Brussels is losing its grip on one of its mightiest weapons: state aid control.

State aid enforcement lies at the heart of the European project, and has long been one of the strongest tools at the European Commission's disposal to ensure that the EU can impose common standards and goals across the Continent.

Fundamentally, it is a mechanism that prevents individual EU countries from taking widely divergent economic directions from others by selectively supporting certain industries with subsidies and tax breaks.

In recent years, state aid has been at the forefront of some of the EU's biggest strategic decisions. Most famously, in August 2016, Brussels forced Ireland to claw back €13 billion, plus interest, from U.S. tech giant Apple over a sweetheart tax deal.

In the teeth of the financial crisis, state aid control was the EU's chief tool to ensure countries did not simply fling money into failing banks without restructuring them. It is also one of Brussels' key levers to ensure that it has influence over how countries restructure traditional heavy industries, like Poland's dockyards and coal mines.

These powers are now, however, coming under threat like never before. In the past months, the EU courts have shot down an unprecedented number of decisions on state aid. According to POLITICO's calculations, the Commission has lost 17 out of 41 state aid cases taken to the Luxembourg courts on appeal since November. This is an alarming reversal for the Commission which, as a rule of thumb, normally expects to win four out of five cases in Luxembourg.

The last big setback happened on May 16, when the court said that Poland was not breaching EU rules by exempting small supermarkets from paying a retail tax. Seeking to protect the single market, Brussels' state aid enforcers had ruled against Warsaw's tax on the grounds that it would disadvantage big international supermarkets. Only a few days later, the Commission lost a smaller case on whether the football club Real Madrid had unfairly benefited from a land deal.

Lawyers are noticing that the courts are now subjecting the EU's state aid decisions — long seen as highly political in nature — to far more exacting legal standards.

As Alfonso Lamadrid, a partner at Garrigues, put it: “We are probably witnessing a paradigm change that will lead to subjecting state aid control to more of an objective legal logic, reducing the emphasis of political discretion.”

For Margrethe Vestager, these losses could not be coming at a worse time. As she seeks to project herself as a potential leader after she announced her intention to get the Commission top job, she needs big wins.

Big fails

The annulled decisions are far from peripheral.

In the past few months, the Commission has been defeated in cases involving special tax arrangements in Belgium and Spain, the U.K.’s program to manage power capacity shortages and the legality of an Italian bank rescue.

The EU’s General Court also threw out the Commission’s decision to approve the Danish government’s €7 billion support for a submarine road and rail link between Vestager's homeland and Germany: the Fehmarn Belt link.

What’s striking about these decisions that were annulled — partially or in full — is the political dimension. They mostly relate to the policy priorities that steered European Commission President Jean-Claude Juncker’s mandate: the energy union, the banking union and the fight against tax avoidance.

And as for the Fehmarn Belt, Vestager hardly wants trouble in her homeland, which will have to nominate her for another stint in Brussels if Danes believe she should stay there.

These infographics are from POLITICO Pro’s DataPoint library. To access this DataPoint, and see what else we have in the library, email pro@politico.eu requesting a complimentary trial.

The Commission did not respond directly to a question about the recent flurry of defeats, but took a longer-term approach, saying it makes about 300 state aid decisions a year. "Of those 300 decisions, about 10 percent are appealed to the General Court. And, out of the appealed decisions, the Commission’s position over the past few years has been ultimately upheld by the General Court in over 75 percent of the cases," a Commission spokesman said.

"In those cases in which the Commission’s position is not upheld, we study the judgments carefully and try to draw lessons from them."

Time to up your game, Margrethe

Phedon Nicolaides, a professor at Maastricht University, dismissed the idea that the Luxembourg courts could be pushing back at the politicization of state aid cases.

“These setbacks are coincidental,” he said.

He added that there is no sign the Commission has lowered its standards. “They concern different issues. I don’t detect any shortcuts … On the contrary, I have observed over the years that Commission decisions have become more meticulous and detailed.”

In Luxembourg, though, the Commission’s decisions have not been living up to the courts’ standards.

Lamadrid noted that “the commonality across many of these cases is the Commission’s failure to sufficiently investigate all the relevant circumstances and context of the measures.”

Competition lawyers generally stressed that the EU courts were upping their game in state aid. As one put it: “What this shows is that state aid is more and more important, more complex, and difficult. And the court is getting more and more thorough in the review.”

It means, as top state aid lawyer Massimo Merola explained, that the Commission has to renew efforts to pass the courts' tests. “The EU courts are putting extra burden on the Commission insofar as the reasoning of state aid decisions is concerned.”