State Aid as a Defence for Public Authorities? Annotation on the Judgment of the Court of Justice of the European Union (Second Chamber) of 15 November 2015 in Case C-505/14 Klausner Holtz Niedersachsen GmbH v Land Nordrhein-Westfalen

In the annotated judgment a public authority uses the existence of State aid as a defence in a legal action, where its contractual partner aimed to achieve damages and fulfilment of the contracts. The public authority claimed that the contracts were not on market terms, which also was the national court’s perception. As the contracts had been declared to be in force by a declaratory judgment that was res judicata, the dispute before the CJEU concerned the national interpretation of the principle of res judicata and its application in a State aid context. The CJEU first turned to the principle of consistent interpretation, which it considered could provide various solutions for the national court to draw all the necessary consequences of the possible breach of the duty to notify State aid. In the alternative, the CJEU considered the principle of effectiveness and found that due to the fundamental principle of State aid control, the national court’s broad interpretation of the principle of res judicata could not be retained. The judgment cements the specific limitation on national principles of res judicata in a State aid context and tropicalises the issue of how breach of State aid law by public authorities and national courts might be prevented.