OPINION OF ADVOCATE GENERAL
MENGOZZI
delivered on 5 July 2016 (1)
Joined Cases C‑164/15 P and C‑165/15 P
European Commission
v
Aer Lingus and Ryanair
(Appeal — State aid — Irish tax on air passengers — Application of differentiated rates — Reduced rate for flights to destinations no more than 300 km from Dublin — Advantage — Selective nature — Assessment where the fiscal measure is likely to constitute a restriction on the freedom to provide services — Recovery — Excise duties — Passing the advantage on to the beneficiary undertaking’s customers)
In the present joined cases, the Commission is seeking the partial annulment of the judgments handed down by the General Court on 5 February 2015 in Cases T
1. ‑473/12 Aer Lingus v Commission (EU:T:2015:78: ‘the Aer Lingus judgment’) and T‑500/12 Ryanair v Commission (EU:T:2015:73: ‘the Ryanair judgment’) (when both judgments are referred to: ‘the judgments under appeal’). The appeals raise the question of whether, and to what extent, the Commission is required to take into account, when calculating the amount of aid to be recovered, the fact that the beneficiaries passed on to their customers the economic advantage which they had obtained.
2. Aer Lingus and Ryanair (when both are referred to: ‘the appellants’) have each lodged a cross-appeal, raising various issues pertaining to the classification of a State measure as aid, particularly where the measure is likely at the same time to constitute a restriction on a fundamental freedom.
I – Background to the disputes
3. As set out in the judgments under appeal, the background to the disputes may be summarised as follows.
4. As of 30 March 2009, Ireland introduced an excise duty, known as the air travel tax (‘the ATT’), payable by every passenger embarking on an aircraft departing from an Irish airport and collected directly from the airlines. (2) At the time of its introduction, the ATT was calculated on the basis of the distance between the departure airport and the arrival airport, and was set at the rate of EUR 2 in the case of a flight to an airport located no more than 300 km from Dublin airport and EUR 10 in all other cases.
5. Ryanair lodged two separate complaints with the Commission regarding the ATT, one alleging a breach of the rules on State aid and the other based on Article 56 of the Treaty on the Functioning of the European Union (‘the TFEU’) and on Regulation No 1008/2008. (3) In response to the second complaint, the Commission initiated an investigation regarding possible infringement of the provisions on freedom to provide services and, on 18 March 2010, sent the Irish authorities a letter of formal notice (‘the letter of formal notice addressed to the Irish authorities’). Ireland then amended, as of 1 March 2011, the rules on calculating the ATT and introduced a single rate of EUR 3, applicable regardless of the distance travelled. (4) The Commission then concluded its investigation.
6. On 13 July 2011, the Commission opened a formal investigation procedure, pursuant to Article 108(2) TFEU, in respect of the lower rate of the ATT applied between 30 March 2009 and 1 March 2011. On 25 July 2012, the Commission adopted Decision 2013/199/EU concerning State aid SA.29064 (11/C, ex 11/NN) — Differentiated air travel rates implemented by Ireland (‘the contested decision’). (5) According to Article 1 of the decision, the aid in the form of a lower travel tax applicable to all flights operated by aircraft capable of carrying more than 20 passengers and not used for State or military purposes, departing from an airport handling more than 10 000 passengers a year to a destination located no more than 300 km from Dublin airport between 30 March 2009 and 1 March 2011, unlawfully put into effect by Ireland in breach of Article 108(3) TFEU was incompatible with the internal market. Article 4(1) required Ireland to recover the aid. Recital 70 in the preamble set the amount of the aid as the difference between the lower rate of the ATT and the standard rate of EUR 10 (that is to say, EUR 8 per passenger) and listed the appellants among the beneficiaries.
II – Procedure before the General Court and the judgments under appeal
7. On 1 November 2012 and 15 November 2012 respectively, Aer Lingus and Ryanair brought actions before the General Court seeking to have the contested decision annulled. Each appellant raised five pleas in law in support of its action.
8. In the judgments under appeal, the General Court examined and rejected, in each of the applications, the fifth plea in law, alleging a breach of the obligation to state reasons, (6) and Ryanair’s fourth plea in law, alleging a failure on the part of the Commission to give notification of the decision to recover the aid. (7) The cross-appeals do not relate to those parts of the judgments under appeal. The General Court then considered and rejected, in each of the actions, the first plea in law, by which the appellants, in essence, disputed the classification of the reduced rate of the ATT as aid. Those parts of the judgments under appeal form the subject matter of the cross-appeals. Lastly, the General Court examined and partially upheld the third and fourth pleas of Aer Lingus and the second and third pleas of Ryanair, which related to the methods of calculating the amount of aid. The appeals lodged by the Commission concern those parts of the judgments under appeal.
9. By point 1 of the operative part of the judgments under appeal, the General Court annulled Article 4 of the contested decision ‘in so far as it orders the recovery of the aid from the beneficiaries for an amount that is set at EUR 8 per passenger in recital 70 of that decision’. The judgments under appeal dismiss the actions as to the remainder (point 2 of the operative part of the judgments) and order the Commission to pay, in addition to its own costs, half of the costs incurred by Aer Lingus and Ryanair (point 3 of the operative part of the judgments).
III – Analysis
10. The Commission’s appeals are directed against point 1 of the operative part of the judgments under appeal. Supported by Ireland, the Commission claims that the Court should annul that point of the operative part, dismiss in their entirety the actions before the General Court or, in the alternative, refer the cases back to the General Court and order Aer Lingus and Ryanair to pay the costs (or reserve the costs if the cases are referred back to the General Court). In support of its appeals, the Commission relies on a single ground of appeal, alleging a breach, by the General Court, of Article 108(3) TFEU and Article 14 of Regulation No 659/1999. (8)
11. The cross-appeals are, on the other hand, directed against point 2 of the operative part of the judgments under appeal, by which the General Court dismissed ‘as to the remainder’ the actions by Aer Lingus and Ryanair. The cross-appeals contend that the Court should annul that point of the operative part, annul the contested decision and order the Commission to pay the costs. Both cross-appeals raise a single ground of appeal, subdivided into four parts and directed against the rejection, by the General Court, of the pleas in law relied on by Aer Lingus and by Ryanair concerning the classification of the reduced rate of the ATT as State aid.
12. I shall begin by analysing the cross-appeals, as they relate to an aspect of the judgments under appeal (the classification of the measure at issue as aid) which logically precedes the issue raised in the main appeals (the legality of the recovery order).
A – The cross-appeals
13. The complaints set out by Aer Lingus and Ryanair in their respective appeals and the arguments put forward in their support broadly overlap. For the sake of simplicity, I shall, where possible, group and examine them together.
1. The complaint alleging that the General Court erred in law in taking the view that the unlawful nature of a measure is irrelevant as regards its classification as State aid (first part of the single ground of Aer Lingus’ cross-appeal)
(a) The Aer Lingus judgment
14. The first complaint raised by Aer Lingus in its sole ground of appeal is directed against paragraph 43 of the Aer Lingus judgment, in which the General Court notes, as a preliminary point, that the concept of State aid is an objective one and that the question of whether there is an advantage within the meaning of Article 107(1) TFEU ‘must be examined in the light of the anticompetitive effects caused by the aid measure in question, and not in the light of other factors such as the lawfulness of the measure by which the aid is granted’.
(b) Succinct presentation of the arguments of the parties
15. Aer Lingus claims that if paragraph 43 of the Aer Lingus judgment is to be construed as meaning that, when analysing whether a selective advantage exists, the fact that the domestic measure at issue is in part unlawful, or forms an integral part of a measure that is unlawful, should be disregarded, then that paragraph is vitiated by an error of law. According to Aer Lingus, failure to take into consideration the unlawful nature of the domestic measure that gives rise to the selective advantage is incompatible with the case-law of the Court of Justice and of the General Court according to which, in assessing the existence of aid in a State intervention, it is necessary to consider the measure as a whole and its context. Aer Lingus notes that it argued, before the General Court, that the higher rate of the ATT was unlawful, since it was contrary to Article 56 TFEU and to Regulation No 1008/2008, and that the ATT paid at that rate was subject to reimbursement. If established, unlawfulness of that nature is relevant for the purpose of assessing both the existence and scale of the alleged economic advantage conferred on the airlines required to pay the lower rate. An advantage of that nature cannot result from the fact that Ireland failed to levy an unlawful tax on those airlines and, in any event, any advantage would consist solely in being able to benefit immediately from the application of the lower rate, without having to bring a claim for reimbursement.
16. The Commission and the Irish Government reject that complaint on the basis of broadly similar arguments.
(c) Assessment
17. In my view, the complaint at issue is based on an incorrect reading of paragraph 43 of the Aer Lingus judgment. In the first part of that paragraph, the General Court cites, paraphrasing settled case-law — also referred to, moreover, by Aer Lingus in its cross-appeal — according to which Article 107(1) TFEU defines State measures by reference to their effects. (9) According to that case-law, neither the status of the public or private bodies which grant the aid, (10) the conduct or statements of the institutions of the European Union, (11) nor the form of, reasons for or the objective (12) pursued by State measures are factors sufficient to justify excluding those measures ipso facto from classification as aid within the meaning of Article 107(1) TFEU, although they may, where appropriate, be relevant for the purposes of assessing the compatibility of those measures with the internal market for the purpose of Article 107(3) TFEU, (13) or determining whether there is an obligation to repay the aid. (14)
18. On the basis of the abovementioned case-law, in the second part of paragraph 43 of the Aer Lingus judgment, the General Court states, in essence, that the lawfulness of the State measure is not relevant for the purpose of assessing whether there is an advantage within the meaning of Article 107(1) TFEU. The reasoning underlying that statement — namely that where the existence of a selective advantage is established, the mere fact that the measure may prove to be unlawful under domestic or EU law, or under both, is not of itself sufficient to preclude it from being classified as aid — is implicit, but clear, from a reading of paragraph 43 as a whole, and is confirmed by the reference to the judgment of 7 October 2010 in DHL Aviation and DHL Hub Leipzig v Commission (T‑452/08, EU:T:2010:427). In that judgment, the General Court rejected the argument raised by the applicant companies according to which the fact that the aid measures at issue were contained in the terms of an agreement that had to be regarded as null and void under German law — as they had been concluded in breach of Article 88(3) EC — and could not therefore be implemented meant that they had not genuinely benefited from any economic advantage that could be subject to repayment. (15) At paragraph 40 of that judgment, which is cited in paragraph 43 of the Aer Lingus judgment, the General Court held that the possibility that the clauses in the agreement were null and void from the outset under German law could not alter the fact that the applicant companies actually benefited from them, giving them a market advantage over their competitors, nor did it have an effect in that specific case on the obligation to repay the aid from which they had actually benefited. (16) Therefore, while the General Court left open the possibility that the unlawfulness of the State measure could in some way affect the order for recovery of the aid, it absolutely ruled out any possibility that a finding of unlawfulness could preclude the classification of an economic benefit actually enjoyed by the undertaking or undertakings in question as an ‘advantage’, within the meaning of Article 107(1) TFEU.
19. Contrary to Aer Lingus’ claim, to state, as did the General Court, that the unlawfulness of the State measure (or of a measure associated with that State measure) is irrelevant where an analysis of its effects reveals that it actually accords a selective and anticompetitive advantage to one or more undertakings, does not mean that it must automatically be ruled out that the finding of unlawfulness may have a bearing on the assessment of those effects, and such a statement is not therefore inconsistent with the case-law cited by Aer Lingus concerning the reimbursement of taxes levied in breach of EU law or the payment of compensation for damage caused by public authorities. (17) In each of the cases cited, in fact, the Court of Justice found that the measure at issue could not be classified as aid, not because of the unlawful or wrongful nature of the State measure associated with it, (18) but because it could not identify any anticompetitive advantage in a measure designed to eliminate the consequences of such an intervention for the addressee. Consequently, the reimbursement of a tax levied in breach of EU law, if considered together with the earlier payment by the undertakings responsible for payment of the tax — a payment which was not due since it was levied unlawfully — resulted in a transaction that was financially neutral for the undertakings concerned. (19) The same applies to compensation paid by the State for damage previously caused as a result of the conduct of public authorities. (20) In the present case, however, the situation is fundamentally different. The advantage from which, according to the contested decision, Aer Lingus benefited in relation to internal flights (that is to say, the application of a rate of tax lower than that regarded as normal by the Commission) was not designed to compensate for a disadvantage Aer Lingus had suffered because of an earlier unlawful State intervention, and it therefore resulted in a net benefit for the airline (regardless of how the benefit is classified and quantified). As regards the judgment of 1 July 2010 in ThyssenKrupp Acciai Speciali Terni v Commission (T‑62/08, EU:T:2010:268), which was also cited by Aer Lingus in support of its arguments, as correctly pointed out by the Commission, that case related not to compensation by the State for damage caused by an earlier unlawful measure, but compensation for the expropriation of assets. (21)
20. Thus interpreted, paragraph 43 of the Aer Lingus judgment appears to be in line with the case-law of both the General Court and the Court of Justice cited at paragraph 17 above, and not inconsistent with the judgments cited at paragraph 19 above. It is not therefore vitiated by the error of law alleged by Aer Lingus in the first part of its single ground of appeal.
2. The complaints alleging that the General Court erred in law in considering that the fact that the higher rate of the ATT was unlawful did not preclude it being classified as the normal rate for the purposes of applying Article 107 TFEU (second part of the single ground of Aer Lingus’ cross-appeal; second part of the single ground of Ryanair’s cross-appeal)
(a) The judgments under appeal
21. In their applications at first instance, both Aer Lingus and Ryanair maintained, in connection with their first pleas, that the higher rate of the ATT could not be regarded by the Commission as the reference rate for determining the existence of a selective advantage because that rate was incompatible with Article 56 TFEU. At paragraph 58 of the Aer Lingus judgment and paragraph 83 of the Ryanair judgment, the General Court found that those complaints were based on an erroneous premiss, namely that in the letter of formal notice sent to the Irish authorities, the Commission had established that it was the higher rate, not the imposition of ‘differentiated rates’ for domestic and intra-Union flights, that constituted a restriction for the purpose of the provisions on freedom to provide services.
(b) Succinct presentation of the arguments of the parties
22. Both appellants claim that if taxing intra-Union flights at a rate higher than that applied to domestic flights constitutes a restriction on the freedom to provide services, that rate must, of necessity, be recognised as unlawful. According to the appellants, this is clear from the Court’s case-law, (22) in particular the judgment of 6 February 2003 in Stylianakis (C‑92/01, EU:C:2003:72). (23) Ryanair adds that, as well as being unreasonable, the adoption of the higher rate, recognised to be unlawful, as the reference rate is inconsistent with the principles of the unity and consistency of EU law and would undermine the effectiveness of State aid control, as it would deter companies from making complaints about similar fiscal measures if they had benefited, even to a very limited extent, from the lower rate.
23. Employing broadly the same arguments, the Commission and the Irish Government maintain that the complaints in question are unfounded. According to the Commission, the arguments put forward by Ryanair are also ineffective.
(c) Assessment
24. In my view, the arguments put forward by Aer Lingus and Ryanair are not capable of calling seriously into question the General Court’s finding that their complaints were based on an erroneous premiss. Regardless of whether the content of the conclusion in the letter of formal notice sent to the Irish authorities was definitive, (24) it is, in my view, clear that it is not in itself the imposition of an EUR 10 tax on flights to destinations more than 300 km from Dublin airport (in reality, almost all intra-Union flights) that raises doubts as to the compatibility of that measure with the provisions on freedom to provide services, but the overall structure of the tax. More specifically, it is not even the differentiation in the rates as such that gives rise to such doubts, but rather the fact that such differentiation results in the imposition, without there being any obvious and acceptable justification, (25) of conditions that are more onerous for intra-Union than for domestic flights or — which amounts to the same thing — the imposition of less onerous conditions for the latter than the former. Contrary to the appellants’ contentions, that analysis is confirmed, not invalidated, by the judgment in Stylianakis (EU:C:2003:72), which concerned a tax similar in structure to the tax at issue in the present cases. (26) In that judgment, the Court found that, since airport taxes directly and automatically influence the price of the journey, differences in the taxes to be paid by passengers will automatically be reflected in the transport costs. (27) After establishing that, despite the ostensible neutrality of the criterion used to differentiate the amount of tax imposed, the most onerous tax specifically concerned non-domestic flights, (28) it concluded that the provisions on freedom to provide services preclude ‘a measure adopted by a Member State …, which imposes on, for the most part, flights to other Member States, higher airport tax than that applicable to domestic flights within that Member State’. That finding was also made specifically subject to the condition that it had not been demonstrated that ‘those taxes compensate [for] air services necessary for the processing of passengers and that the cost of those services provided to passengers flying to other Member States is proportionately higher than the cost of those services necessary for the processing of passengers on domestic flights’. It seems clear that, according to the Court, it is the tax system viewed as a whole, in the light of its effects and objectives, not an individual aspect of that system, that creates, in some cases, obstacles to freedom to provide services which are incompatible with EU law.
25. The General Court did not therefore commit the errors alleged by the appellants or contradict itself when, at paragraph 58 of the Aer Lingus judgment and paragraph 83 of the Ryanair judgment, it found that the arguments of the appellants were based on the erroneous premiss that the higher rate of the ATT was in itself unlawful.
26. Moreover, even taking the compartmentalised view of the ATT adopted by the appellants, it does not seem automatically to follow that if it is incompatible with the rules on freedom to provide services that necessarily implies that the higher rate is unlawful (or, to be precise, that the element of that rate in excess of the lower rate is unlawful). In point of fact, in the light of the data contained in the contested decision — which indicate that only between 10% and 15% of all flights subject to the tax meet the conditions for application of the EUR 2 rate — it would seem more accurate to maintain that the ‘unlawful element’ of the tax is in fact the lower rate, as it departs from the generally applied rate and thus grants a tax reduction (namely the difference between the higher and lower rates of the tax) to those companies that operate domestic flights. (29) Contrary to Aer Lingus’ claims, therefore, the advantage which the Commission found, in the contested decision, to exist in favour of those airlines that operated domestic flights during the period under consideration consisted not in the fact that they were not subject to excess unlawful tax, but the fact that they benefited, in relation to those flights, from a tax exemption, which resulted in both State aid and a restriction on the freedom to provide services, reflecting a situation that the Court has examined previously. (30)
27. Lastly, even if it had to be concluded, as advocated by the appellants, that, in view of the conclusion set out in the letter of formal notice sent to the Irish authorities, the EUR 10 rate applied to intra-Union flights is unlawful, in so far as it gives rise to a restriction on freedom to provide services, that would not, in my view, preclude the Commission from adopting that rate as the reference rate when analysing whether the advantage conferred on the airlines subject to the lower tax was selective. I do not in fact consider that a legal classification of that nature is of itself an appropriate means of ascertaining whether that rate is a true reflection as to the material existence and selective nature of any advantage obtained by those airlines. At that stage of the investigation of the State measure, the Commission’s analysis focused on the effects of the measure during the reference period. It follows that factors that had no actual bearing on those effects are, in principle, irrelevant. Support for that position may be inferred from the judgment of 3 March 2005 in Heiser (C‑172/03, ECR, EU:C:2005:130), to which the Commission refers, although the circumstances of the present cases are objectively different from the circumstances of the case which gave rise to that judgment. In Heiser, the Court rejected the possibility that, as the measure imposing the tax from which the applicant was exempt might be incompatible with Community law, the exemption could not be regarded as an advantage for the purpose of the rules on aid. According to the Court, that measure in fact remained ‘liable to have an impact as long as it is not repealed or, at the very least, as long as its unlawfulness is not established’. In the present cases, even assuming, as Aer Lingus contends, that, unlike the case in Heiser, it had already been definitively established that the ATT at differentiated rates was unlawful in the letter of formal notice sent to the Irish authorities, it must be pointed out that this prevented neither the collection of the tax at that rate during the reference period — approximately half of which precedes the dispatch of the letter of formal notice (31) — nor the effects consequent on the application of differentiated rates.
28. On the basis of the foregoing, Ryanair’s argument that, by adopting as the reference rate the EUR 10 rate, which Ryanair considers unlawful, the Commission infringed the principles of the unity and consistency of EU law, is also unfounded. As I shall explain in greater detail below, the present cases unquestionably raises the sensitive issue of how to coordinate two sets of rules under the Treaty regarding the fundamental freedoms and State aid, though not in the sense indicated by Ryanair in the complaint under consideration.
29. On the basis of the above considerations, I consider that the complaints raised by the appellants regarding the effect of the unlawfulness of the higher rate of the ATT, as alleged, are unfounded and must, for that reason, be rejected.
3. The complaint alleging that the General Court erred in law when it dismissed as irrelevant the fact that the lower and higher rates of the ATT were introduced by the same piece of legislation (fourth part of the single ground of appeal in Ryanair’s cross-appeal)
(a) The Ryanair judgment
30. Before the General Court, Ryanair also criticised, from a different perspective, the Commission’s decision to take the higher EUR 10 rate as the ‘normal’ rate. According to Ryanair, unlike typical State aid cases involving tax schemes, there was no pre-existing general tax regime under which measures were subsequently introduced to favour or discriminate against a specific category of taxpayers. In the airline’s opinion, since that was not the position, the lower rate of the ATT could not be interpreted as an exception to the higher rate. At paragraph 89 of the Ryanair judgment, the General Court rejected that argument, stating that Article 107(1) TFEU does not establish a distinction between measures of State intervention by reference to the techniques used by the national authorities and, consequently, the fact that the two rates of the ATT were introduced at the same time was irrelevant, since the Commission had sufficiently established the reasons for which it considered that the EUR 2 rate constituted a derogation from the EUR 10 rate.
(b) Succinct presentation of the arguments of the parties
31. According to Ryanair, the simultaneous introduction of the higher and lower rates of the ATT is not merely a question of ‘technique’, as the General Court maintains. The Irish authorities would never have introduced the higher rate without, at the same time, introducing the lower rate, as demonstrated by the fact that they subsequently replaced both rates with a single EUR 3 rate, rather than simply abolishing the ‘exception’ in the form of the EUR 2 rate. Ryanair further claims that the frequency of the taxable event is, at most, one of the factors to be taken into account in determining the ‘normal’ rate of taxation, but it is not necessarily the decisive factor.
32. The Commission considers the complaint to be unfounded, while the Irish Government takes the view that it is in part ineffective and in part inadmissible.
(c) Assessment
33. Like the Commission, I consider that this complaint is unfounded. (32) The fact that, under a particular scheme, the measure conferring on some undertakings a benefit in the form of a — total or partial — exemption from a tax for which they would normally be liable was adopted at the same time as the measure imposing that tax, is not, in principle, relevant for the purpose of determining whether that benefit is selective and does not preclude the former measure being regarded as an exception to the latter. As correctly noted by the General Court at the contested paragraph of the Ryanair judgment, the Court has previously stated in its judgment of 22 December 2008 in British Aggregates v Commission (C‑487/06 P, EU:C:2008:757, paragraph 89) that Article 107(1) TFEU defines State interventions on the basis of their effects, and thus independently of the techniques used. Consequently, in that judgment, the Court found to be irrelevant the fact that the advantage for the recipient undertakings derived not from the grant of an exemption, but from the way in which the material scope of the fiscal measure at issue was defined. (33) In its judgment of 15 November 2011 in Commission v Government of Gibraltar and United Kingdom (C‑106/09 P and C‑107/09 P, EU:C:2011:732, paragraph 92), which is also cited at paragraph 89 of the Ryanair judgment, the Court of Justice specified that it would be contrary to case-law, which focuses on an analysis of the effects of aid, to interpret the selectivity criterion as requiring that, in order for a tax system to be classifiable as selective, it must be designed in accordance with a certain regulatory technique, with the result that certain national tax rules fall, from the outset, outside the scope of control of State aid merely because they were adopted under a different regulatory technique, even though they produce the same effects in law and/or in fact. That clarification was, moreover, provided by the Court in a case involving complex tax systems which, instead of laying down general rules applicable to all undertakings from which a derogation is made for certain undertakings, achieved the same result by adjusting and combining the tax rules in such a way that their application resulted in a different tax burden for different undertakings (judgment of 15 November 2011 in Commission v Government of Gibraltar and United Kingdom, C‑106/09 P and C‑107/09 P, EU:C:2011:732, paragraph 93), or by defining the scope of the tax in such a way as to exclude certain undertakings which were in a comparable situation as regards the objectives of the system at issue (judgment of 22 December 2008 in British Aggregates v Commission, EU:C:2008:757, paragraph 89). The present cases, however, involves a relatively straightforward system in which all undertakings that engage in the economic activity that gives rise to the taxable event are subject to the tax, albeit at different rates.
34. Moreover, even were it to be assumed that, as Ryanair claims, the frequency of the taxable event does not of itself constitute a decisive factor for determining the normal rate of taxation under a specific tax regime, in a binary system like the ATT system with differentiated rates, in which a small percentage of the flights subject to the tax (between 10% and 15% according to the data provided to the Commission by the Irish authorities and not contested by Ryanair) are subject to a single lower rate, while the remaining flights are subject to a single higher rate, it is difficult not to regard the lower rate as an exception to the higher rate. The sole argument put forward by Ryanair to counter that conclusion — namely that those percentages merely reflect the Irish authorities’ intention to grant aid to Aer Arann and support domestic flights and activity in national airports, while discriminating against the more numerous and economically more significant airlines operating international flights — seems to me to confirm rather than negate the fact that the lower rate is the exception. By that argument, Ryanair appears, furthermore, to imply that intervention in support of Aer Arann is not confined to tax relief for domestic flights but has also had the effect of imposing an excessive and ‘abnormal’ tax burden on airlines that operate international flights. However, even assuming that the level of taxation to which almost all international flights were subject was deliberately set at an abnormally high rate in order to favour Aer Arann, it seems to me that the only approach that permits a full assessment of the extent of that advantage is precisely the approach whereby that rate of taxation is taken as the reference point when applying the rules on State aid. Moreover, it cannot be maintained, and nor is it claimed by Ryanair, that — even assuming that the intention of the Irish authorities was to discriminate against or in any event weaken the power of airlines operating international flights in order to favour an airline competing with them on domestic routes — the benefit actually enjoyed by the former on those routes must be assessed differently, as a mere ‘collateral effect’ of the State intervention. Aside from the intentions of the State granting the aid, what actually matters in relation to aid, as I have already had occasion to point out, are the effects of the measure at issue. From that perspective, the fact that Ryanair benefited from the EUR 2 rate to a proportionately lesser extent than other airlines (34) is irrelevant in so far as it is apparent that it actually benefited from the advantage. (35)
35. Lastly, as observed by the Commission, the Court of Justice and General Court have already had occasion to consider tax systems under which the legislation imposing the tax and the legislation establishing the exemption from it were introduced at the same time. In addition to the cases cited by the Commission, I would refer, by way of example, to the cases which gave rise to the judgments of 8 November 2001 in Adria-Wien Pipeline and Wietersdorfer & Peggauer Zementwerke (C‑143/99, EU:C:2001:598) (36) and 15 June 2006 in Air liquid Industries Belgium (C‑393/04 and C‑41/05, EU:C:2006:403). (37)
36. On the basis of the foregoing considerations, I consider that the fourth complaint of Ryanair’s single ground of appeal must be rejected as unfounded.
4. The complaint alleging that the General Court erred in law by dismissing as irrelevant the EUR 3 rate adopted by the Irish authorities in March 2011 (first part of the single ground of appeal in Ryanair’s cross-appeal)
(a) The Ryanair judgment
37. In its first plea before the General Court, Ryanair also claimed that, given that the ATT charged at differentiated rates was unlawful, the only rate the Commission was entitled to adopt as the reference rate was the EUR 3 rate introduced in March 2011. At paragraphs 74 to 76 of the Ryanair judgment, the General Court rejected that complaint, stating that, since the EUR 3 rate was not actually applied during the period reviewed by the Commission, it would not allow a full and proper assessment of the effects of the measure at issue and could not, therefore, constitute the appropriate reference rate.
(b) Succinct presentation of the arguments of the parties
38. According to Ryanair, the fact that the EUR 3 rate was not applied during the period considered in the contested decision does not preclude its adoption as the reference rate, given that the tax system and its objectives remained the same. Ryanair also claims that, since the higher and lower rates of the ATT applied during the period taken into account in the contested decision were introduced and abolished at the same time, there was never, in the present case, a pre-existing rate that could be defined as ‘normal’.
39. The Commission and Irish Government consider the complaint to be ineffective and unfounded for broadly the same reasons.
(c) Assessment
40. Like the Commission and the Irish Government, I consider that the appellant’s arguments do not address the reasons set out in paragraphs 75 and 76 of the Ryanair judgment and are, therefore, first and foremost, ineffective. In particular, Ryanair fails to address the General Court’s objection that a rate that is introduced subsequently and falls between the two rates actually applied does not permit a comprehensive assessment of the effects of the measure at issue Ryanair also fails to explain why that rate would be more suitable for the purpose of determining those effects than the rates actually applied.
41. As regards the substance, I would point out that, according to settled case-law, a measure fulfils the condition of selectivity which is a defining characteristic of the concept of State aid within the meaning of Article 107(1) TFEU if, under a particular statutory scheme, it is such as to favour certain undertakings or the production of certain goods in comparison with others which, in the light of the objective pursued by the system in question, are in a comparable legal and factual situation. (38) To enable the situation of the undertakings concerned to be properly assessed, by identifying the tax burden affecting them and any benefits which they enjoy as a result of the measure at issue, it is necessary to take account of the circumstances of fact and law that exist when the measure is applied, as well as those that, even if not contemporaneous, are genuinely capable of influencing that assessment. (39) In the present cases, it is hard to see how the fact that the rate of the ATT was standardised and set at EUR 3 — after the period under consideration — can actually influence any reconstruction of the burdens borne and the benefits enjoyed respectively by the undertakings subject to the ATT at differentiated rates. In any event, Ryanair has provided no information in that regard. It simply claims that the higher EUR 10 rate cannot be adopted as the reference rate because it was introduced at the same time as the lower rate and because it was unlawful. Both arguments are unfounded. In that regard, I shall merely refer back to what I stated in paragraphs 33 to 35 above, in relation to the first argument, and in paragraphs 24 to 29 above, in relation to the second argument.
42. Lastly, I would point out that the appellant’s argument would have the paradoxical effect of defining as ‘normal’ a rate of tax to which none of the undertakings concerned were subject during the reference period.
43. On the basis of the foregoing considerations, I consider that the first part of Ryanair’s single ground of appeal must be rejected as ineffective. In addition, the arguments adduced in support of that complaint are, in my view, unfounded.
5. The complaints alleging that the General Court erred in law in finding that the right of the airlines to obtain reimbursement of the excess ATT paid had no bearing on whether it was possible for the Commission to adopt the higher rate of EUR 10 as the normal rate (second, third and fourth parts of the single ground of Aer Lingus’ cross appeal and third part of the single ground of Ryanair’s cross appeal)
(a) The contested judgments
44. After noting that the various possibilities available to Ireland for remedying the tax discrimination that existed included standardising the rates at the higher level (paragraph 60 of the Aer Lingus judgment and paragraph 85 of the Ryanair judgment), and that any right of the airlines subject to the higher rate to obtain reimbursement of the excess paid was not automatic and would depend on a number of factors such as the applicable limitation periods for bringing such an action in national law and the observance of general principles such as the absence of unjust enrichment (paragraph 61 of the Aer Lingus judgment and paragraph 86 of the Ryanair judgment), the General Court found (at paragraph 63 of the Aer Lingus judgment and paragraph 88 of the Ryanair judgment) that the Commission was justified in adopting the EUR 10 rate as the reference rate for the ATT without taking into consideration possible reimbursement claims, which were merely hypothetical and not certain to succeed.
(b) Succinct presentation of the arguments of the parties
45. The appellants claim that, contrary to the General Court’s assertion, the right to reimbursement of taxes paid under a national measure that is incompatible with EU law is not merely hypothetical but derives from settled case-law of the Court of Justice. Reimbursement of that kind is not a matter of discretion for the Member State concerned. In the present case, therefore, Ireland could not remedy the tax discrimination established by the Commission by retroactively imposing the higher rate on the companies subject to the lower rate. According to Aer Lingus, the General Court is confusing the question of the action the Member State concerned must take to bring that discrimination to an end with the question of the measures needed to bring to an end the unlawful situation that pertained during the period in which the discriminatory taxes were applied. Even assuming that the ATT was unlawful on account of the differentiated rates applied, the basic obligation incumbent on the Irish authorities to reimburse the tax unlawfully collected in any event precluded the adoption of the higher EUR 10 rate — from which the amount to be reimbursed must be deducted — as the ‘normal rate’ and the classification of the airlines which paid the lower EUR 2 rate as beneficiaries of a selective advantage. In that context, the outcome of any reimbursement claims is wholly irrelevant.
46. The Commission and Irish Government consider the complaints under consideration to be unfounded on the basis of broadly the same arguments.
(c) Assessment
47. Like the Commission and the Irish Government, I consider it necessary to reject Aer Lingus’ argument that the General Court confuses the action that a Member State may take to bring an end to tax discrimination with the measures necessary to eradicate its effects, because it is based on an incorrect interpretation of the Aer Lingus judgment. At paragraph 60 of that judgment (and paragraph 87 of the Ryanair judgment, which is identically worded), the General Court merely stated that, since the Member State concerned ‘may bring an end to’ such discrimination by standardising the rate at the higher level, that rate of taxation cannot be considered to be unlawful in itself, and that only the application of that rate in conjunction with a different rate is likely to give rise to a restriction on the freedom to provide services. Those findings form part of a discussion — initiated in the two paragraphs referred to above — that takes place before the issue is raised as to whether Ireland is required to reimburse the difference between the two rates of the ATT, a question on which the General Court, moreover, deliberately refrains from adopting a definitive position.
48. That being the case, the appellants’ arguments are generally characterised, as pointed out by both the Commission and the Irish Government, by an excessively formalistic approach which, on the whole, is difficult to reconcile with the rules on aid, which places emphasis on a substantive approach rooted in an analysis of the effects produced by State measures. In line with that approach, the analysis designed to determine whether and on what terms a tax is ‘normally’ payable, in order to establish whether a State measure that excludes certain undertakings from the tax or provides relief from the tax, confers on them a selective advantage within the meaning of Article 107 TFEU, must be conducted having regard to the nature and structure of the reference tax system, as well as the circumstances of fact (for instance, the relationship between the taxable and exempt events) and of law (for instance, the legal status of the undertakings subject to the tax) that are directly and specifically capable of influencing that analysis. (40) In the present cases, reimbursement of the difference between the higher and lower rates of the ATT which the Irish authorities would, in principle, be obliged to provide if a restriction on freedom to provide services were established, does not form an integral part of the tax system concerned and cannot be regarded as a substantive element of that system, on the basis of which the normal rate of tax payable should be established.
49. I would further point out that Aer Lingus’ argument would have the de facto effect of impeding the application of the rules on aid to tax advantages caught by the prohibition under Article 107(1) TFEU if, at the same time, they involve restrictions on one of the fundamental freedoms, giving rise to the basic obligation on the part of the State concerned to extend the same tax treatment to the undertakings discriminated against. Such an outcome is clearly undesirable. The rules on aid and those applicable to fundamental freedoms must be applied cumulatively to the same situation, (41) even though, as I shall explain in greater detail below, there has to be coordination to maintain consistency between the two areas of legislation and to avoid the adoption of mutually incompatible measures.
50. On the basis of the foregoing considerations, I take the view that the complaints forming the subject matter of the second, third and fourth parts of the single ground of Aer Lingus’ cross-appeal and the third part of the single ground of Ryanair’s cross-appeal must be rejected as unfounded.
6. Conclusions in relation to the cross-appeals
51. Since, in the light of the above analysis, I consider that none of the complaints put forward in the cross-appeals may be upheld, I suggest that the Court dismiss the cross-appeals in their entirety.
B – The main appeals
52. In support of both its appeals, and employing the same arguments, the Commission relies on a single ground, alleging breach of Article 108(3) TFEU and of Article 14 of Regulation No 659/99. That ground is directed against paragraphs 88 to 127 of the Aer Lingus judgment and paragraphs 119 to 152 of the Ryanair judgment.
1. The contested judgments
53. The reasoning adopted by the General Court in those parts of the grounds of the contested judgments that the Commission criticises, which is essentially the same in both judgments, may be summarised as follows.
54. First of all, the General Court notes that the ATT is an excise duty designed as such to be passed on to passengers, including on the basis of the obligation, imposed on airlines by Article 23 of Regulation No 1008/2008, (42) to indicate the amount of such taxes separately in the price of each ticket. The General Court then notes that, like the tax, the advantage deriving from the application of the reduced rate, that is to say the EUR 8 difference between the normal rate and the reduced rate, may also be passed on to passengers in full or in part. If this happens, then, according to the General Court, the airlines do not retain the advantage or retain it in part only. In those circumstances, the Commission was not justified in assuming that the advantage deriving from the application of the reduced rate actually obtained and retained by the airlines was, in all cases, equivalent to EUR 8 per passenger. According to the General Court, if the duty is passed on, the advantage actually obtained by airlines does not necessarily consist in the difference between the two rates, but in the option open to them to offer their customers more attractive prices, thereby increasing their turnover. The Commission ought therefore to have determined the extent to which the airlines subject to the EUR 2 rate actually passed on to their passengers the economic advantage derived from the application at the reduced rate of the ATT, in order to calculate precisely the advantage they had actually enjoyed, or to have requested the national authorities to perform that task. Moreover, by assuming, in all cases, that the advantage corresponded to the difference between the higher and lower rates of the ATT, the Commission failed, according to the General Court, to take sufficient account of the competitive situation on the market concerned and of the fact that all the airlines operating flights covering a distance less than 300 km from Dublin airport were subject to the ATT at the lower EUR 2 rate. Lastly, the General Court states that, in the contested decision, the Commission failed adequately to justify the reasons why it was necessary to recover an amount equivalent to the difference between the normal rate and the reduced rate in order to restore the situation that existed before the aid was granted. The General Court concludes that, by calculating the amount of the aid to be recovered as the difference between the reduced and normal rates of the ATT, the Commission committed an error of assessment and an error of law.
2. Succinct presentation of the arguments of the parties
55. The Commission, supported by Ireland, claims, in essence, that by criticising the contested decision for failing to take account of the extent to which the beneficiary airlines passed on to their passengers the advantage derived from the application of the reduced rate of the ATT, the General Court adopted a new economic test for determining the amount of aid to be recovered in a case involving a tax measure fixing a reduced rate by reference a standard rate of tax.
56. Aer Lingus claims that at issue in the present case is indirect aid, which the Commission treated as direct aid in the contested decision. It submits that when the Commission itself calculates the amount of the aid to be recovered, it must do so as precisely as possible, without relying on simplistic assumptions. Aer Lingus further notes that it was not permitted to collect from passengers on flights subject to the reduced rate an amount in excess of that rate and that, if required to repay the EUR 8 per ticket demanded by the Commission, it would not be possible to recoup that sum retrospectively from passengers who had purchased their tickets at the reduced rate. Contrary to the Commission’s claims, Aer Lingus had never — either in theory or in practice — been in possession of that sum. According to Aer Lingus, the Commission is wrong to claim that the consequence of the line of reasoning followed by the General Court is that recovery may not be demanded of the beneficiary companies. In its view, that argument is based on an incorrect interpretation of the Aer Lingus judgment. Lastly, Aer Lingus considers that there are no inconsistencies with existing case-law, contrary to what is claimed by the Commission.
57. Ryanair contends, primarily, that the Commission’s single ground of appeal is ineffective. According to Ryanair, the Commission has adopted a position solely in relation to the first of the three separate arguments employed by the General Court to justify the annulment of Article 4 of the contested decision, that is to say the failure to take into account the passing-on to passengers of the ATT, the failure to consider the situation on the market and the lack of justification for the need to recover the difference between the higher and lower rates of the ATT in order to restore the status quo ante. In the alternative, Ryanair claims that the Commission’s ground of appeal is unfounded. In its view, the General Court merely applied the principle that it is necessary to calculate the actual value of the advantage obtained through the aid. In addition, the Commission overstated the difficulty involved in calculating the amount precisely if the solution advocated by the General Court were to be adapted. Lastly, Ryanair states that it would be inconsistent not to take account of the passing on to passengers of the advantage obtained by the beneficiary of the aid, when, in fact, if a competing undertaking which claims to have suffered loss passes on to its customers the additional charge resulting from an infringement of antitrust law, the party that committed the infringement is able to avoid a claim for damages. (43)
3. Assessment
58. I must begin by rejecting the argument put forward by Ryanair as its principal argument, namely that the single ground of the Commission’s appeal is ineffective. On the one hand, in the broad scheme of the General Court’s reasoning, the three arguments set out by Ryanair do not constitute self-standing grounds for the annulment of the contested decision and, on the other, in its single ground of appeal, the Commission considered the various aspects of the grounds of the Ryanair judgment which led the General Court to annul the contested decision.
59. As regards the substance, as a preliminary point, it should be recalled that, according to settled case-law, the obligation on a Member State to abolish and recover aid regarded by the Commission as incompatible with the common market has as its purpose to restore the situation as it was before the aid was granted. (44) That restoration of the status quo ante is attained through ‘repayment of the aid’, that is by repaying what the State made available to the undertaking, plus, where appropriate, interest. (45) By repaying the aid, the recipient forfeits the advantage which it had enjoyed over its competitors on the market. (46)
60. The amount to be recovered is calculated in different ways depending on the form in which the aid was granted. For instance, when the State makes sums of money available to the beneficiary undertakings, or provides them with goods or services free of charge or at preferential prices, the undertakings will, in principle, be required to repay a sum equivalent to the nominal amount of the aid granted or the counter-value (or to the difference vis-à-vis the market price) of the goods or services from which they have benefited, (47) plus any relevant interest.
61. When the aid takes the form of a tax advantage, restoring the status quo ante usually involves recovering, from the beneficiary undertakings, a sum corresponding to the tax or duty payable under the fiscal legislation that would apply in the absence of the unlawful aid, together with appropriate interest. (48) The underlying idea is that, although favourable tax treatment is not strictly the same as a subsidy, it has a similar distorting effect on competition, basically corresponding to the distortion that results from the grant of a sum of money equivalent to the lesser tax burden borne. An advantage of that nature may result from direct business taxation measures — in the form, for example, of a reduction in the taxable amount, a total or partial reduction in the amount of the tax or the deferment, cancellation or even special rescheduling of the tax debt — or from indirect taxation measures, such as an exemption from or reduction in excise duties or other levies, provided, however, that the exemption or reduction provides relief from the charges normally borne by the budgets of the beneficiary undertaking. (49)
62. When determining the amount to be recovered, the Commission is not, in principle, required to look into the way in which the advantage that flowed from the grant of the aid was actually used by the beneficiary undertaking. The purpose of recovery is not to eliminate the benefit that the undertaking actually gained as a result of the grant of the aid, but to eliminate the competitive advantage it initially acquired by being granted the aid. This means, first, that recovery will normally have to be confined to the direct benefit obtained from the grant of the aid and cannot be extended to include any indirect benefits that may also have accrued. (50) If, therefore, as a result of its use of the aid (for example, by cutting its prices or investing in advertising), the beneficiary undertaking has obtained new market shares or if, as a result of the aid, it has been awarded a contract or avoided insolvency, it will nevertheless be required to repay an amount corresponding solely to the advantage consequent on the conferment of the aid. On the other hand, it will be required to repay the whole of that amount even where, as a result of poor management of the aid, or because of the characteristics of the market in which it operates, its position on that market, its financial position or business methods, it failed to benefit fully from the competitive advantage that flowed from the aid. In other words, the decisions made by the undertaking once the aid has been granted, or events that ensue are, in principle, irrelevant when it comes to determining the extent (51) of the obligation to repay. (52) Moreover, the aid must be repaid regardless of the negative effects — even when they outweigh the advantages consequent on the grant of the aid — which it may have on the beneficiary’s economic and financial position. In that regard, the Court has made clear that, given the purpose of the obligation to repay the aid, as a general rule, and save in exceptional circumstances, the Commission will not exceed the bounds of its discretion if it asks the Member State concerned to recover the sums granted by way of unlawful aid, (53) even where recovery represents for the beneficiary undertaking a burden that may give rise to its disappearance from the market. (54)
63. It is clear from the above that ‘restoring the situation as it was before aid was granted’ — which, as seen, is the main purpose of recovery — does not mean recreating the conditions of competition that existed at the time when the aid was granted. Some effects of the aid are in fact irreversible, and it would be an illusion to think that repayment of the sums corresponding to the advantage obtained by the beneficiary undertaking or undertakings would be sufficient to place market operators in the same competitive position they were in before the aid was granted. (55) It is therefore possible that, even after the aid has been repaid, the beneficiary undertaking or undertakings will actually continue to benefit from the positive impact of the State intervention on their competitive position. Similarly, it is possible that, despite the advantage obtained, once the aid has been repaid, their competitive position will deteriorate compared with its position before the aid was granted.
64. Lastly, case-law has recognised that the national authorities responsible for recovering the aid may, within certain limits, take account of circumstances likely to diminish the advantage obtained by the beneficiary undertaking as a result of the grant of the aid, and thus to affect the calculation of the amount of aid to be repaid. For instance, if the grant of the aid gave rise to additional fiscal burdens for the undertaking concerned, the excess paid must be deducted from the amount to be repaid. Similarly, it is necessary to take account of the tax relief to which the undertaking would in any event have been entitled under the national law, in accordance with EU law, that was applicable at the time when the aid was granted. (56) However, without prejudice to the right of undertakings to defend themselves in the national recovery procedures — particularly where the national authorities are required to identify the beneficiaries and quantify the aid — the possibility of claiming that the advantage resulting from the aid was diminished or neutralised by invoking factors linked to the organisational and strategic model which the beneficiary undertaking employs on the market, or to the competitive context in which it operates, would appear to be limited.
65. Lastly, it must be pointed out that, as well as being designed to eliminate the competitive advantage obtained by the beneficiary or beneficiaries of the aid, recovery is also designed to act as a deterrent to undertakings, which are themselves responsible for verifying that aid has been granted in compliance with the procedure laid down by the Treaty. (57) As rightly pointed out by the Commission at the hearing, the obligation on the State that granted the aid to recover the unlawful aid is imposed in order to remedy an unhealthy situation — the breach of the ‘standstill’ requirement set out in Article 108(2) TFEU. Although not punitive in nature, its effect is to deter undertakings from being complicit in a breach of that kind or to encourage them to protect themselves against the risk of having to repay what they have received when they are not actually in a position to avoid the grant of aid, as frequently occurs when aid is granted under a tax scheme.
66. It is clear from all of the principles set out above that the recovery of fiscal aid in the form of the application of a tax rate below the normal rate will, in principle, be based on the difference between the normal rate and the rate actually applied. In that way, as correctly pointed out by the Commission, the beneficiary undertaking will ultimately be required to meet the tax burden from which it was unlawfully exempted. In such circumstances, calculation of the aid therefore simply involves determining the sum owing to the State which has not been collected and does not require complex assessments of an economic nature, or, in principle, an analysis of the conditions of competition on the market in question or of the conduct of the operators concerned on that market.
67. By requiring Ireland to recover the difference between the higher and lower rates of the ATT for every ticket issued, the Commission therefore complied, in the contested decision, with the principles set out above.
68. It is therefore necessary to ascertain whether the General Court’s annulment of the recovery order in the contested judgments is justified on the basis of the specific circumstances of the present cases.
69. However, before embarking on that review, I consider it necessary to reject the Commission’s argument that it follows from the reasoning which led the General Court to annul the recovery order that no repayment may be demanded of the airlines subject to the lower rate of the ATT. Contrary to what the Commission would appear to argue, to accept that it is possible that the undertakings in receipt of the aid may rely on the total or partial passing-on to passengers of the advantage obtained does not mean that they are released from all obligation to repay the aid, but requires the adoption of specific procedures for calculating the amount to be recovered. In the judgments under appeal, the General Court clearly indicated that, if the advantage obtained from the reduction in the rate of the ATT were passed on in full or in part to passengers, that advantage may no longer be regarded as equivalent in all cases to the difference between the two rates of the ATT, but corresponds to the increase in turnover resulting from being able to offer more attractive prices on the market. An advantage of that nature may no doubt be determined by applying a method of calculation similar to that applied by the Commission in cases of indirect aid, (58) that is to say by assessing the impact of the reduction in air fares on demand, so as to establish the number of extra tickets sold as a result of the reduction. Employing a method of that nature undoubtedly makes the process of quantifying the amount to be repaid more complex, but not impossible, and does not therefore fundamentally preclude, as the Commission appears to maintain, a claim for recovery in relation to the beneficiary airlines.
70. In that connection, I would point out that the reasoning that led the General Court to criticise the way in which the Commission calculated the amount to be recovered is based, as we have seen, on the fact that the ATT is an excise duty, that is to say an indirect tax that is formally and economically intended to be passed on to passengers. According to the General Court, there is a formal passing on of the ATT because, in particular, airlines are required, pursuant to Article 23 of Regulation No 1008/2008, to indicate the amount of the ATT separately in the price of each ticket sold, a requirement which the General Court considers to be ‘common ground between the parties’.
71. The Commission disputes that premiss, contending, first, that the General Court was incorrect to consider that it subscribed to the interpretation of Article 23 of Regulation No 1008/2008 given in the judgments under appeal and, secondly, that the fact that the ATT is an excise duty was not relevant for the purpose of assessing the advantage obtained by the airlines as a result of the application of the lower rate.
72. As regards the first point, the Commission states that it consistently maintained before the General Court that Article 23 of Regulation No 1008/2008 does not require the airlines to indicate the amount of the tax separately in the ticket price in all cases, but only when they have decided to include it in the fare. In that regard, I would merely point out that both the text of that provision and its rationale, as is clear in particular from recital 16 in the preamble, (59) seem to argue in favour of the Commission’s interpretation, namely that there is a requirement to indicate the amount of the applicable taxes separately in the overall ticket price only if, and to the extent to which, the airline decides to pass on to its passengers the cost of the taxes. However, without it being necessary to adopt a definitive position on the interpretation of Article 23 of Regulation No 1008/2008 in the present proceedings, it is necessary to point out that even if it were accepted that, under that provision, airlines were required always and in any event to indicate the whole amount of the ATT in the ticket price, this would not mean that they were not free — by reducing the ticket price exclusive of tax and, consequently, their own profit margins on the individual transaction — to bear part or all the cost of the ATT. (60) In other words, the fact that the ATT was formally intended to be passed on to passengers does not mean that the airlines had no margin of manoeuvre in relation to its economic impact.
73. As regards the second point raised by the Commission set out at paragraph 71 above, I agree with the latter that the importance the General Court attached, in the broad logic of its reasoning, to the fact that the ATT is an excise duty must be re-evaluated.
74. First of all, although such taxes are intended to be passed on to consumers, they have an impact, at least formally, on the budget of the undertaking concerned which is regarded as the taxable person. They are levied because of and in connection with business activities (61) — in the case of the ATT, the act of providing air transport services. For the beneficiary undertaking which sees its tax burden reduced, any reduction in those taxes represents a direct advantage within the meaning of the rules on aid, which, contrary to Aer Lingus’ claims, cannot be equated with an indirect advantage which an undertaking obtains when subsidies are granted to consumers for the purchase of the products it manufactures. (62)
75. Secondly, it may be that the formal passing on of the excise duty is not translated into an economic passing on of the duty, as the corresponding cost of the tax may be absorbed, in whole or in part, by the undertaking providing the goods or service in the form of a price adjustment. (63) Similarly, if the overall price of the product or service provided remains unchanged or is not decreased by the full amount of the reduction, a reduction in the amount of duty may be wholly or partially converted into profit for the undertaking. In that sense, the situation of the airlines subject to the ATT differs from that of the Greek casinos operating under the system of differentiated admission charges examined by the General Court in the case that resulted in the judgment of 11 September 2014 in Greece v Commission (T‑425/11, EU:T:2014:768), which was discussed by the parties at the hearing. Under that system, the price of admission tickets was set by the State, as was the percentage of the ticket price that each casino was allowed to retain as the fee for issuing the ticket. As they could influence neither the price of the admission ticket, (64) nor the fees due to them, the casinos, unlike the airlines subject to the ATT, were acting simply as intermediaries tasked with collection. (65)
76. Thirdly, the mechanism for passing on does not relate solely to excise duties, in the area of production or consumption, (66) but in general to any indirect tax — for example duty paid to the exchequer for a service provided — which, as it forms part of production costs, is reflected in the final price of the product or service. A form of passing on may, moreover, exist in relation to direct taxes. For example, an increase in corporation tax, in particular where it relates to a special tax, may lead the producer to pass the increase in the tax burden on to the goods produced by increasing prices, or may cause it to withdraw its investment in the sector affected by the tax, resulting in a fall in supply and a price increase. Moreover, a tax may be passed on by the producer not only downstream, to consumers, but also upstream to suppliers, and transversally (so-called indirect passing on), for instance, by raising the price of products other than the products caught by the tax. In other words, there are a range of mechanisms that enable an undertaking liable for the tax, including a tax that is not an indirect tax, to pass on the cost, in whole or in part, to others. If these mechanisms are set in motion, it cannot be excluded that even an advantage deriving from a reduction in the tax burden may, depending on the characteristics of the relevant market, be passed on to persons other than the de facto taxpayer.
77. On the basis of the foregoing, I consider that neither the particular circumstances of the present cases, especially the nature of the tax in question, nor any requirement for airlines to comply with the criteria established by Article 23 of Regulation No 1008/2008 on pricing, justify of themselves a departure from the application of the criteria normally applied for the purpose of quantifying aid granted in the form of the application of a reduced rate of tax.
78. The General Court also bases its finding that the Commission ought to have taken account of the possibility of passing on to passengers the advantage derived from the application of the reduced rate of the ATT on a number of precedents in case-law, in particular the judgment of 29 March 2007 in Scott v Commission (T‑366/00, EU:T:2007:99) and the judgment of 22 January 2013 in Salzgitter v Commission (T‑308/00, EU:T:2013:30), which place the emphasis on the Commission’s obligation to limit the recovery order to the financial advantages resulting from the grant of the aid.
79. Those judgments would appear to be of questionable relevance in the present proceedings, however. The cases giving rise to those judgments concerned situations in which the process of quantifying the advantage attaching to the aid (an interest-free government advance consequent on the deferral of tax in Salzgitter v Commission and funding resulting from the sale of land at a preferential price in Scott v Commission) demanded complex economic assessments, the accuracy of which was criticised by the beneficiary undertakings. In the present cases, however, the criticism levelled at the Commission before the General Court is that it failed to take account of the circumstances subsequent to the grant of the aid (the possible passing on of the advantage to passengers), which could change the nature and extent of the advantage initially obtained by the beneficiary companies in the form of a reduced rate of tax that was correctly quantified by the Commission. (67) In other words, it is the right of the undertakings in receipt of aid to use the passing-on defence in order to reduce the amount of the sums to be repaid that is the important issue in the present cases and not — or at least not directly — an error in calculating the aid intensity, as in the cases giving rise to the judgments cited by the General Court.
80. As I have already had occasion to point out, the precise determination of the advantages that flow from the grant of aid does not, in principle, involve examining how the aid was actually used once it had been granted. The extent to which such advantages have been transferred by the beneficiaries to other persons once the aid has been granted should not therefore matter when establishing the amount to be recovered. Clear guidelines to that effect are to be found in the judgment of 20 March 1997 in Alcan Deutschland (C‑24/95, EU:C:1997:163), in which the Court rejected the possibility of using, to counter the order for the recovery of aid, the national law of a Member State under which repayment was precluded if the beneficiary which had acted in good faith could demonstrate that the gain consequent on the grant of the aid no longer existed. (68) In his Opinion in the case which gave rise to that judgment, Advocate-General Jacobs expressly rejected the use of the passing-on defence in the State aid sector, (69) though the Court had in fact accepted it in the Community aid sector by its judgment of 21 September 1983 in Deutsche Milchkontor and Others (205/82 to 215/82, EU:C:1983:233).
81. The recovery of an amount equal to the aid granted (in the present cases, the amount owning to the State that has not been collected), together, where appropriate, with interest, is, as seen earlier, deemed in principle to eliminate the competitive advantage obtained by the recipient of the aid and to restore the status quo ante. Any other rule — that, for example, permits the beneficiary of the aid to challenge the recovery order on the basis that the benefit had been passed on to its own customers through a price reduction — would, as pointed out by Advocate-General Jacobs in his Opinion cited in paragraph 80 above, be difficult to apply and, in so far as it entailed the recovery of a lesser amount, would jeopardise attainment of the objectives laid down in the Treaty. (70)
82. Ryanair contends that not allowing the passing-on defence in relation to aid would be at odds with the requirement for consistency in EU law, since that defence is permitted in actions for damages relating to breaches of antitrust law for undertakings which have committed breaches of a quasi-criminal nature, whereas it is denied to undertakings which, like the airlines in the present cases, did not in fact have the opportunity of opposing the grant of the aid. On that point, even if it were accepted that the mechanism by which an undertaking passes on to its own customers the benefit obtained from the grant of aid can, from a legal and economic perspective, be equated with the mechanism that enables a competitor who has been harmed to pass on to consumers the loss he has suffered, I would point out that, in the present cases, the use of the passing-on defence is raised in the context of public enforcement of the rules on aid and not, as in antitrust cases, in relation to private enforcement. Private enforcement takes an approach to compensation that is geared to the protection of private interests and differs from the rationale underlying the application of competition law by the Commission, which is guided by the pursuit of the public interest in maintaining the competitive structure of the markets. Consequently, the parallel suggested by Ryanair does not seem to me to be relevant, at least in that regard. Moreover, in the context of private enforcement under Article 108(3) TFEU, if undertakings which are beneficiaries of aid are summoned in proceedings for the award of damages, there is nothing to prevent them from invoking against the undertaking that considers itself harmed the fact that the latter passed on the loss, in full or in part, to its own customers. Consequently, the inconsistency alleged by Ryanair does not exist in that regard either.
83. Lastly, Aer Lingus and Ryanair point to the fact, also noted by the General Court in the judgments under appeal, (71) that the airlines required to repay the difference between the higher and lower rates of the ATT are not able retroactively to recover, from those passengers who purchased tickets at the lower rate, the tax at the higher rate which they did not pay. That does not seem to me to be a crucial factor, since it was in any event open to the airlines concerned to pass on to their own customers the cost of repaying the aid when issuing new tickets. (72) I would also point out that in its abovementioned judgment of 4 March 2009 in Associazione italiana del risparmio gestito and Fineco Asset Management v Commission (T‑445/05, EU:T:2009:50), the General Court held that the corporate investment vehicles concerned or the undertakings managing them were required to repay the difference between the standard tax and the reduced tax resulting from the measure at issue, regardless of the possibility, which was not established, of effecting recovery from their investors in accordance with the provisions of national law. (73) Lastly, if it is in fact the case that the recovery of an amount equal to the difference between the higher and lower rates of the ATT has an effect similar to that of retroactive taxation at the higher rate, as Ryanair and Aer Lingus suggest, the Court has previously had occasion to establish that this is a normal consequence of classification of the tax reduction at issue as aid. (74)
84. On the basis of all the foregoing considerations and for the reasons set out, I consider that, in annulling, by the judgments under appeal, Article 4 of the contested decision in so far as it orders the recovery of an amount equal to the difference between the higher and lower rates of the ATT, the General Court erred in law. I therefore suggest that the Court uphold the Commission’s appeal and set aside the judgments under appeal.
C – Referral back to the General Court
85. In accordance with the first paragraph of Article 61 of the Statute of the Court of Justice, the latter may, after setting aside the decision of the General Court, itself give final judgment in the matter, where the state of the proceedings so permits, or refer the case back to the General Court for judgment. In that regard I would point out that the General Court did not examine the second plea in law or part of the fourth plea in Case T‑473/12 or the second part of the third plea in Case T‑500/12. I therefore consider it appropriate to refer the present joined cases back to the General Court for it to examine those pleas and arguments.
86. The observations below are therefore given in the event that the Court should decide to give final judgment in the matter.
87. For the reasons set out in the present Opinion, the third and fourth pleas in Case T‑473/12 and the second and third pleas, in so far as they were examined by the General Court, in Case T‑500/12, should be rejected as unfounded.
88. In its second plea in Case T‑473/12, which the General Court did not consider, Aer Lingus claimed that, when deciding to recover the aid, the Commission ought to have taken account of the right of airlines subject to the higher rate of the ATT to obtain reimbursement of the excess tax paid in breach of Article 56 TFEU and Regulation No 1008/2008, as well as of Article 108(3) TFEU. By ordering the recovery of the difference between the higher and lower rates of the ATT in such circumstances, the Commission infringed Article 14(1) of Regulation No 659/1999 and the principles of legal certainty, effectiveness and sound administration.
89. By the second part of its third plea in case T‑500/12, which, once again, was not examined by the General Court, Ryanair put forward similar arguments concerning the legality of the recovery order. It stressed in particular the serious distortions of competition that would result from the combination of the right to bring proceedings before the national courts to obtain reimbursement of the tax paid in breach of Article 56 TFEU and the decision to recover the aid, distortions that would, in particular, damage small airlines such as Aer Arann.
90. Let me begin by pointing out that Aer Lingus’ contention that there is a right to reimbursement of the ATT before the national courts pursuant to Article 108(3) TFEU was rejected by the General Court at paragraphs 65 to 76 of the Aer Lingus judgment. That part of the judgment has not been appealed.
91. That said, I consider the arguments put forward by Aer Lingus and Ryanair must be also rejected in so far as they are based on the alleged right to reimbursement of the ATT pursuant to the provisions on freedom to provide services.
92. According to settled case-law, the recovery of aid is the logical consequence of the finding that it is unlawful. (75) As a rule, therefore, the distortions of competition generated by unlawful aid are remedied by requiring the beneficiaries to repay the aid to the body that granted it.
93. Recovery is designed to restore the status quo ante. In the case of aid granted in the form of (total or partial) exemption from a tax, that objective is usually pursued through the adoption by the Member State concerned of the measures needed to order the beneficiary undertakings to pay sums corresponding to the amount of the unlawfully granted exemption. (76) If, after establishing that the exemption at issue was unlawful, the Commission were to refrain from requiring the Member State that granted the aid to adopt such measures, in order to enable the undertakings concerned to exercise their right to reimbursement of the tax in cases in which the fiscal measure as a whole constituted a restriction on fundamental freedoms, the attainment of that objective would inevitably be jeopardised.
94. Contrary to what Aer Lingus appears to contend, bringing proceedings for the reimbursement of the ATT before the national courts on the basis of Article 56 TFEU cannot constitute an alternative to recovery with a view to rectifying the anticompetitive effects of the aid found to exist by the Commission Even if it were accepted that a reimbursement measure may contribute to limiting those effects, by reducing the number of economic operators harmed, (77) the fact remains that the adoption of such a measure is contingent on the undertakings concerned taking that initiative and dependent on compliance with both procedural and substantive rules. Moreover, if that route were taken, the effects of the aid would be eliminated only if all of the undertakings subject to the higher rate were to seek and obtain reimbursement. It is clear that, in those circumstances, there is no guarantee that the objective of restoring the status quo ante would actually be achieved.
95. By ordering the recovery of the aid without taking account of the right to reimbursement to which the airlines that paid the higher rate of the ATT claim to be entitled, the Commission did not, therefore, in my view, infringe Article 14(1) of Regulation No 659/1999 or the general principles of EU Law cited by Aer Lingus. (78)
96. In those circumstances, while reliance on the reimbursement procedure does not constitute a valid alternative to the recovery order, it seems clear that it is not possible to apply the two remedies concurrently either, as their effects are irreconcilable with each other. The effect of any reimbursement measure would in fact be to extend to the airlines subject to the higher rate of the ATT the advantage inherent in the application of the reduced rate, whereas the recovery order requires the airlines subject to the reduced rate to give back that advantage. Consequently, as rightly observed by both Aer Lingus and Ryanair, if the simultaneous application of both mechanisms were permitted, the anticompetitive effects of the ATT would persist, even though the group of operators at an advantage and that of operators at a disadvantage would be reversed.
97. In order to avoid such a paradoxical outcome, it is the responsibility of the national court seised of reimbursement proceedings to take account of the consequences of the recovery order. It seems clear to me that, by de facto extending the application of the normal rate of the ATT to the airlines subject to the reduced rate, that order retroactively eliminates the discrimination consequent on the application of differentiated rates. In such circumstances, were reimbursement granted, the range of beneficiaries of the aid would be increased and its anticompetitive effects of the aid extended. (79)
98. On the basis of the forgoing, if they are examined by the Court, the second plea in Case T‑473/12 and the second part of the third plea in Case T‑500/12 should, in my view, be rejected as unfounded.
99. In its fourth plea, Aer Lingus claims that, since it is not possible to recover retrospectively from the passengers who benefited from the lower rate of the ATT the EUR 8 to be recovered in accordance with the recovery order, that order would amount to a supplementary tax, and thus an unlawful penalty, and would infringe both the principle of proportionality and Article 14 of Regulation No 659/1999. In that regard, I would simply refer to the observations set out in paragraph 83 above.
100. In the light of all the foregoing considerations, I consider that, if, on setting aside the judgments under appeal, the Court were to decide to give judgment itself in the cases under appeal, both actions should be dismissed in their entirety.
IV – Conclusion
101. On the basis of all the above considerations, I suggest that the Court dismiss the cross-appeals, uphold the main appeals, set aside the judgments under appeal and refer the cases back to the General Court. If, on setting aside the judgments under appeal, the Court decides to give final judgment itself in Cases T‑473/12 and T‑500/12, I propose that both actions be dismissed in their entirety and that Aer Lingus and Ryanair be ordered to pay the costs of the present proceedings and of the proceedings before the General Court.