The EU General Court rejects actions against the Commission’s decisions on COVID-19 aid schemes in the aviation sector (Ryanair)

On 17 February 2021, the General Court delivered two important judgments concerning State aid granted by Sweden (T-238/20) and France (T-259/20), respectively, on the basis of the Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak (the “Covid-19 Temporary Framework”).

In particular, the first judgment (T-238/20) concerns a Swedish aid scheme granting airlines a State guarantee to ensure that they have sufficient liquidity to preserve their viability during and after the Covid-19 crisis (the “Swedish aid scheme”). This aid scheme benefited all airlines which, on 1 January 2020, held a Swedish operating licence to conduct commercial activities in aviation under Article 3 of Regulation (EC) No 1008/2008 (OJ 2008 L 293, p. 3, (“Regulation 1008”) – except for airlines which have non-scheduled passenger air services as their main activity. The Swedish aid scheme was limited in time (until 31 December 2020) and amount (SEK 5 billion).

The second judgment (T-259/20) concerns a separate – but similar – aid scheme adopted by France (the “French aid scheme”). This aid scheme is aimed at ensuring that airlines holding an operating licence issued in France – pursuant to Article 3 of Regulation 1008 – maintain sufficient liquidity until the Covid-19 travel restrictions are lifted. The aid scheme deferred the payment of aviation taxes until 1 January 2021, and then spread payments over a period of 24 months, until 31 December 2022. The French aid scheme is limited to a certain amount of taxes per airline, calculated on a monthly basis.

By two separate decisions of 31 March (France) and 11 April 2020 (Sweden), the Commission approved the French and Swedish aid schemes. While the French aid scheme was approved on the basis of Article 107(2)(b) TFEU (i.e., “aid to make good the damage caused by natural disasters or exceptional occurrences”), the Swedish aid scheme was authorized based on Article 107(3)(b) TFEU (i.e., “aid to [...] remedy a serious disturbance in the economy of a Member State”) and on the Covid-19 Temporary Framework.

The judgments of the General Court of 17 February 2021 rejected two separate actions for annulments brought by Ryanair against the above-mentioned decisions of the Commission on the basis of Article 263 TFEU. Below we outline the most interesting aspects of the reasoning followed by the General Court in the two judgments, which concern, in both cases, the first plea in law raised by the Applicant.

The first plea in law raised by Ryanair in support of its actions for annulment alleged a violation of the fundamental principles of non-discrimination on grounds of nationality set out in Article 18 TFEU, and of the EU rules on freedom to provide services. In short, Ryanair argued that the French and Swedish aid schemes discriminate between airlines on grounds of nationality, and that this discrimination is neither necessary nor proportionate to achieve the aims of the aid schemes. Moreover, the aid schemes would restrict the freedom to provide services, without any valid justification.

As a preliminary remark, the General Court noted that the eligibility criteria of the aid schemes – in particular, the requirement to hold a French/Swedish licence – require that the recipient has its principal place of business in the relevant Member State. This criterion results in a difference in treatment between, on the one hand, airlines which operate in France/Sweden and have their principal place of business in France/Sweden, and, on the other hand, airlines which operate in France/Sweden but have their principal place of business in another Member State (e.g., in the case of Ryanair, Ireland).

In this regard, the General Court recalled that, in light of the case law, the Commission cannot declare State aid which provides conditions contrary to the provisions and general principles of the Treaty – such as the principle of equal treatment – compatible with the internal market. However, the General Court clarified that the difference in treatment must not be assessed – as the applicant argued – on the basis of Article 18 TFEU, which sets out the general prohibition on discrimination on the ground of nationality. In fact, that prohibition is only applicable insofar as no more specific provision contained in the EU Treaties applies. In the present case, the applicable specific provisions are Article 107(2)(b) and (3)(b) TFEU, namely the legal basis of the decisions of the Commission challenged before the General Court. The compatibility of the aid schemes with EU law must hence be assessed in light of those provisions – meaning that it must be considered whether, first, the objectives of the aid schemes at issue satisfy the requirements of those provisions and, second, the conditions for granting the aid do not go beyond what is necessary to achieve that objective.

First, as regards the objective of the aid schemes at issue, the General Court found that the French and Swedish aid schemes are essentially aimed at remedying the economic damages caused to airlines as a result of the Covid-19 outbreak. In this sense, they pursue objectives that are compatible with Article 107(2)(b) and (3)(b) TFEU. With respect to the French aid schemes, it is interesting to note that the Court confirmed that the Covid-19 pandemic constitutes an “exceptional occurrence” within the meaning of Article 107(2)(b). Specifically, the pandemic and the measures taken by the French authorities to deal with it can be considered as a whole as being an “exceptional occurrence” for the purposes of that provision.

Second, the General Court found that the French and Swedish aid schemes are appropriate and proportionate to achieve the objective set out in Articles 107(2)(b) and 107(3)(b) TFEU, respectively.

In particular, with regard to the French aid schemes, the General Court noted, inter alia, that the temporary tax deferral granted to airlines which hold a French licence is appropriate to address the economic damages resulting from Covid-19. The compensation does not take the nationality of the “victims” of the damage as the chief factor for allocation as such, but requires an “institutional link” with the place where the damage caused by the travel restrictions and lockdown arose, namely the principal place of business of the airline concerned. This criterion ensures that the recipient airlines have a “stable presence” in France and will maintain such a presence in the future. This implies that, when the time will come to pay the deferred taxes, the airlines will be in the French territory and the authorities will be able to ensure that the taxes are effectively paid. Moreover, the authorities are also able to control the manner in which that aid is used by the recipients – which would not have been the case if it would have been granted to airlines established in another Member State.

The General Court followed the same reasoning with regard to the Swedish aid schemes. It found that granting the State guarantee only to airlines holding a Swedish licence, in so far as it requires the principal place of business of the undertakings to be on the Swedish territory, ensures the stability of the presence of the airlines. This stability is necessary for the Swedish authorities to be able to control the manner in which that aid is used.

Third, the General Court rejected the arguments of the applicant concerning the existence of alternative means to achieve the objectives sought by the French and Swedish aid schemes, without discriminating against airlines having their principal place of business in other Member States. In particular, according to the applicant, the aid schemes could have relied on eligibility criteria such as the market shares in France/Sweden, or the number of passengers carried or the routes.

In this regard, the Court noted that in the context of its analysis of the proportionality of the aid, the Commission is not required to consider every possible alternative measure that could have been adopted by the Member State to achieve the same results. For its part, the Member State is also not required to prove that no other conceivable measure – which by definition would be hypothetical – could better achieve the intended objective. Moreover, and in any event, the alternatives suggested by the applicant would not have been appropriate to pursue the objective of the aid schemes, since they would not have allowed to ensure the necessary stability in France/Sweden and the consequent control of the French/Swedish authorities over the aid recipients.

Fourth, with regard to the allegation that the aid schemes would have infringed the applicant’s freedom to provide services, the General Court stressed that Article 56 TFEU does not apply to services in the transport sector. The freedom to provide services is regulated, in the transport sector, by the rules set out in Title IV of the TFEU, and by the acts adopted pursuant to Article 100(2) TFEU – namely, in the present case, Regulation 1008. However, the applicant did not invoke any arguments to support the view that the aid schemes would be incompatible with that Regulation.

In any event, according to the General Court, the restrictive effects deriving from the choice of the principal place of business as the relevant criterion to define eligible airlines do not go beyond the effects which trigger the prohibition in Article 107(1) TFEU. In other words, those effects justify the application of the State aid rules – but, for the reasons set out above, they are appropriate and proportionate to achieve the objectives required by Articles 107(2)(b) and 107(3)(b) TFEU.

To conclude, it is evident that the two Ryanair judgments of 17 February 2021 should be carefully read by all those interested in understanding the scope and purpose of the Covid-19 Temporary Framework, and related State aid measures in the aviation sector. The guidance provided by the General Court in those judgments is likely to have far reaching consequences, even beyond the realm of the State aid rules – especially insofar as the intersections with the freedom to provide services is concerned. Moreover, it should also be noted that Ryanair has already brought several other actions for annulment before the General Court, against State aid adopted by various Member States in support of their airline sectors on the basis of the Covid-19 Temporary Framework (e.g., cases T-769/20 Recapitalisation and subsidised interest loan for Nordica, T-737/20 Recapitalisation of airBaltic, T-677/20 Aid to Austrian Airlines, T-665/20 Aid to Condor Flugdienst GmbH, T-657/20 Recapitalisation of Finnair, and many more). With that in mind, and even though each case must be assessed in light of its own specific circumstances, the judgments of 17 February 2021 are likely to set a (dangerous) precedent for Ryanair’s actions.

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Authors

  • Van Bael & Bellis (Brussels)
  • Van Bael & Bellis (Brussels)

Quotation

Francesco Pili, Markus Wellinger, The EU General Court rejects actions against the Commission’s decisions on COVID-19 aid schemes in the aviation sector (Ryanair), 17 February 2021, e-Competitions February 2021, Art. N° 99593

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