The EU General Court delivers three judgments State aid granted to support airlines in the aftermath of the COVID-19 pandemic (Ryanair)

On 19 May 2021, the General Court of the European Union (“GC”) delivered three further judgments in cases brought by Ryanair concerning State aid granted to support other airlines in the aftermath of the COVID-19 pandemic. In one of these cases, the GC rejected Ryanair’s action for annulment against a Spanish aid scheme (Case T-628/20, Ryanair v Commission); in the other two cases, it ruled in favour of Ryanair and annulled the contested Commission decisions relating to aid granted by Portugal and the Netherlands (Cases T-465/20 and T-643/20, Ryanair v Commission). These judgments follow the recent rejections by the GC of several other actions for annulment filed by Ryanair against Commission decisions authorizing other COVID-19 related State aid in the airline sector

The two judgments in which the General Court ruled in favour of Ryanair are the most interesting of the three, and these are analysed further below. The first case (T-465/20) concerns aid measures adopted by Portugal in favour of Transportes Aéreos Portugueses SGPS SA (“TAP Holding”). TAP Holding is the sole share- holder of Portuguese Transportes Aéreos Portugueses SA (better known as “TAP Air Portugal”). The shares in TAP Holding were held as to: 50% by a state-owned management company Parpública; 45% by Atlantic Gateway SGPS Lda (“AGW”); and 5% by third parties. In a decision of 10 June 2020, the Commission authorized the State aid granted by Portugal in favour of TAP Holding (the “TAP decision”) on the basis of Article 107(3)(c) TFEU and the Guidelines on State aid for rescuing and restructuring non-financial undertakings in difficulty (the “Restructuring Guidelines”). The second case (T-643/20) concerns State aid granted by the Netherlands in favour of the airline Koninklijke Luchtvaart Maatschappij NV (better known as “KLM”). The aid was authorized by a Commission Decision of 15 July 2020 (the “KLM decision”) on the basis of the Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak (the “Temporary Framework”). As explained in the judgment (para. 3), the aid to KLM followed another aid measure granted by the Netherlands to Air France, which is part of the same corporate group as KLM (Air France and KLM are both subsidiaries of the Air France-KLM holding company).

In its judgments of 19 May 2020, the General Court annulled both the TAP and KLM decisions, finding that the Commission failed to comply with its duty to state reasons under Article 296 TFEU. It should be recalled that this provision, as interpreted by the case law, requires an EU institution adopting a measure to “disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure, in such a way as to enable the persons concerned to ascertain the reasons for it and to enable the competent court to exercise its power of review” (Cases T-465/20, para. 36, and T-643/20, para. 38).

In particular, the Court found that the TAP decision did not provide any analysis with regard to the conditions set out in paragraph 22 of the Restructuring Guidelines. This paragraph sets out three cumulative conditions in order for aid granted to a company belonging to a group to be regarded as compatible with the internal market. The Commission must examine, first, whether the beneficiary of the aid belongs to a group and, as the case may be, the composition of that group; second, whether the difficulties faced by the beneficiary are intrinsic and are not the result of an arbitrary allocation of costs within the group; and third whether those difficulties are too serious to be dealt with by that group itself. The Court noted that the TAP decision did not include any findings or analysis in relation to the group of undertakings to which the beneficiary belonged. Moreover, it failed to provide any explanation as to why the second and third conditions laid down by paragraph 22 of the Guidelines would be satisfied.

As regards the KLM decision, the Court found that the Commission had breached its duty to state reasons essentially because it had failed to assess whether the aid pre-previously granted to Air France had an impact on the compatibility with the internal market of the aid adopted in favour of KLM. Since Air France and KLM are part of the same group of undertakings, the Commission should have provided sufficient reasons to demonstrate that the aid previously granted to Air France could not have been used by KLM to finance its liquidity needs. In the absence of such a demonstration, the Court found that it could not authorize the State aid to KLM. For these reasons, the General Court annulled both the TAP and KLM decisions. However, the Court decided, on the basis of Article 264 TFEU, to maintain the effects of those decisions (i.e., to treat them as still applicable) on a temporary basis until the Commission has adopted the measures necessary to replace them in accordance with the requirements stemming from Articles 266 and 296 TFEU.

In particular, the Court ruled that overriding reasons of legal certainty justify the temporary maintenance of the effects of the TAP and KLM decisions “for a period of no more than two months from the date of delivery of this judgment if the Commission decides to adopt such a new decision under Article 108(3) TFEU, and for a reasonable further period if the Commission decides to initiate the procedure under Article 108(2) TFEU” (Cases T-465/20, para. 62, and T-643/20, para. 84). In this regard, the Court emphasized, inter alia, the negative effects that an (immediate) annulment would have had on the Member States’ economies. It also noted that the reason for the annulment of the decisions was the inadequacy of the statement of reasons provided by the Commission – and not flaws in the substantive analysis. As a result, in each of the two cases, the Commission could potentially remedy the defects in the decisions by providing a more detailed analysis of the relevant factors at stake.

The temporary maintenance of the effects of the two decisions is the sting in the tail of these judgments. At least for the time being, in practice Ryanair’s victory will not have any positive consequences for the airline, and will not lead to the recovery of the amount of aid granted to its competitors. An order maintaining the effects of an annulled EU law provision is very rare – the Court only applies Article 264 TFEU in exceptional circumstances. The fact that it decided to do so, in this case, appears to confirm the Court’s desire to ensure greater flexibility in the application of the State aid rules in order to enable Member States to tackle the economic consequences of the COVID-19 outbreak.

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Auteurs

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

Citation

Francesco Pili, Markus Wellinger, The EU General Court delivers three judgments State aid granted to support airlines in the aftermath of the COVID-19 pandemic (Ryanair), 19 mai 2021, e-Competitions May 2021, Art. N° 101399

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