Landmark Ruling of the CJEU: EU State Aid Law prevails over the legal Effect of national Judgments - GvW Graf von Westphalen achieves an important Victory for the Federal State of North Rhine-Westphalia

The effective enforcement of EU state aid law cannot be circumvented by a binding national court judgment. This was decided by the European Court of Justice (CJEU) in its ground-breaking ruling of 11 November 2015 (C-505/14), thereby endorsing the point of view of the Federal State of North Rhine-Westphalia (NRW), represented by GvW, which was sued by the Austrian Klausner group before the regional court Münster to pay damages in the amount of EUR 56 million and to deliver approx. 1.5 cubic meters of spruce pulpwood (total value in dispute: approx. EUR 123 million). The regional court Münster stayed the proceedings and seized the Court of Justice in Luxemburg. The Luxemburg judges thereby followed GvW’s line of argument.

The CJEU ruling which has now been delivered is also significant beyond the individual case and has a fundamental scope, since it sets standards for when the circumvention of legal effect with regard to national judgments is advisable against the backdrop of the principle of effectiveness under Union law.

The legal dispute which is currently pending before the regional court Münster and provides the background for the CJEU ruling is based on a contract from 2007 between Klausner and the Federal State of NRW as the defendant. With reference to this contract, Klausner asserts a damage claim and the delivery of spruce pulpwood.

In a previous proceeding between the parties, the higher regional court Hamm found in 2012 with legally binding judgment that the contract would be valid. GvW was not involved in this previous dispute and was first mandated by the Federal State of NRW in the subsequent proceeding held before the regional court Münster. Here, GvW achieved the turnaround. The GvW lawyers for the first time raised the issue that the Klausner contract would be contrary to state aid law and were able to convince the regional court Münster of their legal view: The court deems the Klausner contract to constitute an inadmissible state aid distorting competition to Klausner’s advantage and therefore assumes that the contract is void.

In view of the declaratory judgment of the higher regional court Hamm which was passed in the previous proceedings in 2012, the regional court Münster submitted the legal issue to the CJEU with decision of 17 September 2015 upon the request of the GvW lawyers, asking for clarification as to whether EU law requires that a previous, legally binding judgment in which the continuation of a “state aid infected” contract was found, should be ignored if, under national law, the execution of the contract which is contrary to state aid law cannot be avoided otherwise. The CJEU has clearly answered this question in the affirmative in its recently delivered ruling. The legal dispute will now be continued before the regional court Münster. In its submission decision, the court announced that it would reject the claim if - as now clarified by the CJEU - European law requires in the present case that the legal effect of the judgment of the higher regional court Hamm be ignored. The contract which is the subject matter of the dispute would then be void and could not form the basis for the claims asserted by Klausner. The further course of the proceeding remains to be seen.

GvW advises and represents the Federal State of North Rhine Westphalia with a team across locations consisting of Dr Frank Süß (lead lawyer/litigation, Frankfurt), Dr Gerd Schwendinger, LL.M. (state aid law, Hamburg/Brussels); Dr Bettina Meyer-Hofmann (procurement law, Düsseldorf), Christian Kusulis (competition and antitrust law, Frankfurt), Stephen-Oliver Nündel (litigation, Frankfurt), Dr Ronald Steiling, Saskia Soravia, Corinna Lindau (public commercial law, Hamburg).