EU takes Italy to court over illegal aid to Sardinia hotels

The EU's competition watchdog decided yesterday to take Italy to the European Court over its failure to recover illegal aid from hotels in Sardinia.

"The recovery of illegal and incompatible aid is essential to restore a level playing field in the single market," said European Competition Commissioner Neelie Kroes.

"The Commission is determined to take all necessary steps to ensure that member states comply with their recovery obligations," she added in a statement.

The aid in question, the size of which was not revealed, was aimed at boosting the development of the island's tourist hotel industry.

To ensure that the state aid was necessary, the EU Commission - guardian of Europe's competition laws - had insisted, back in 1998, that any such aid money be solicited before building work had begun on the project in question.

However, complaints that this rule was being breached began coming in as early as 2003, where the work on one project had started prior to the application for aid under the scheme. Brussels launched a formal investigation and in 2008 concluded that some of the aid had been granted in violation of the conditions set out, ordering Italy to recover the illegal aid.

"More than one year after the adoption of the Commission's decision, Italy has not recovered any aid from the beneficiaries concerned," the Commission complained.

In its statement, Brussels said that Rome had indeed handed recovery orders to the aid beneficiaries concerned. However, the companies targeted, appealed to the Italian courts, which in many case suspended the recovery orders.

"Such suspension decisions are clearly contrary to EU law," said the Commission which complained that "this is a persistent problem in the Italian legal system".

It recalled that several similar cases against Italy were already pending in the European courts.