Three new cases: State aid for airlines - were they justified in view of the impact of the pandemic or not?
In view of the economic difficulties caused by the COVID-19 pandemic, it was unthinkable for the European Commission not to ease restrictions on State aid. As such, the European Commission approved unprecedented forms of State aid to save the epidemic-struck European economy.
In this context, the governments of the member states have poured billions of euros into the airline industry, which has been hit particularly hard by virus-related restrictions and lockdowns.
According to Ryanair, State aid given to national airlines constitutes unfair competition; as such, the airline has filed 16 lawsuits against the Commission for allowing the provision of State aid to individual airlines.
On 19 May, the General Court has delivered three judgments, deciding to uphold Ryanair’s actions for the annulment of Commission State aid decisions in respect of TAP and KLM, but dismissed the action concerning Spain.
The measures at issue and the actions brought by the airline Ryanair
The airlines at issue were provided with government-backed loans. Last year, the Commission cleared a 3.4 billion euro Dutch bailout for the airline KLM, a 1.2 billion euro Portuguese rescue loan for Transportes Aereos Portugueses (TAP), and a 10 billion euro Spanish recapitalisation scheme for strategic companies.
In its decisions, the Commission declared the measures at issue to be compatible with the internal market.
The airline Ryanair brought actions for the annulment of these decisions. According to Ryanair, the cases of aid for selected airlines at issue create an unfair advantage and support only their national flag carriers, and as such, they will help these airlines to emerge stronger at the expense of competitors.
Findings of the General Court
The General Court examined the compatibility with the internal market of the State aid scheme adopted to address the consequences of the COVID-19 pandemic in the light of Article 107(3)(b) or (c) TFEU.
The General Court annulled the Commission’s decision to approve the financial aid of the Netherlands for the airline KLM amid the COVID-19 pandemic on the grounds of inadequate reasoning. It also pronounced the same verdict in the case of Portugal and TAP.
However, the Court rejected Ryanair’s challenge to the Spanish fund for virus-hit companies approved by the European Commission, because that measure complied with EU law.
KLM and TAP cases
Ryanair alleged, inter alia, a breach by the Commission of the duty to state reasons.
According to the findings of the General Court, in both cases, the Commission failed to set out, in a sufficiently clear and precise fashion, all the relevant matters of fact and law to be taken into account in order to assess a complex situation. Consequently, the General Court ruled that the Commission failed to provide reasons for the contested decisions to the requisite legal standard, and, for this reason, required that they be annulled.
However, given that the cause of these annulments is the inadequacy of the statement of reasons and that the immediate calling into question of the aid measures would have had particularly damaging consequences for the economies of the Netherlands and Portugal, the Court suspended the effects of the annulments (including the cancellation of the aid and the order to repay) pending the adoption of new decisions by the Commission. Thus, the Commission gets a chance to re-examine the cases and fix any procedural flaws.
The Spanish case
Ryanair submitted that the contested decision infringes the principle of non-discrimination and also the freedom to provide services and the freedom of establishment.
The General Court found that the restriction of the scheme at issue to non-financial undertakings which are of systemic or strategic importance for the Spanish economy and which are established in Spain, is both appropriate and necessary in order to achieve the objective of remedying the serious disturbance in the Spanish economy.
The General Court confirmed that the objective of the aid scheme at issue satisfies the requirements of the derogation laid down in Article 107(3)(b) TFEU and that the conditions for granting the aid do not go beyond what is necessary to achieve that objective. Thus, that scheme does not infringe the principle of non-discrimination, or the freedom to provide services and the freedom of establishment.
According to the Court, the measure at issue, intended for the adoption of recapitalisation measures, constitutes a State aid scheme but is proportionate and non-discriminatory. So the solvency support fund for strategic Spanish undertakings experiencing temporary difficulties due to the impact of the Covid-19 pandemic is compatible with EU law.
At the beginning of the pandemic, the Commission adopted the State aid Temporary Framework to support the economy and to avoid as much as possible the negative economic consequences of the crisis. Since the adoption of the framework, the Commission has approved numerous national State aid measures.
Now the General Court annulled two decisions on the basis of the above-mentioned reasons. The illegality that has been found is a failure to state reasons and not a substantive error. It seems, according to the General Court, that the objective of the measures can be justified due to the pandemic. In fact, in these cases, the Court gave the Commission the chance to re-examine the cases and fix any procedural flaws.
Author: Krisztina Széles, PhD student, University of Debrecen, Faculty of Law