The case arose from an incident in 1990 when the Commission ruled that it was illegal for the Council to allow Portugal to bail out struggling pig farmers. The Commission had determined that national subsidies broke EU law, but the Council had decided to give Portugal the go-ahead, citing the financial plight of the farmers.
The Commission then took proceedings in the ECJ, complaining that the governments' move undercut its authority under EU law. And the court has now decided that the Council "cannot authorise an aid measure which the Commission has declared incompatible with the common market". Portugal must now recover the money it gave to its farmers.
Strangely enough, the UK has been there before. On 28 May 1977, the Cabinet committee which dealt with (then) Common Market issues was told that the Commission had successfully appealed to the ECJ to have ruled "out of order" pig meat subsidies paid by the British government, and had instructed that the subsidies be stopped "forthwith".
Tony Benn was present at the meeting. He asked whether this was the first time that a European Court decision had been taken against the British government and was told it was. In his diaries, he wrote:
Then I asked what would be the political effect of this on pig producers in the UK. John Silkin said it would mean in effect the destruction of our industry, the mass slaughtering of pigs and the abandonment of our processing plants in favour of the Danes… I wanted to be told explicitly – as I was – that I was a member of the first British Government in history to be informed that it was behaving illegally by a court whose ruling you could not alter by changing the law in the House of Commons. It was a turning point…Now the Portuguese have learned the same lesson, with the court confirming that, in matters of EU law and the application of the treaties, the Commission is top dog. With a new Portuguese president about to be anointed, this is perhaps a timely lesson.
Interestingly, many of the news reports still insist on calling the Commission the EU's "executive body". This case also confirms that the term "government" would be more appropriate.