Case T‑28/22
(Publication by extracts)
Ryanair DAC
v
European Commission
Judgment of the General Court (Eighth Chamber), 8 May 2024
(State aid – German air transport market – Restructuring aid granted by Germany to an airline – Changes to the terms of loans granted by Germany and the partial write-off of debts – Decision not to raise any objections – Action for annulment – Locus standi – Admissibility – Safeguarding of procedural rights – Serious difficulties – Article 107(3)(c) TFEU – Point 67 of the Guidelines on State aid for rescuing and restructuring non-financial undertakings in difficulty – Burden sharing)
1. Action for annulment – Natural or legal persons – Measures of direct and individual concern to them – Commission decision finding State aid compatible with the internal market without initiation of the formal investigation procedure – Action by parties concerned within the meaning of Article 108(2) TFEU – Action designed to safeguard the procedural rights of the parties concerned – Admissibility
(Art. 108(2) and (3), and Art. 263, fourth para., TFEU; Council Regulation 2015/1589, Art. 1(h))
(see paragraphs 17-19)
2. Action for annulment – Natural or legal persons – Measures of direct and individual concern to them – Individual concern – Criteria – Commission decision finding aid compatible with the internal market without initiation of the formal investigation procedure – Undertaking contesting the merits of that decision – Market position of the undertaking not substantially affected – Inadmissibility
(Art. 108(2) and (3), and Art. 263, fourth para., TFEU)
(see paragraphs 20-29)
3. Aid granted by a Member State – Examination by the Commission – Preliminary review and main review – Commission’s duty to initiate the main review procedure in the event of serious difficulties – Circumstances enabling the existence of such difficulties to be established – Insufficiency or incompleteness of the examination carried out by the Commission
(Art. 108(2) and (3) TFEU; Council Regulation 2015/1589, Art. 4)
(see paragraphs 33-36, 241-243)
4. Aid granted by a Member State – Prohibition – Exceptions – Aid capable of being regarded as compatible with the internal market – Aid for restructuring firms in difficulty – Assessment in the light of Article 107(3)(c) TFEU and the Guidelines on State aid for rescuing and restructuring non-financial undertakings in difficulty – Company in difficulty belonging to a larger business group – Company excluded from eligibility for aid under the Guidelines – Acquisition of a company in difficulty by a group – Acquisition conditional on a grant of restructuring aid – Company in difficulty that is eligible to receive aid under the Guidelines
(Art. 107(3)(c) TFEU; Commission Communication 2014/C 249/01, point 22)
(see paragraphs 40-54)
5. Aid granted by a Member State – Prohibition – Exceptions – Aid capable of being regarded as compatible with the internal market – Aid for restructuring firms in difficulty – Assessment in the light of Article 107(3)(c) TFEU and the Guidelines on State aid for rescuing and restructuring non-financial undertakings in difficulty – Criteria – Pursuit of an objective of common interest – Measure that aims to prevent social hardship or address a market failure – Risk of disruption to an important service which is hard to replicate and where it is difficult for any competitor simply to step in if the beneficiary of the aid were to fail
(Art. 107(3)(c) TFEU; Commission Communication 2014/C 249/01, points 43 and 44)
(see paragraphs 57-92)
6. Aid granted by a Member State – Prohibition – Exceptions – Aid capable of being regarded as compatible with the internal market – Aid for rescuing an undertaking in difficulty – Assessment in the light of Article 107(3)(c) TFEU and the Guidelines on State aid for rescuing and restructuring non-financial undertakings in difficulty – Criteria – Necessity of the aid in order to attain the objectives set out in Article 107(3)(c) TFEU – Incentive effect of the aid on the beneficiary with a view to inducing it to contribute to the attainment of those objectives
(Art. 107(3)(c) TFEU; Commission Communication 2014/C 249/01, points 8, 53 and 59 and Annex II, second para., point 3)
(see paragraphs 96-120)
7. Aid granted by a Member State – Prohibition – Exceptions – Aid capable of being regarded as compatible with the internal market – Aid for rescuing an undertaking in difficulty – Assessment in the light of Article 107(3)(c) TFEU and the Guidelines on State aid for rescuing and restructuring non-financial undertakings in difficulty – Criteria – Obligation for the Member State to submit a feasible, coherent and far-reaching restructuring plan to restore the beneficiary’s long-term viability within a reasonable timescale – Restructuring plan that must be appropriate and limited to the minimum necessary for achieving the intended objective
(Art. 107(3)(c) TFEU; Commission Communication 2014/C 249/01, points 45, 47, 48, 50 to 52, 54, 58 and 61 and Annex II, second para., point 9)
(see paragraphs 123-126, 150, 161, 175, 183, 184, 187, 195)
8. Aid granted by a Member State – Prohibition – Exceptions – Aid capable of being regarded as compatible with the internal market – Aid for rescuing an undertaking in difficulty – Assessment in the light of Article 107(3)(c) TFEU and the Guidelines on State aid for rescuing and restructuring non-financial undertakings in difficulty – Criteria – Adequate contribution to restructuring costs by the beneficiary of the aid, its shareholders or creditors, its business group or new investors
(Art. 107(3)(c) TFEU; Commission Communication 2014/C 249/01, points 61 to 64)
(see paragraphs 198-201)
9. Aid granted by a Member State – Prohibition – Exceptions – Aid capable of being regarded as compatible with the internal market – Aid for rescuing an undertaking in difficulty – Assessment in the light of Article 107(3)(c) TFEU and the Guidelines on State aid for rescuing and restructuring non-financial undertakings in difficulty – Criteria – Adequate burden sharing – Aid strengthening the beneficiary’s equity – Terms for granting the aid that must afford the State a reasonable share of future gains in value of the beneficiary
(Art. 107(3)(c) TFEU; Commission Communication 2014/C 249/01, point 67)
(see paragraphs 204-233)
10. Aid granted by a Member State – Prohibition – Exceptions – Aid capable of being regarded as compatible with the internal market – Aid for rescuing an undertaking in difficulty – Assessment in the light of Article 107(3)(c) TFEU and the Guidelines on State aid for rescuing and restructuring non-financial undertakings in difficulty – Criteria – Adequate burden sharing – Calibration of measures to limit distortions of competition
(Art. 107(3)(c) TFEU; Commission Communication 2014/C 249/01, points 87 and 90)
(see paragraphs 236-238)
Résumé
Adjudicating on an action for annulment brought by the airline Ryanair DAC, the General Court annuls the decision of the European Commission which approved an aid measure granted by the Federal Republic of Germany to the airline Condor Flugdienst GmbH (‘Condor’) in order to support its restructuring. (1) In that context, the Court provides clarification regarding the review of the compatibility of restructuring aid with the internal market in the light of the requirement, as set out in the Guidelines on State aid for rescuing and restructuring non-financial undertakings in difficulty, (2) that any State aid that enhances the equity position of the beneficiary should be granted on terms that afford the State a reasonable share of future gains in value of the beneficiary.
In order to make good the damage incurred as a result of the imposition of travel restrictions linked to the COVID-19 pandemic, Germany granted, in 2020 and then in 2021, two individual aid measures to Condor.
By decision of 26 April 2020, (3) the Commission found that the COVID-19 aid granted to Condor in 2020, which took the form of two loans totalling EUR 550 million (‘the COVID-19 loans of 2020’), backed by a State guarantee, was compatible with the internal market on the basis of Article 107(2)(b) TFEU. After an action for annulment was brought before it, the Court annulled that decision owing to a failure to state reasons, while suspending the effects of that annulment pending the adoption of a new decision. (4) Accordingly, on 26 July 2021, the Commission adopted a new decision, finding that the COVID-19 aid of 2020 was compatible with the internal market. (5)
On the same day, the Commission adopted a decision by which it found that the COVID-19 aid granted to Condor in 2021, which took the form of a partial write-off amounting to EUR 60 million of debt resulting from the loans provided under the COVID-19 aid of 2020, was also compatible with the internal market on the basis of Article 107(2)(b) TFEU. (6)
Lastly, by another decision of 26 July 2021, (7) the Commission, on the basis of Article 107(3)(c) TFEU and the R&R Guidelines, approved an aid measure granted by Germany to support the restructuring and continuation of Condor’s operations, which comprises two parts. The first part consists in a modification to the terms of the COVID-19 loans of 2020 and a partial write-off of EUR 90 million of debt resulting from those loans. The second part involves the write-off of EUR 20.2 million of debt corresponding to the interest payable by Condor following the amended decision of 26 July 2021 on the COVID-19 aid of 2020.
Ryanair brought an action for annulment before the General Court against the decision of 26 July 2021 approving the restructuring aid to Condor.
Findings of the Court
In support of its action, Ryanair claimed, inter alia, an infringement of its procedural rights, since the Commission had adopted the contested decision without initiating the formal investigation procedure provided for in Article 108(2) TFEU, despite doubts that it should have had as to the compatibility of the aid at issue with the internal market.
According to settled case-law, where the preliminary examination of an aid measure has not enabled the Commission to overcome the serious difficulties involved in assessing the compatibility of that measure with the internal market, the formal investigation procedure must be initiated. In that context, it has also been stated in the case-law that proof that the examination carried out by the Commission in its assessment of the compatibility of aid with the internal market is insufficient or incomplete is such as to establish that that assessment raised serious difficulties.
In the light of that case-law, Ryanair claimed, inter alia, that the Commission had infringed point 67 of the R&R Guidelines in the contested decision, which demonstrated the existence of serious difficulties and called for the initiation of the formal investigation procedure.
On that issue, the Court states that under point 67 of the R&R Guidelines, any State aid that enhances the beneficiary’s equity position should be granted on terms that afford the State a reasonable share of future gains in value of the beneficiary, in view of the amount of State equity injected in comparison with the remaining equity of the company after losses have been accounted for.
Since the contested decision did not assess the question of whether the terms on which the measure at issue had been granted would afford Germany a reasonable share of future gains in value of Condor, the Court addresses the argument made by the Commission that the measure at issue did not fall within the scope of point 67 of the R&R Guidelines. According to the Commission, point 67 applies only where the aid measure constitutes a capital injection and the Member State concerned has a shareholding in the beneficiary’s capital, which was not the case in the circumstances at hand.
In that regard, the Court observes, first of all, that the wording of point 67 of the R&R Guidelines is somewhat inconsistent since, on the one hand, its introductory part states that it is to apply to ‘any State aid that enhances the beneficiary’s equity position’, namely grants, capital injections and debt write-offs, while its final part refers, on the other hand, only to ‘State equity injected’. However, that inconsistency, which is, moreover, attributable to the Commission, as it drew up those guidelines, should have led it to examine that provision more thoroughly in the light of its context and objectives, which it failed to do.
As regards the context of which point 67 of the R&R Guidelines forms part, the Court observes, next, that that point forms part of the section of the guidelines related to burden sharing, which begins with point 65. That latter point, which provides that aid to cover losses should be granted on terms which involve adequate burden sharing by investors, refers, without distinction, to grants, injections of capital and debt write-offs. Similarly, point 66 of the R&R Guidelines, which states that State intervention should only take place after losses have been fully accounted for and attributed to the existing shareholders and subordinated debt holders, is to apply regardless of the form of that intervention. However, there is nothing to indicate that those points 65, 66 and 67 should have differing scopes, depending on the form taken by the State support. In particular, the broad logic of the requirements foreseen by points 66 and 67 and the fact that they are cumulative suggest that, as with point 65 of those guidelines, they are intended to apply to any State aid which enhances the beneficiary’s equity position.
Lastly, as regards the objectives pursued by point 67 of the R&R Guidelines, the Court observes that the provisions in the section related to burden sharing are intended, inter alia, to prevent a situation whereby shareholders and subordinated creditors are protected from the consequences of their choice to invest in the beneficiary, which could create moral hazard and undermine market discipline. However, there is nothing in those guidelines to indicate that that risk of moral hazard arises only where a Member State injects capital into the beneficiary, but not where it writes off its debt or provides it with a grant. Furthermore, the objective underlying point 67, namely to reduce the possibility that undertakings anticipating that they are likely to be rescued or restructured when they run into difficulty might take excessive risks in order to generate more profits, cannot be fully achieved if certain types of aid measure, such as the write-off of debt, were to be excluded from its scope, even though they enhance the beneficiary’s equity position and give rise to the same moral hazard as that resulting from a capital injection. In addition, ensuring the State a reasonable share of future gains in value of the beneficiary of restructuring aid, whether that is through a grant, an injection of capital or a debt write-off, is consistent with the objectives of the efficiency of public spending, as referred to in the R&R Guidelines.
In the light of the foregoing, the Court considers that the Commission was not entitled to find that the restructuring aid granted to Condor did not fall within the scope of point 67 of the R&R Guidelines and fail to examine whether that aid complied with the requirements set out in that point.
Since Ryanair has thus demonstrated that the examination of the compatibility with the internal market of the restructuring aid granted to Condor was incomplete and insufficient, the Court finds that the Commission should have had doubts justifying the initiation of the procedure under Article 108(2) TFEU and it annuls the contested decision.