Case T‑390/20
(Publication in extract form)
Scandlines Danmark ApS
and
Scandlines Deutschland GmbH
v
European Commission
Judgment of the General Court (First Chamber, Extended Composition) of 28 February 2024
(State aid – Public financing of the Fehmarn Belt fixed rail-road link – Aid granted by Denmark to Femern – Decision declaring the aid compatible with the internal market – Individual aid – Important project of common European interest – Necessity of the aid – Proportionality – Weighing the beneficial effects of the aid against its adverse effects on trading conditions and on the maintenance of undistorted competition – Communication on the criteria for the analysis of the compatibility with the internal market of State aid to promote the implementation of important projects of common European interest)
1. Aid granted by a Member State – Examination by the Commission – Classification of several consecutive interventions as individual aid – Conditions – Interventions that are inseparably linked – Consequence – No obligation to provide prior notification of each of the tranches paid as individual aid
(Council Regulation 2015/1589, Art. 1(e))
(see paragraphs 37-51, 62-64)
2. Aid granted by a Member State – Prohibition – Derogations – Aid capable of being regarded as compatible with the internal market – Aid helping to promote the execution of an important project of European interest – Grant of several individual aids paid in a number of tranches for the financing of one and the same project – Joint examination of the compatibility of those aids with the internal market – Whether permissible
(Art. 107(3)(b) TFEU)
(see paragraphs 52-61)
3. Aid granted by a Member State – Prohibition – Derogations – Aid capable of being regarded as compatible with the internal market – Aid helping to promote the execution of an important project of European interest – Important project of common European interest – Concept – Project fulfilling the general criteria and a general positive indicator laid down by the Communication on the execution of projects of common European interest – Included
(Art. 107(3)(b) TFEU; Commission Communication 2014/C 188/02, paras 14-20)
(see paragraphs 69, 70, 91-102)
4. Aid granted by a Member State – Prohibition – Derogations – Aid capable of being regarded as compatible with the internal market – Aid helping to promote the execution of an important project of European interest – Important project of common European interest – Criteria – Co-financing of the project by the beneficiary of the aid
(Art. 107(3)(b) TFEU; Commission Communication 2014/C 188/02, para. 18)
(see paragraphs 82-85)
5. Aid granted by a Member State – Prohibition – Derogations – Aid capable of being regarded as compatible with the internal market – Aid helping to promote the execution of an important project of European interest – Necessity of the aid – Incentive effect of the aid – Submission of an aid application before the start of the works – Specific-purpose company established by the public authorities for the execution of a specific project – Aid application inherent in the establishment of that company
(Art. 107(3)(b) TFEU; Commission Communication 2014/C 188/02, para. 28)
(see paragraphs 109-137)
6. Aid granted by a Member State – Prohibition – Derogations – Aid capable of being regarded as compatible with the internal market – Aid helping to promote the execution of an important project of European interest – Necessity of the aid – Assessment in the light of a counterfactual scenario – Counterfactual scenario consisting in the absence of an alternative project – Whether permissible – Conditions
(Art. 107(3)(b) TFEU; Commission Communication 2014/C 188/02, para. 29)
(see paragraphs 141-163)
7. Aid granted by a Member State – Prohibition – Derogations – Aid capable of being regarded as compatible with the internal market – Aid helping to promote the execution of an important project of European interest – Necessity of the aid – Assessment in the absence of an alternative project – Amount of the aid not to exceed the minimum necessary – Calculation of the project’s internal rate of return – Determination of the relevant lifetime of the project taking into account the conduct of investors on the market
(Art. 107(3)(b) TFEU; Commission Communication 2014/C 188/02, para. 30)
(see paragraphs 168, 171, 176-178)
8. Aid granted by a Member State – Prohibition – Derogations – Aid capable of being regarded as compatible with the internal market – Aid helping to promote the execution of an important project of European interest – Proportionality of the aid – Calculation of the maximum level of the aid based on the funding gap – Calculation of the funding gap – Determination of the relevant lifetime of the project taking into account the conduct of investors on the market
(Art. 107(3)(b) TFEU; Commission Communication 2014/C 188/02, para. 31)
(see paragraphs 169, 170, 179)
9. Aid granted by a Member State – Prohibition – Derogations – Aid capable of being regarded as compatible with the internal market – Aid helping to promote the execution of an important project of European interest – Aid in the form of a guarantee or loan – Requirement that the aid be limited in time
(Art. 107(3)(b) TFEU; Commission Communication 2014/C 188/02, para. 36)
(see paragraphs 195-206)
10. Aid granted by a Member State – Prohibition – Derogations – Aid capable of being regarded as compatible with the internal market – Aid helping to promote the execution of an important project of European interest – Proportionality of the aid – Calculation of the maximum level of the aid based on the funding gap – Calculation of the funding gap – Revenue and costs taken into account
(Art. 107(3)(b) TFEU; Commission Communication 2014/C 188/02, para. 31)
(see paragraphs 218-247)
11. Aid granted by a Member State – Prohibition – Derogations – Aid capable of being regarded as compatible with the internal market – Operating aid – Not included – State guarantees and State loans limited to the costs of planning and constructing an important project of common European interest – Measures constituting investment aid
(Art. 107(3)(b) TFEU)
(see paragraphs 248-250)
12. Aid granted by a Member State – Administrative procedure – Determination of the amount of the aid – Aid helping to promote the execution of an important project of European interest – Aid including State guarantees and State loans – Calculation of the amount of the aid – Aid amount not corresponding to the total of the amounts covered by the State loans and loans with a State guarantee – Aid amount corresponding to the amount of the funding gap in respect of the project in question – Whether permissible
(Art. 107(1) TFEU; Commission Notice 2008/C 155/02, point 4.1)
(see paragraphs 256-262, 264-271)
13. Aid granted by a Member State – Prohibition – Derogations – Aid capable of being regarded as compatible with the internal market – Aid helping to promote the execution of an important project of European interest – Proportionality of the aid – Weighing the positive effects of the aid in terms of contribution to the objective of common European interest against its negative effects in terms of distortion of competition and effect on trade between Members States – No manifest error of assessment made by the Commission
(Art. 107(3)(b) TFEU; Commission Communication 2014/C 188/02, paras 41-43)
(see paragraphs 279-327)
Résumé
The General Court dismisses the action for annulment brought by the shipping companies Scandlines Danmark ApS and Scandlines Deutschland GmbH against the Commission Decision of 20 March 2020 (1) by which the European Commission found that the support measures granted by Denmark to the public undertaking Femern A/S for the planning, construction and operation of a Fehmarn Belt fixed rail-road link between Denmark and Germany constitute State aid that is compatible with the internal market. In that context, the Court provides clarification as to the Commission’s procedures for monitoring aid measures that are paid in several tranches. The Court is also called upon to review the Commission’s application of certain paragraphs of its communication on the execution of important projects of common European interest (2) (‘the IPCEI Communication’).
In 2008, Denmark and Germany signed a treaty regarding a Fehmarn Belt fixed link project consisting of, on the one hand, a railway and road tunnel under the Baltic Sea between Denmark and Germany (‘the Fixed Link’) and, on the other, road and rail hinterland connections in Denmark.
The Danish public undertaking Femern was entrusted with the financing, construction and operation of the Fixed Link. Having received capital injections, loans guaranteed by the State and loans granted by Denmark, Femern will receive fees from users as from when the Fixed Link is put into service, in order to repay its debt.
At the end of 2014, the Danish authorities notified the Commission of the financing model for the Fehmarn Belt Fixed Link project. Without initiating the formal investigation procedure, the Commission decided not to raise any objections to the notified measures. (3)
By judgments of 13 December 2018, (4) the Court partially annulled that decision. As regards the public financing granted to Femern, the Court held that the Commission had failed to fulfil its obligation under Article 108(3) TFEU to initiate the formal investigation procedure due to the existence of serious difficulties.
Having initiated the formal investigation procedure following those judgments, the Commission found, by its decision of 20 March 2020, that the measures consisting of capital injections and a combination of State loans and State guarantees granted to Femern for the planning, construction and operation of the Fixed Link constituted State aid that was compatible with the internal market on the basis of Article 107(3)(b) TFEU, (5) in that those measures were intended to promote the execution of an important project of common European interest in observance of the principle of proportionality.
The shipping companies Scandlines Danmark and Scandlines Deutschland brought an action before the Court for annulment of that decision.
Findings of the Court
In the light of the fact that the State guarantees and State loans in favour of Femern had been granted by way of successive tranches paid according to the progress of the Fixed Link project, the applicants complained that the Commission had erred in finding, in the contested decision, that the various financial support measures could be grouped into three individual aid measures, namely a first aid in the form of a capital injection in 2005, a second aid in the form of capital injection, State guarantees and State loans granted under a law adopted in 2009, (6) and a third aid in the form of State loans and State guarantees granted under a law adopted in 2015. (7)
On that point, the Court states that several consecutive measures of State intervention may be regarded as a single intervention where those measures, having regard in particular to their chronology, their purpose and the undertaking’s situation at the time of those interventions, are so closely linked to each other that they are inseparable from one another. Since that condition was satisfied in respect of all the financing granted under the law adopted in 2009 and as regards the financing granted under the law adopted in 2015, the Commission did not err in classifying them as individual aids. It follows that the Commission was also not obliged to require the Danish authorities to notify it separately of each State loan and each State guarantee granted to Femern under those laws.
Moreover, since the three individual aids granted to Femern in 2005, 2009 and 2015 were to finance one and the same project, the Commission did not exceed the limits of its discretion by jointly examining their compatibility with the internal market. It is precisely by taking account of all those aids that the Commission is in a position to assess their effect on competition in the context of the examination of one of the derogations provided for in Article 107(3) TFEU, in particular for an important project of common European interest, the implementation of which involves the payment of public financing over a long period.
The Court also rejects the plea for annulment alleging infringement of Article 107(3)(b) TFEU, resulting from the fact that the Commission allegedly incorrectly classified the project at issue as a project of common European interest and wrongly concluded that the aid was necessary and proportionate.
First, as regards the classification of the Fixed Link project as a project of common European interest within the meaning of Article 107(3)(b) TFEU, the Court states that the concept of ‘common European interest’ laid down in that provision must be interpreted strictly and that an initiative is classified as a project of common European interest only where it forms part of a transnational European programme jointly supported by various Member State governments or where it is part of concerted action by various Member States in order to combat a common threat.
The concept of ‘common European interest’ was also clarified by the Commission in the IPCEI Communication, which sets out the general cumulative criteria to be satisfied in order for a project to fall within that concept, as well as positive indicators justifying a more favourable approach by the Commission for the purposes of classification as a project of common European interest, including that of co-financing of the project by way of an EU fund.
Since the Fixed Link project met the general cumulative criteria set out in the IPCEI Communication and that project had, moreover, received EU financing, the Commission was entitled to conclude, on the basis of only those criteria and indicators, that the Fixed Link project was of common European interest.
Second, as regards the necessity of the aid, the Court states that, in the context of Article 107(3)(b) TFEU, aid to promote the execution of an important project of common European interest must, in order to be compatible with the internal market, have an incentive effect on the recipient undertakings. To that end, it must be demonstrated that, in the absence of the planned aid, the investment intended to implement the project at issue would not take place. In that regard, the Court states that a finding that an aid measure is not necessary can arise in particular from the fact that the aided project has already been started, or even completed, by the undertaking concerned prior to the application for aid being submitted to the competent authorities, which means that the aid concerned cannot operate as an incentive (criterion that the application for aid must be submitted prior to the start of the works).
On the latter point, the Court endorses the Commission’s line of argument that, in the present case, the criterion that the application for aid must be submitted prior the start of the works was satisfied because the application for aid was inherent in the establishment of Femern. In that regard, the Court states that, as a specific-purpose company set up by the public authorities to carry out the Fixed Link project, Femern is dependent on public financing until the Fixed Link is brought into operation. Moreover, since the Commission could jointly examine the compatibility with the internal market of all the financing granted to Femern since it was established, the criterion that the application for aid must be submitted prior to the start of the works did not have to be verified for each of the three individual aids.
Nor did the Commission err in finding that the counterfactual scenario taken into account, in accordance with the IPCEI Communication, for the purposes of assessing the necessity of the notified aid, consisted in the absence of an alternative project. More specifically, the applicants and the interveners have not demonstrated that there was an alternative project that was feasible without aid and that was of a comparable size or scope or that would provide benefits equivalent to those expected from the Fixed Link project.
The Court also rejects the complaint that the Commission made manifest errors of assessment in relying on a lifetime of 40 years in order to calculate both the internal rate of return of the Fixed Link project (necessity of the aid) and the calculation of the funding gap (proportionality of the aid), whereas the Fixed Link project has a lifetime of 120 years.
In that regard, the Court states, on the one hand, that, in accordance with paragraph 30 of the IPCEI Communication, in the absence of an alternative project, the Commission must verify that the amount of aid does not exceed the minimum necessary for the aided project to be sufficiently profitable, and that all the expected costs and benefits concerned must be considered over the lifetime of the project. Since that reference to the lifetime must be understood as referring to the economic lifetime of the investment project and not of the infrastructure from a technical perspective, the Commission did not err in referring to the conduct of investors on the relevant market in order to calculate the internal rate of return on the basis of an economic lifetime of the investment of 40 years.
On the other hand, in accordance with paragraph 31 of the IPCEI Communication, the maximum amount of aid is determined by reference to the funding gap, which corresponds to the difference between the positive and negative cash flows over the lifetime of the investment. Since the aim of the funding gap analysis is to determine the extent to which the project could be financed under market conditions, the Commission cannot be criticised for having taken into account, in order to carry out that analysis, the period which a reasonable investor in that project would have taken into account, estimated at 40 years.
Third, as regards the proportionality of the aid, the Court notes, first of all, that the applicants cannot complain that the Commission disregarded the requirement that aid in the form of a guarantee or loan be limited in time, as set out in the IPCEI Communication, since the contested decision states that (i) at the latest 16 years after the opening of the Fixed Link, all loans with a guarantee must have been terminated and all State loans must have been repaid and (ii) the Danish authorities are not authorised to grant Femern such loans and guarantees for an amount that exceeds the maximum guaranteed amount of 69.3 billion Danish kroner (approximately EUR 9.3 billion).
Next, the Commission did not underestimate Femern’s revenues in order to increase the funding gap artificially. On the one hand, the IPCEI Communication does not require that the revenues cover the entire costs of the project. On the other hand, the applicants and the interveners have not adduced evidence that a price structure for road traffic differing from that adopted by the Commission would automatically lead to an increase in revenues because of the elasticity of demand and competition on the market.
Lastly, the Commission did not disregard the IPCEI Communication by including operating costs of the Fixed Link in the eligible costs for the calculation of the funding gap. The inclusion of those costs in the negative cash flows of the Fixed Link project does not result in operating aid being granted, since the operating revenues of that fixed link, which should also be taken into account under positive cash flows, largely exceed the operating costs. Moreover, no evidence has been adduced that could call into question the Commission’s explanations in support of the inclusion of those costs in the funding gap analysis.
In the light of all those considerations, the Court dismisses the action for annulment of the contested decision.