On 14 April 2021, the General Court ("GC") handed down three judgments dismissing Ryanair’s challenges against decisions by the European Commission, approving individual aid measures granted by Finland to Finnair (Case T-388/20) and by Denmark and Sweden to SAS in the context of the COVID-19 pandemic (Cases T-378/20; T-379/20).
Key takeaways
- In the wake of the COVID-19 pandemic, the European Commission has approved a flurry of aid measures to the aviation sector. Ryanair has lodged a series of applications for annulment of these decisions, essentially arguing that they contravene the principle of non-discrimination.
- In its first judgments concerning individual aid measures adopted in this context, the GC ruled that the latter are inherently discriminatory (by being selective) but that this does not in itself call into question their compatibility.
- Member States are allowed to grant selective favourable treatment in the COVID-19 context to companies which are important to their national economy.
Background
In the context of the COVID-19 pandemic, Member States notified a flurry of aid measures to the European Commission to alleviate the adverse effects of the crisis, notably on the aviation industry. The European Commission approved a series of individual aid measures in favour of airlines, including in April and May 2020 respectively:
- a Danish and a Swedish loan guarantee in favour of SAS to compensate it for part of the damage suffered due to the COVID-19 outbreak on the basis of Article 107(2)(b) TFEU; and
- a Finnish loan guarantee in favour of Finnair to remedy a serious disturbance in the economy on the basis of the Temporary Framework (which is based on Article 107(3)(b) TFEU).
Ryanair - a competitor of Finnair and SAS in Finland, Sweden and Denmark - challenged the European Commission’s decisions, essentially arguing that they are at odds with the EU principle of non-discrimination and that the aid measures approved are disproportionate. The GC dismissed the three actions.
Judgments
In all three judgments, the GC stressed that "individual aid by definition benefits only one company, to the exclusion of all the other companies, including those in a situation comparable to that of the recipient of the aid" and is therefore inherently discriminatory. It follows that the discriminatory character of individual aid cannot in itself call into question the compatibility of individual aid under Articles 107(2)(b) or 107(3)(b) TFEU.
However, the discrimination needs to be (i) justified by a legitimate objective and (ii) appropriate and proportionate for achieving that objective.
Finnish ruling – aid to remedy a serious disturbance in economy
In its Finnish ruling, the GC first clarified that there is no requirement that the "aid in question is capable, in itself, of remedying the serious disturbance in the economy of the Member State".
It was sufficient for the European Commission to establish that because of Finnair’s importance for the Finnish economy, the aid at issue – insofar as it sought to maintain Finnair’s operations – was appropriate to contribute to remedying the serious disturbance in that economy.
For the same reasons, Finnair did not receive unjustified favourable treatment.
Swedish and Danish rulings – aid to make good the damage caused by the pandemic
In its Swedish and Danish rulings, the GC made clear that Member States are not required to make good all the damage caused by the pandemic and grant aid to all its victims.
In both cases, it found that compensation for the damage resulting from the travel restrictions was not disproportionate. In view of (i) the evolving nature of the pandemic and (ii) the prospective nature of the quantification of the damage, the European Commission’s methodology for calculating damage was defined precisely enough. In particular, the European Commission could assess the damage by reference to the projected fall in air traffic. The GC also noted the commitment to carry out an ex post assessment of the damage suffered by SAS and the existence of a claw-back mechanism.
Accordingly, SAS was not considered to have received unjustified favourable treatment. SAS has the largest market share in Denmark and Sweden, and was therefore more affected than its closest competitor in those two countries by the travel restrictions.
Comment
After upholding the European Commission’s approach to COVID-19 aid schemes for the aviation industry earlier this year (see our March 2021 newsletter), the GC has now confirmed that Member States can grant individual aid in the context of the COVID-19 crisis to companies that are important to the national economy. However, these rulings suggest that individual aid (including aid compensating for damage caused by the pandemic) to companies which have less economic significance might be more difficult to justify in the light of the GC’s reasoning.
Ryanair announced that it would appeal these judgments before the European Court of Justice.
