The EU General Court rejects a company’s actions for annulment against decisions of the Commission on COVID-19 individual aid in the aviation sector (Ryanair)

On 14 April 2020, the General Court dismissed the actions for annulment brought by Ryanair against three decisions of the Commission authorising State aid in the airline sector. These judgments were delivered by the same Tenth Chamber (extended composition), which had already dismissed in February two actions for annulment filed by Ryanair against COVID-19 aid measures (Cases T-238/20, Ryanair v Commission, and T-259/20, Ryanair v Commission, – both currently under appeal before the Court of Justice, Cases C-209/21 P and C-210/21 P).

The present cases concern “individual aid” measures – within the meaning of Article 1(e) of Regulation 2015/1589 (OJ L 248, 24.9.2015, pp. 9-29, the “State aid Procedural Regulation”) granted by Finland to Finnair, and by Denmark and Sweden to Scandinavian Airlines (“SAS”) (Cases T-388/20, T-378/20 and T-379/20). In particular, the Finnish case (Case T-388/20) concerns a State guarantee in favour of Finnair, which was granted with a view to supporting that airline in obtaining a loan from a pension fund to cover its working capital needs. The guarantee covers 90% of the loan for three years, and would be triggered in the event of Finnair’s default. The Commission authorised the aid measure on the basis of Article 107(3)(b) TFEU, which enables Member States to grant “aid to [...] remedy a serious disturbance in the[ir] economy” (Decision C(2020) 3387 final on State aid SA.56809 (2020/N)). It found that the potential liquidity shortage addressed by the aid was “realistic”, and that the measure was necessary to avoid such a scenario. Given the importance of this airline for the Finnish economy, the Commission considered that the aid would contribute to the objective sought by Article 107(3)(b) TFEU. The Danish case (Case T-378/20) concerns a State guarantee on a revolving credit facility (up to a certain amount) in favour of SAS. The Commission authorised the aid measure on the grounds of Article 107(2)(b) TFEU, which allows Member States to grant “aid to make good the damage caused by natural disasters or exceptional occurrences” (Decision C(2020) 2416 final on State aid SA.56795 (2020/N)). It found that the “notified measure aims to compensate SAS for losses suffered due to the cancellation or rescheduling of its flights as a result of the imposition of travel restrictions linked to the COVID-19 outbreak” (ibid., para. 59), and that the aid measure would not overcompensate the damage resulting from the travel restrictions (ibid., para. 68).

Finally, the Swedish case (Case T-379/20) concerns a similar measure to that adopted by Denmark, which was also granted in favour of SAS. The Commission authorised the Swedish aid to SAS on similar grounds as those relied upon in the Danish case (Decision C(2020) 2784 final on State aid SA.57061 (2020/N)). Leaving the specificities of the three cases aside, the judgments concerning the aid measures in favour of Finnair and SAS are of considerable broader importance for the assessment of the lawfulness of measures adopted to tackle the consequences of the COVID-19 pandemic and appear to endorse the Commission’s “liberal” approach to tackling the crisis.

1. Member States can grant “individual aid” to certain companies affected by the economic consequences of the COVID-19 outbreak on the grounds of Article 107(2) (b) and (3)(c) TFEU, only insofar as such aid contributes to the overall objectives sought by those provisions

The first plea in law raised by Ryanair in the three cases alleged a breach of Article 107(2)(b) TFEU (in Cases T-378/20 and T-379/20) and Article 107(3)(b) TFEU (in Case T-388/20). The applicant argued that the Commission could not authorise “individual aid” on the basis of those provisions, since such individualised financial support would not be appropriate to remedy the damage caused by the COVID-19 outbreak to the overall economy of the Member State. In short, according to Ryanair, those provisions require the aid measures to make good the damage caused to all comparable undertakings affected by the pandemic. Moreover, the adoption of “individual aid” in favour of only a selected number of beneficiaries contra- vened the principle of equality, as it discriminated against the other undertakings affected by COVID-19, which were not compensated for their damage.

The General Court rejected this claim brought by Ryanair. It clarified that those provisions of the TFEU do not require Member States to grant aid measures to remedy the damage caused by exceptional occurrences (Article 107(2)(b) TFEU) or disturbances to their economy (Article 107(3)(b) TFEU) – Member States may be authorised to adopt aid measures for those purposes, but they are not obliged to do so. This implies that Member States are not required to make good the entirety of the damage caused by COVID- 19, and that they do not have to compensate all “victims” of that damage (see Cases T-378/20, paras 21-24, and T-379/20, paras 22-25). By implication, the Commission is, for its part, not required to consider whether the damage caused by the pandemic affected only the recipient, or also other companies (see Cases T-378/20, para. 39, and T-379/20, para. 51). In addition, the fact that an “individual aid” may by its nature discriminates between companies – because it is only granted to its recipient, and not also to all other companies in a comparable situation – does not contradict the principle of equality, provided that it meets the relevant conditions to be granted under Article 107(3) TFEU (see, to that effect, Cases T-378/20, paras 65-76, and T-379/20, paras 77-89, and T-388/20, para. 81-92).

Moreover, with specific regard to Article 107(3)(b) TFEU, the General Court specified that this provision applies both to “aid schemes” – in the sense of Article 1(d) of the State aid Procedural Regulation – and “individual aid” (see Case T-388/20, para. 32). Thus, “individual aid” may be authorised on the grounds of that provision, insofar as it meets the relevant conditions set out by the State aid rules (ibid., para. 34). In particular, the Court noted that an aid measure authorised on the ground of Article 107(3)(b) TFEU does not have to be “capable, in itself, of remedying the serious disturbance in the economy of the Member State concerned. Once the Commission has established the reality of a serious disturbance in the economy of the Member State concerned, that State may be authorised, if the other conditions laid down in that Article are also satisfied, to grant State aid, in the form of aid schemes or individual aid, which help to remedy that serious disturbance.” (ibid., para. 41, emphasis added). In short, an “individual aid” may be authorised insofar as it contributes to the overall objective of remedy- ing the disturbance to the economy caused, in the present case, by the COVID-19 outbreak (and meets all the other relevant conditions).

For instance, the Court found that the aid measure granted to Finnair was such as to contribute to that objective, since in the absence of that measure the company would have likely become insolvent, which would have had major consequences for the Finnish economy. The Court emphasised, inter alia, that Finnair is essential for the proper functioning of the Finnish air transport network, and that a significant number of businesses, workers and individuals rely on its services. The Court also noted that because of the climate and the isolated geographical position of Fin- land in Europe, the other modes of transportation available are not always a satisfactory alternative to flying. Thus, if Finnair were to be insolvent, other economic operators would not be able to appropriately replace Finnair in the short term (see Case T-388/20, paras 57-59).

2. The Commission must ensure that the aid amount does not overcompensate the damage caused by the COVID- 19 outbreak, but it is not required to weigh the positive against the negative effects of the aid measure on trade and competition

A second interesting set of arguments made by Ryanair concerned the amount of the aid measures. In particular, in the Danish and Swedish cases (Cases T-378/20 and T-379/20), Ryanair argued that the aid measures would lead to overcompensation for the damage suffered by SAS. In the Finnish case (Case T-388/20), Ryanair alleged that the Commission failed to weigh the beneficial effects of the aid measure on the achievement of the objectives set out in Article 107(3)(b) TFEU against its adverse effects on trading conditions and competition in the EU.

As regards the first issue, the General Court recalled that Article 107(2)(b) TFEU does not allow the Commission to authorise “aid likely to exceed the losses incurred by the beneficiaries” (Cases T-378/20, para. 30, and T-379/20, para. 40). In relation to the calculation of the amount of damage suffered by SAS, which the aid measures were intended to compensate, the Court noted that this amount was assessed by the Commission on the basis of several objective and appropriate factors, namely: (i) the loss of revenue; (ii) the avoided variable costs; (iii) the adjustment of the profit margin; and (iv) the period of time during which the damage could (prospectively) arise. Moreover, the Member States granting the aid committed to carry out an ex post evaluation of the amount of damage suffered by SAS, and, if necessary, to request SAS to pay back any overcompensation. Under those circumstances, the calculation method was sufficiently precise to comply with Article 107(2)(b) TFEU (see Cases T-378/20, paras 35-36, and T-379/20, paras 45-46).

With regard to the second issue, the General Court noted that Article 107(3)(b) TFEU does not require the Commission to weigh the beneficial effects of the aid against its adverse effects on trade and competition. The Court stressed that this is an important difference between this provision and Article 107(3)(c), which instead requires such a “balancing test” (Case T-388/20, paras 65-67).

Interestingly, the General Court noted that “it follows from the wording of [Article 107(3)(b) TFEU] that its authors considered that it was in the interests of the European Union as a whole that one or other of its Member States be able to overcome a major or even an existential crisis which could only have serious consequences for the economy of all or some of the other Member States and therefore for the Euro-pean Union as a whole” (ibid., para. 65, emphasis added). This significant passage of the judgment emphasises the solidarity rationale which underlies the State aid rules and their significance in the context of a major economic crisis, such as the one caused by the COVID-19 outbreak.

To conclude, it is evident that the three Ryanair judgments of 14 April 2021 provide important clarifications concerning the scope of the grounds for authorising “individual aid” under Articles 107(2)(b) and (3)(b) TFEU. Together with the previous Ryanair judgments of 17 February 2021 (Cases T-238/20, Ryanair v Commission, and T-259/20, Ryanair v Commission – both currently under appeal before the Court of Justice, Cases C-209/21 P and C-210/21 P), the judgments of 14 April appear to provide a relatively broad interpretation of the State aid rules, which favours the “relaxation” sought by the Commission in order to grant Member States wider scope to tackle the economic consequences of the COVOD-19 outbreak. Finally, it should be noted that, as far as Ryanair is concerned, even though each case must be assessed in light of its own specific circumstances, the five judgments so-far delivered by the General Court are not encouraging for its other pending actions for annulment against State aid in the airline sector (e.g., among many others, 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), at least at the level of the General Court.

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Authors

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

Quotation

Francesco Pili, Markus Wellinger, The EU General Court rejects a company’s actions for annulment against decisions of the Commission on COVID-19 individual aid in the aviation sector (Ryanair), 14 April 2021, e-Competitions June 2021, Art. N° 100862

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