European Court of Justice rules for Babolna in complementary state aid case

Babolna applied for a European Union single area payment and a complementary national subsidy in 2004. The company was allocated HUF 174m for the single area payment and HUF 71m in complementary national aid in May 2005, but the Office of Agriculture and Rural Development later rejected the application for complementary aid and ordered Babolna to repay almost HUF 16m that had already been paid out after discovering that the company had undergone voluntary liquidation in September 2004. Hungarian law prohibits payment of EU farm subsidies and complementary national farm aid to companies that are under liquidation or in bankruptcy proceedings, but no such exclusion exists for EU single area payments. The Court of Justice said EU rules grant a “certain degree of discretion” to member states on the implementation of complementary national aid, but legislation cannot be established or applied in such a way as to “compromise the objectives pursued by that policy…and more particularly those envisaged by the aid schemes”.

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