Austria's handling of the COVID crisis was, and this can be said without any schadenfreude in hindsight, not optimal. COFAG, the vehicle at the centre of the aid architecture, was found unconstitutional. A series of pandemic regulations were struck down as unconstitutional or unlawful. And the generous short-time work aid, in the view of the Court of Auditors, deepened the labour shortage in other sectors. And now – following the judgment of the Austrian Supreme Court (Oberster Gerichtshof, OGH) of 28 April 2026 (1 Ob 23/26b) – aid is being clawed back in series, on the ground that it is said to have breached EU State aid law. Those affected are corporate groups whose companies were each funded up to the “cap” individually – exactly as COFAG's and the Finance Ministry's administrative practice expressly allowed. On the OGH's reading, the cap is instead a single ceiling for all companies belonging to the same group. Several thousand proceedings are pending, and the deadlines by which the Republic itself offered a way out have expired. Does EU State aid law really require repayment of everything above the cap, with interest running from the day of payment?
The answer in short: Not necessarily. Whether COVID aid above the cap has to be repaid has been settled in principle by the OGH. Anyone fighting the clawback at that level, invoking legitimate expectations or suing the Republic for damages, will (in this author's view) lose. But the OGH said nothing about whether the money paid out can stand on other State aid bases. That is exactly where the room for manoeuvre lies for recipients – and the Federal Finance Court (Bundesfinanzgericht, BFG) has already used it in one case.
What the OGH decided
The facts. The claimant in the case before the OGH operated motorway service stations and belonged to a group of companies that had received more than €10m in aid under Section 3.1 of the Temporary Framework – lockdown revenue compensation, the revenue shortfall bonus and the fixed cost subsidy. Of that, some €1.4m above the cap was attributable to the claimant itself. When it applied in 2022 for loss compensation of some €3.3m, COFAG refused to pay out to that extent.
The question. The dispute turned on what an “undertaking” means under the aid rules: the individual legal entity (the claimant's position) or the economic unit (the position COFAG had come to take). The Temporary Framework and the Commission's approval decisions set caps – most recently €2.3m – “per undertaking”, without defining the term. EU competition and State aid law generally works with the functional notion of an undertaking, which looks to the economic unit rather than the legal entity. The stakes are high: for a group of fifteen companies the cap is either €34.5m (legal entity) or €2.3m (economic unit).
How it got here. With no express definition in the Temporary Framework, the Austrian funding guidelines simply carried over the “cap of €2.3m” without defining the notion of an undertaking any further. COFAG's funding practice and the Finance Ministry's FAQs (see Q1.22.) then went by the individual legal entity, and advisory practice largely followed. By letter of 8 March 2021 the Directorate-General for Competition told COFAG that the cap of €2.3m had to be calculated for the economic unit as a whole. It took until 2024 for the Republic to create, in the Obergrenzenrichtlinien (cap guidelines), a route for recipients to reallocate COVID aid above the cap of €2.3m per economic unit onto a State aid compliant basis – within narrow limits. Some, but not all, companies made use of it.
The ruling. The OGH considered the law clear. The prohibition in Article 107(1) TFEU rests on the functional notion of an undertaking. The recipient of aid is the economic unit. Had the Commission wanted to depart from that, it would have said so. The court found confirmation in DG Competition's letter to COFAG and in the Obergrenzenrichtlinien themselves: “there would have been no need for the possibility of a State aid compliant reallocation” if the legal entity had been the relevant unit.
The consequence. The amount exceeding the cap of €2.3m is not approved under the COVID aid rules. Paying it out breached the standstill obligation in Article 108(3) TFEU. The Republic has to recover it.
Why legitimate expectations and State liability do not hold
Legitimate expectations under EU law. The argument is the obvious one: the approvals were in place, the Republic reported quarterly, and for three years nobody objected to the cap being calculated per legal entity. The argument has little chance of succeeding. On the settled case law of the Court of Justice (ECJ), legitimate expectations against the recovery of aid can only be created by the EU institutions. Assurances given by the Member State are irrelevant, even where the national authority is responsible for the illegality to a degree that makes withdrawal look like a breach of good faith. As regards the aid above the cap, the Commission created no expectation of its own. To the contrary, from March 2021 it told the Republic that the cap had to be calculated at group level.
State liability. A damages claim against the Republic has little prospect either, and for reasons of EU law. On the settled case law of the ECJ, a claim that economically amounts to leaving the unlawful aid with the recipient undermines the effectiveness of the recovery obligation.
What options are left to recipients
The starting point. What has to be recovered is what was granted in breach of the standstill obligation. There is no such breach where the aid falls under an approval decision or a block exemption regulation. The OGH held, bindingly, that aid above the cap of €2.3m is not approved under the COVID aid rules. It said nothing about whether those amounts might be approved under some other State aid basis.
The alternatives. If the aid paid out meets the substantive conditions of another State aid basis, there is no breach of the standstill obligation, and State aid law requires no recovery. That it was paid out under the wrong label is a national labelling problem. The whole State aid toolbox is in play as an alternative basis, in particular the General Block Exemption Regulation (GBER) and the De-minimis Regulation. Whether, and which, alternative basis can justify the aid above the cap of €2.3m has to be assessed individually for each company and its business and investment activities. Investments in decarbonisation (swapping an oil-fired boiler for a heat pump), in green energy (installing a photovoltaic system), the employment of workers with disabilities, investments in culture or in research and development can all come into play.
The BFG's confirmation. The Federal Finance Court confirmed the approach in substance in a decision of 4 September 2025 (RV/7101856/2025). That case concerned a late application rather than an excess over the cap, but the same reasoning applies. Although the appellant had not made use of the reallocation route available in 2024, the BFG held that no recovery claim arises where the amount paid out meets the conditions of the De-minimis Regulation. The missing reallocation application did not matter.
Between the lines: what to take away
After the OGH's ruling of principle on the recovery of COVID aid, some questions are settled and some are still open.
One economic unit. For calculating the cap of €2.3m, what counts is not the legal entity that received the aid but the economic unit – the group as a whole.
A long wait. The EU limitation period for the recovery of aid is ten years from the date the aid was granted. Alongside that, the time limits of the Austrian tax procedure apply to recovery by the tax office. Sitting it out is not a strategy in either direction.
Check the alternatives. Anyone facing a possible clawback of COVID aid should be thinking about alternative approval routes. Which investments were begun after the aid was applied for? Are workers with disabilities or apprentices employed? How much was spent on research and development? These alternatives will not fit every case, but they may well head off some clawbacks.
Disclosure: This article was written the way we work. The topic, the analysis, the arguments and the final wording are ours. We use AI as a research and drafting tool along the way. The result is meant to speak for itself.