

10.

Are there national rules or guidelines relating to the implementation of EU state aid rules, in particular EU guidelines?

The guidelines published by the AMC so far include:

  • Guidelines on Application of the state aid legislation No. 1-pp/дд of 4 January 2018, regarding the application of the Law of Ukraine On State Aid to Undertakings to reimbursement of expenses related to the production of agricultural products;
  • Guidelines on Application of the state aid legislation No. 2-pp/дд of 28 February 2018;
  • Guidelines on Application of the state aid legislation No. 3-pp/дд of 20 March 2018 regarding support of natural monopolies;
  • Guidelines on Application of the state aid legislation No. 4-pp/дд of 20 March 2018 regarding application of the State Aid Law to services of general economic interest;
  • Guidelines on Application of the state aid legislation No. 5-pp/дд of 17 April 2018;
  • Guidelines on Application of the state aid legislation No. 6-pp/дд of 18 May 2018 regarding state support for the activities in the area of culture; and
  • Guidelines on Application of the state aid legislation No. 35-pp/дд of 5 October 2017.

Essentially, in all guidelines listed above the AMC quotes and explains the relevant jurisprudence of the Court of Justice of the European Union, as well as certain secondary legislation, frameworks, guidelines and other administrative acts in force in the European Union.

11.

Are there national rules or guidelines relating to the process of applying for, and the granting of, state support? 

Structurally, the Ukrainian state aid-related rules are scattered around various legal acts, from the Commercial, Budget, and Tax Codes to sectoral laws tailored to a particular industry (eg, the Law on State Support of Cinematography in Ukraine, the Law on the Electricity Market, the Law on State Support of Agriculture of Ukraine; the Law on Renewable Energy, etc).

All of the above legal acts typically lay down only the basic rules explaining what aid measures are available and who can meet the eligibility criteria, while the detailed procedural rules are reserved for secondary rules (eg, Procedure on Approval of the Use of Funds of the State Budget to Support the Construction of Coal and Peat Mining Enterprises, Technical Re-Equipment of Such Enterprises approved by the Resolution of the Cabinet of Ministers of Ukraine on 8 October 2012 No. 988; Procedure for Establishing, Reviewing and Termination of the Green Tariff for Electricity for Undertakings and Households approved by the Ruling of the Energy and Utilities National Regulatory Commission of Ukraine on 2 November 2012 No. 1421).

Relatedly, subject to few exemptions (including for de minimis aid), the Ukrainian state aid control requires prior notification of all new aid measures to the AMC. Donors of state aid must wait for the AMC's decision before they can put the measure into effect. The AMC should decide on the notified aid within two months from the receipt of a complete notification or a duly reasoned statement of the donor concerned that it considers the notification to be complete because the additional information requested by the AMC is not available or has already been provided. Pre-notification consultations are available.

12.

How is the concept of "service of general economic interest" (SGEI) defined on the national level? Did the definition recently lead to disputes, and, if so, how was the dispute adjudicated?

Currently, the Ukrainian approach to the SGEI is not fully consistent with the one in the EU for a number of reasons. 

First, the broadly worded definition of SGEI in the State Aid Law appears to lack all the EU principles envisaged (eg, by the landmark Altmark case). Second, the role of the AMC in ex antemeasurement of the accounts of SGEI providers to avoid overcompensation is not clear-cut. In one of the AMC reports it expressly invited the CMU to clarify the AMC’s role in relation to the SGEI services. Finally, the Resolution of the CMU on the List of Services of General Economic Interest No. 420 of 23 May 2018 does not seem to be fully comprehensive, in the sense that it includes mainly energy-related services (ignoring many other services that may fall under the notion of SGEI in the EU).

Nonetheless, in practical terms, the AMC generally tends to follow the EU approaches to SGEI. It frequently makes references to Altmark case in its decisions applying all relevant criteria, as well as requesting additional information from the notifying parties to ensure that the new measures do not lead to overcompensation.

13.

Do any studies on national enforcement of EU state aid rules exist? If so, describe the main subjects and results of these studies.

The EU funded Project ‘Harmonisation of Public Procurement System in Ukraine with EU standards’ issued a study on state support measures in Ukraine in March 2015.

The study was prepared in order to provide the stakeholders with a general overview of the scope and forms of state support to undertakings in Ukraine. It was based on publicly available data on state budget expenditures, budgetary revenue foregone and public liabilities registered during a period of three to five preceding years.

The study revealed that all Ukrainian governments had provided undertakings with public support in various forms – direct budget subsidies and loans, tax exemptions and deferrals, writing off debts and penalties in regard to the social insurance system, compensating interest rates for commercial borrowings, issuing state guarantees to secure financial liabilities of state-owned enterprises, compensating the cost of services provided to the population below their actual costs and providing additional funds to state-owned companies through capital injections.

In general, state support to undertakings in Ukraine had been predominantly sectoral in character; during the latest three years preceding the report the largest share of support measures (mainly through direct budget financing, state guarantees and tax benefits) had been granted to agricultural producers, although comparable amounts have been also directed at support to coal mining and energy companies. According to the estimates, sectoral measures in 2012 accounted for approximately 43.6 per cent of the total state support in Ukraine. At the same time, the scope of horizontal measures that could have encouraged investments, SME development, research and innovation, new jobs, energy saving and environmental protection, regional cohesion, has been rather limited over recent years.

The largest share of public support (including subsidies, tax benefits, write-offs, state guarantees and compensations) has been granted to state-owned enterprises in the energy sector (including coal), to shipbuilding, aircraft building, steel protection and IT development. Total budget revenue foregone from special tax benefits to undertakings accounted for approximately 3–5 per cent of GDP annually.

The energy sector (including coal, oil and gas, electricity) received on average some 30 per cent of the total amount of budget support to undertakings in Ukraine between 2011 and 2013. Here it is also worthwhile mentioning another report of the AMC publicised on 30 December 2016. In particular, the latter relates to the AMC’s pilot inquiry into state support measures in the energy sector. The results of the inquiry showed that almost half of the measures studied by the AMC might be qualified as state aid under the EU rules (let alone contravene these rules). The report also points out that the AMC was unable to adequately assess nearly a third of the measures covered by the inquiry because of complex over-regulated nature of the sector and lack of cooperation from certain state authorities. Unless these measures have expired or were repealed before August 2017, they will have to be notified to the AMC for closer assessment.

Role of national courts

14.

Do all national courts have jurisdiction to apply state aid rules? Or do certain dedicated courts have specific jurisdiction for state aid cases?

Where the aid provider or beneficiary do not comply with the recovery decision, the AMC may refer the matter directly to the Administrative Court of Kiev City. In turn, the judicial review of the AMC decisions with respect to state aid matters is also dealt with by the administrative courts.

Relatedly, if the state aid is granted through commercial relations with public undertakings, the commercial courts may also be competent to review state aid cases.

15.

Can the judgment of a national court on a state aid matter be appealed? If so, what grounds of appeal are available, and which court can hear the appeals? Does an appeal of a recovery order entail an automatic suspension of the obligation to recover unlawful aid (not notified) pending the outcome of the appeal?

No specific rules exist for appeals in state aid cases. Procedural rules allow for appeal to a higher court, eg, a judgment of the Administrative Court of Kiev City may be appealed to the Kiev Appeal Administrative Court and, subsequently, to the Supreme Court. The grounds for the appeal can be incorrect application of national law or incomplete examination of evidence.

16.

Do national courts sometimes confuse the concept of unlawful aid with incompatible aid?

To our knowledge, the Ukrainian courts have not been called upon to apply the state aid rules yet.

17.

Do national courts sometimes confuse the concept of new aid with existing aid?

To our knowledge, the Ukrainian courts have not yet been called upon to apply the state aid rules.

18.

Do national courts traditionally refer questions regarding the interpretation of EU state aid rules to the Court of Justice? Provide any notable examples of preliminary references made on state aid questions.

As Ukraine is not a member of the EU, its national courts cannot refer questions regarding the interpretation of the EU state aid rules to the Court of Justice. Moreover, the Ukrainian procedural rules do not allow to refer questions regarding the interpretation of the law to the higher courts.

19.

Do national courts use the possibilities offered by article 29 of Regulation 2015/1589 (Procedural Regulation) providing for the amicus curiae conditions in state aid matters? Has the Commission submitted written observations to national courts and asked authorisation to appear in court hearings?

As Ukraine is not a member of the EU, national courts do not use the possibilities offered by article 29 of Regulation 2015/1589. Moreover, the Ukrainian procedural rules do not allow to refer questions regarding the interpretation of the law to the AMC.

20.

Describe recent developments regarding state aid cases before national courts.

To our knowledge, the Ukrainian courts have not reviewed state aid cases yet.

21.

Under national procedural rules, can a government measure be challenged directly in court on the grounds of illegal state aid, or do applicants first have to go through a preliminary administrative review procedure? If so, describe the steps involved in this procedure. 

A government measure can be challenged directly in the Ukrainian court (via the judicial review process). There is no compulsory preliminary administrative review process.

22.

Under national procedural rules, who has legal standing to challenge a government measure in court on the grounds of illegal state aid?

To challenge a government measure in court, claimants would need to show that their interests might be affected by the measure.

23.

Can a national authority argue in domestic court proceedings that a particular measure contains unlawful state aid, or are there any procedural bars to doing so? 

National authorities may argue in national court proceedings that a particular measure contains unlawful state aids (eg, to justify their decision not to grant support to certain undertakings or refusal to fulfil a contract containing state aid). However, this is untested yet.

24.

What are the limitation periods under national procedural rules for a party seeking to invoke unlawfulness under state aid rules in domestic court proceedings?

There are no specific limitation periods applying to state aid cases, other than the limitation period of one month for challenging the AMC decisions. Otherwise, standard limitation period applies, which is limited to six months from the date when the claimant has acquired knowledge of event or should have acquired knowledge.

25.

Does any provision of national law prevent an individual with standing from bringing state aid proceedings in the domestic courts concurrently with an investigation by the European Commission (eg, if the individual has complained to the Commission in parallel, or the Commission has started an investigation on its own initiative)?

There is no provision of Ukrainian law preventing an individual from bringing state aid proceedings in the national courts concurrently with an investigation by the AMC.

26.

Under which circumstances will a national court stay proceedings as to the existence of state aid pending a Commission investigation?

There are no circumstances allowing the national courts to stay proceedings because of the pending investigation by the AMC.

27.

What are the consequences for national courts if the Commission has already come to the preliminary conclusion in its opening decision that the measure constitutes incompatible state aid?

Overall, the national courts are not bound by the AMC decisions. At the same time, they are likely to refrain from taking decisions that conflict with a decision of the AMC (eg, dismissing a claim on the ground that they consider that the measure at hand should not qualify as state aid).

28.

How do national courts react to the Deutsche Lufthansa case? By referring matters to the European Commission (for amicus curiae support) or to the Court of Justice of the European Union (CJEU) for a preliminary ruling under article 267 TFEU?

Please refer to the response to questions 18, 19 and 27.

29.

What is the burden of proof in state aid cases before national courts?

This depends on the court that reviews the case. In administrative courts the burden of proof rests with the defendant (ie, an aid donor that allegedly unlawfully granted aid or the AMC if the compatibility of the new state aid was allegedly wrongly assessed). In commercial courts the procedure is based on the adversarial principle, which means it is the complainant that has to prove its case.

30.

In light of the EU law obligation on national courts to protect the rights of individuals affected by the unlawful implementation of state aid, what are the requirements under national law for a plaintiff seeking interim measures in the courts, in particular to prevent the grant of aid? In what form and under what circumstances can interim relief be granted? 

For commercial and administrative courts, a general test for granting the interim measures is that failure to do so will significantly hinder or make impossible the enforcement of a final decision or effective protection of the claimant's rights and interests. The additional ground for granting an interim measure for administrative court is a prima facie evidence of unlawful actions and/or decision of the defendant and violation of the claimant's rights and interests by the action and/or decision in issue. The court can grant interim relief upon the application of the interested party or by its own motion.

Consequences of violation of state aid rules

31.

What remedies are available to a national court if it determines that a non-notified measure contained state aid? 

If the national court determines that a non-notified measure contained state aid, it may find the legal act underlying the measure to be ineffective, which affects the validity and enforceability of the measure.

32.

In light of the EU law requirement that national courts must, in principle, order the full recovery of unlawful state aid from a beneficiary, are there any domestic law provisions that may hinder a national court from ordering the recovery of non-notified state aid? Do national courts set aside such domestic law provisions as required by the Court of Justice’s case law?

Formally, neither the Association Agreement nor the State Aid Law empowers national courts to recover the unlawful (non-notified) state aid. Moreover, it appears that the AMC itself cannot recover state aid merely because the standstill obligation was not respected. Instead, the AMC must conduct a full assessment and recover only aid which is incompatible with competition. 

At the same time, general procedural rules do not preclude the Ukrainian administrative courts from ordering the recovery from a beneficiary. Moreover, as noted in response to question 6, under the Association Agreement, while interpreting the national state aid legislation, the Ukrainian authorities should nonetheless be bound by the relevant jurisprudence of the Court of Justice of the European Union, as well as relevant secondary legislation, frameworks, guidelines and other administrative acts in force in the European Union.

Enforcement by the European Commission

33.

Would the national court necessarily declare a guarantee invalid if it secures a loan constituting aid and was granted in breach of article 108(3) TFEU? Does it make a difference if the only aid beneficiary is the borrower and not the lender? 

To our knowledge, Ukrainian courts have not reviewed state aid cases yet, including those involving loans and guarantees.

However, again, as noted in response to question 6, under the Association Agreement, while interpreting the national state aid legislation, the Ukrainian authorities should nonetheless be bound by the relevant jurisprudence of the Court of Justice of the European Union, as well as relevant secondary legislation, frameworks, guidelines and other administrative acts in force in the European Union.

34.

How can a competitor of the beneficiary or other affected third parties claim compensation from the authority granting the state aid for damages caused by the aid? Explain the steps involved in bringing such an action for damages. Explain the steps involved in bringing such an action for damages and how national courts have applied the criteria of the relevant EU case law.

Such damages claims are available by means of lawsuits for government liability. The claimant will need to prove:

  • unlawful behaviour of the authority;
  • the fact of causing damages; and
  • causal link between unlawful behaviour and damages sustained.

In practice, this area of case law is undeveloped in Ukraine.

35.

How can a third party claim compensation from the member state for damage caused by failure to respect the standstill obligation?

Please refer to response to question 34.

36.

Under national law, can a third party bring damages actions against the beneficiary?

In theory, such damages claims are possible. However, it will likely be uneasy for the claimant to pursue them in view of the fact that neither the EU nor the Ukrainian state aid law (modelled after the former) impose any direct obligations on the beneficiary.

37.

Under national law, how can a beneficiary bring damages actions against the member state as per the SFEI case law of the Court of Justice for having unlawfully granted aid? How do national courts avoid the risk of circumvention of EU state aid rules?

Please refer to response to question 34.

38.

What are the consequences of a violation of EU state aid rules for the validity and enforceability of the aid measure under national law? Are the consequences the same for unlawful aid that was not notified to the Commission as for aid that the Commission has ultimately determined as incompatible with the internal market?

There are no provisions in the Ukrainian law that automatically make the measure null and void. Instead, the measure may be declared invalid by the national court, which affects the validity and enforceability of the measure.

Recovery of state aid

39.

What are the consequences of a violation of EU state aid rules for the validity of a government regulation or contract containing the aid measure, and for subsequent regulations or contracts linked to the aid measure? Are the consequences the same for unlawful aid that was not notified to the Commission as for aid that the Commission has ultimately determined to be incompatible with the internal market? 

As mentioned in response to question 34, the national court may declare the legal act serving as a basis for state aid to be ineffective. This, however, does not necessarily mean that the measure will be declared ineffective entirely. The court may well limit its decision to certain provisions of the legal act that violates state aid rules.

40.

Describe any major state aid investigations opened by the Commission against your country over the past 12 months. State whether these investigations were specific to your country or part of a broader investigation into several member states.

There were no investigations opened by the European Commission against Ukraine, as Ukraine is not a member of the EU.

At the same time, since the State Aid Law came into force on 2 August 2017, the AMC has been quite active in terms of enforcement. So far, its primary focus has been on local municipalities, which are the testing ground for the AMC in anticipation of larger cases of nationwide dimension and involving central authorities as donors of the aid. Some of the notable actions of the AMC are outlined below.

On 29 March 2018, the AMC opened its first state aid case. The investigation is the result of the notification of the new aid measure by municipality of Odessa city. The notified measure involved almost €2 million in financial support reserved in the municipal budget for two regional health charities. The AMC had doubts about compatibility of this measure with the new state aid rules owing to insufficient (i) information on the coverage of the services provided by the charities and (ii) justification of the procedure for selection of the beneficiaries of this measure.

Another major case was opened on 21 May 2018 following notification of the new measure involving financial support with the total budget of nearly €70 million spread over the period of six years and taking various forms (capital injections, subsidies, local tax reliefs). This was reserved for a municipal transportation company to mainly compensate for a public service obligation – provision of transportation services to certain categories of passengers. 

The AMC had doubts about the candidate beneficiary and the proportionality of the public service obligation. In particular, the AMC is pointing to the fact that the local authorities of Vinnitsa city may have failed to ensure competition while selecting a candidate that is able to provide the public services at the least cost to the community. The municipal authorities appointed the transport company as a public service provider eligible for compensation without a tender, while that was in fact mandated by both the Ukrainian transport legislation and the EU state aid practice, which should be instructive for Ukraine under the EU–Ukraine Association Agreement (eg, the Altmark case). The municipal authorities tried to explain that the tender had not been required because the municipal transport company allegedly had no competitors, but the AMC rebutted their arguments with reference to materials of the notification and requested additional market data. Separately, by opening the in-depth investigation, the AMC has also called for additional information to ensure that (i) there is no excessive compensation for the beneficiary of the measure; (ii) the benefit to the municipal transport company is determined correctly and transparently; and (iii) the compensation will be reflected in separate accounts of the beneficiary to avoid cross-subsidising.

41.

Has the Commission suggested appropriate measures concerning existing aid measures in your country over the past 12 months?

As Ukraine is not a member of the EU, the Commission has not suggested any measures concerning existing aid measures in your country over the past 12 months.

We are also not aware of any suggestions of the AMC in relation to the state aid measures existing in Ukraine. Perhaps, this is because the deadline for submission of the information on existing aid measures passed not so long ago (ie, only on 2 August 2018) and the AMC takes its time to review all submissions and formulate suggestions (where necessary).

42.

Has the Commission ever opened specific investigations against your country following a sector inquiry?

We are not aware of any cases opened by the AMC as the result of the sector inquiry. To our knowledge, all of the cases opened so far followed a notification of a new aid measure.

43.

Has your country ever been subject to an injunction by the Commission to suspend or provisionally recover aid under article 13 of Regulation 2015/1589?

We are not aware of any injunctions by the AMC to suspend or recover aid.

44.

Has your country ever been subject to an infringement procedure under article 108(2) TFEU and article 260 TFEU? 

Not applicable,

45.

Has the European Commission ever undertaken on-site state aid monitoring visits based on article 27 Regulation 2015/1589 (previously article 22 of Regulation 659/1999)? How were the visits carried out? What measures were taken to assist the officials and experts carrying out the visit?

We are not aware of any on-site state aid monitoring visits carried out by the AMC (though this is possible in practice).

Main areas of state aid

46.

Which national authority orders the recovery of state aid following a Commission decision, a judgment of the Court of Justice, or a national court judgment?

The AMC is responsible for ordering the recovery.

47.

What procedural or administrative actions are contemplated in the national law for the recovery of unlawful or incompatible state aid?

Under the CMU Resolution on Recovery of State Aid, where a negative recovery decision is taken, the AMC sends its copies to aid providers and beneficiaries within three days and publishes it on its website.

The aid provider concerned shall take all necessary measures to recover the aid from the beneficiary and must inform the AMC about them within a set deadline, which should not exceed two months following publication of the negative decision. The overall deadline for recovery of the aid should not exceed six months following publication of the decision.

Where the aid provider or beneficiary do not comply with the recovery decision, the AMC may refer the matter directly to the Administrative Court of Kiev City.

Under the State Aid Law, where the AMC establishes that unlawful state aid is provided on the basis of a legislative act adopted without compliance with the requirements of the State Aid Law, it shall notify the appropriate state aid provider and the Cabinet of Ministers of Ukraine, which, being a subject of the right of legislative initiative, makes proposals for bringing such a legislative act in accordance with the State Aid Law.

Other

48.

What actions are available to the national recovering authority seeking to force an unwilling beneficiary to refund the unlawful and incompatible state aid?

If the beneficiary is unwilling to refund the incompatible state aid, the national authority can seek a court enforcement order.

Relatedly, in case of initiation of the bankruptcy proceeding in relation to the beneficiary, the national authorities are obliged to enter the court proceeding and take other appropriate actions provided for by law in order to restore the debtor's solvency, including to submit the corresponding claims of the creditors on the return of illegal state aid.

49.

Can an individual with standing bring an action in the national courts for the purpose of: challenging the validity of the national recovery order implementing the Commission’s recovery decision; or suspending the national recovery order pending a final decision either on the validity of the national recovery order itself, or on the validity of the Commission’s recovery decision?

Yes, it is possible to bring an action into the national court to challenge the validity of the national recovery order. This, however, will not remove the obligation to repay the aid.

50.

Can third parties with standing obtain a mandatory order from the court that forces the relevant national authority to recover funds from a beneficiary of incompatible state aid where the former has failed to implement a recovery decision by the European Commission?

Yes, this is possible in practice.

51.

What defences by beneficiaries against recovery have been accepted by national authorities or courts?

Possible defences of the beneficiary against recovery are very limited. In particular, the recovery is compulsory except for cases where:

  •  the 10-year limitation period has passed; or
  •  the beneficiary of the aid has been liquidated.

52.

What is the situation under national law if recovery was ordered by a national court owing to the violation of the standstill obligation but the aid is later declared compatible with the internal market by the European Commission?

To our knowledge, there is no developed case law on this in Ukraine, as national courts are yet to review their first state aid cases. At the same time, they should be bound by the relevant jurisprudence of the Court of Justice of the European Union, as well as relevant secondary legislation, frameworks, guidelines and other administrative acts in force in the European Union.

53.

How do national courts apply the CELF I case law (Case C-199/06)?

To our knowledge, there is no developed case law on this in Ukraine, as national courts are yet to review their first state aid cases. At the same time, they should be bound by the relevant jurisprudence of the Court of Justice of the European Union, as well as relevant secondary legislation, frameworks, guidelines and other administrative acts in force in the European Union.

54.

How do national courts handle cases where the Commission has not yet decided on compatibility?

To our knowledge, there is no developed case law on this in Ukraine, as national courts are yet to review their first state aid cases. At the same time, they should be bound by the relevant jurisprudence of the Court of Justice of the European Union, as well as relevant secondary legislation, frameworks, guidelines and other administrative acts in force in the European Union.

55.

Are the recovery interests paid by a beneficiary tax deductible under national tax rules?

Currently, interests are not paid.

56.

Is aid that was granted in the form of a fiscal measure always recovered through a new tax assessment, or do the national authorities use the freedom of choice under EU law to recover through the easiest available and most efficient method, even if not fiscal?

To our knowledge, there is no developed case law on this in Ukraine, as national courts are yet to review their first state aid cases. At the same time, they should be bound by the relevant jurisprudence of the Court of Justice of the European Union, as well as relevant secondary legislation, frameworks, guidelines and other administrative acts in force in the European Union.

57.

Which sectors have received the highest amounts of aid in the past five years?

See question 13.

58.

Provide information on the amounts of state aid paid out under approved state aid schemes and individually approved state aid for the past five years.

To our knowledge, there were only one measure approved in Ukraine. Namely, on 17 April 2018, the AMC took its first ever decision on compatibility of a new state aid. The decision follows the review of the new aid measure notified by the municipality of Chernigov city. The notified measure involves financial support for the city cultural сentre covering its wage costs and utility bills. The AMC found the measure to present state aid, which is however compatible as it promotes culture and heritage conservation and has limited effect on competition.

59.

Provide information on any other special features of your country’s state aid regime not covered above.

Currently, in all its cases the AMC does not asses if measure in question may affect trade between the parties to the EU–Ukraine Association Agreement. This goes in line with the current approach of the authority to skip this test as not expressly required by the national state aid legislation. However, this may change in the future. In particular, the AMC has recently proposed to change the State Aid Law by supplementing the definition of state aid with the 'effect on trade' component. They expect this to reduce the stream of notifications by around 40 per cent, as well as the overall burden on municipalities.