Case T‑306/21
Falke KGaA
v
European Commission
Judgment of the General Court (Second Chamber, Extended Composition), 21 December 2022
(State aid – Framework system to grant support for uncovered fixed costs in the context of the COVID-19 pandemic in Germany – Decision not to raise any objections – Temporary Framework for State aid measures – Individual examination of the aid scheme notified – Measure aimed at remedying a serious disturbance in the economy of a Member State – Proportionality)
1. State aid – Prohibition – Exceptions – Aid capable of being regarded as compatible with the internal market – Aid to remedy a serious disturbance in the economy of a Member State – Observance of the principle of proportionality – Aid scheme to grant support to companies to cover their uncovered fixed costs in the context of the COVID-19 pandemic – Eligibility criterion for the aid scheme that is appropriate, necessary and not disproportionate
(Art. 107(3)(b), TFEU)
(see paragraphs 24, 42, 43, 50-75)
2. State aid – Prohibition – Exceptions – Aid capable of being regarded as compatible with the internal market – Aid to remedy a serious disturbance in the economy of a Member State – Observance of the principle of equal treatment – Aid scheme to grant support to companies to cover their uncovered fixed costs in the context of the COVID-19 pandemic – Aid scheme involving a difference in treatment for certain companies – Justification – Eligibility criterion for the aid scheme that is appropriate, necessary and not disproportionate
(Art. 107(3)(b), TFEU)
(see paragraphs 24, 44-75)
3. Plea of illegality – Incidental nature – Implied but clear wording in the application – Admissibility
(Art. 277 TFEU)
(see paragraphs 30-33)
4. Acts of the institutions – Presumption of lawfulness – Scope – Rules of conduct adopted by the Commission to limit the exercise of its discretion – Not included
(Commission Communication 2020/C 91 I/01)
(see paragraphs 34-38)
5. State aid – Examination by the Commission – Communications adopted by the Commission – Temporary Framework for State aid measures to support the economy in the context of the COVID-19 pandemic – Legal nature – Indicative rules of conduct implying a self-limitation on the Commission’s discretion – Commission’s obligation to carry out an individual examination of the aid measures concerned by the Temporary Framework – Scope
(Art. 107(3)(b), TFEU; Commission Communication 2020/C 91 I/01)
(see paragraphs 36, 37, 78-86)
Résumé
The General Court dismisses the actions brought by the companies Breuninger and Falke against the Commission’s decision approving German aid to undertakings which suffered, in the context of the COVID-19 pandemic, a loss of turnover of at least 30%
The Commission’s decision does not infringe the principle of proportionality or the principle of equal treatment
On 17 November 2020, the Federal Republic of Germany notified the European Commission of an aid scheme to provide support to undertakings for their uncovered fixed costs in the context of the COVID-19 outbreak on its territory. Under the scheme, aid of up to EUR 3 million could be granted to undertakings that had suffered a loss of turnover of at least 30% during the reference period.
Referring to its Communication on the Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak, (1) the Commission declared the notified scheme compatible with the internal market in accordance with Article 107(3)(b) TFEU. (2) Under that provision, aid to remedy a serious disturbance in the economy of a Member State may, under certain circumstances, be considered to be compatible with the internal market.
On 2 February 2021, the Federal Republic of Germany notified the Commission of an amendment to its aid scheme, consisting in the increase of the aid ceiling to EUR 10 million per company and extending it until 31 December 2021. That amendment, which reflected various amendments made by the Commission to the Temporary Framework, was approved by the Commission on 12 February 2021. (3)
The German companies E. Breuninger GmbH & Co. and Falke KGaA brought actions for annulment of the Commission’s decision, as amended, declaring the German aid scheme compatible with the internal market (‘the contested decision’). In dismissing those actions, the General Court clarifies, inter alia, the scope of the review of proportionality of decisions adopted by the Commission under Article 107(3)(b) TFEU.
Findings of the Court
In the first place, the Court analyses the legality of the contested decision in the light of Article 107(3)(b) TFEU.
The applicants claimed, in that regard, that the Commission had infringed the principles of proportionality and equal treatment by approving the eligibility criterion laid down by the German aid scheme. In accordance with that criterion, access to the State aid scheme was restricted to undertakings which suffered a reduction in turnover of at least 30% during the reference period compared to the same period in 2019.
As a preliminary point, the Court rejects the plea of inadmissibility raised by the Commission alleging that the contested decision correctly applied the eligibility criterion set out in paragraph 87 of the Temporary Framework, the validity of which was not disputed by the applicants. On that point, it does indeed follow from the case-law that observance of the presumption of legality of legal measures taken by the European Union may prevent an examination of the merits of a decision that constitutes the mere application of a final measure of general application producing binding legal effects on third parties where the validity of that measure of general application has not been challenged. However, that is not the case where, as in the present case, the Commission applies rules of conduct that it has adopted for the purpose of limiting the exercise of its own discretion in the application of Article 107(3) TFEU and that do not in themselves produce binding legal effects.
As regards compliance with the principle of proportionality of the eligibility criterion laid down by the German aid scheme and approved by the contested decision, the Court recalls that a measure’s compliance with that principle includes three components. The first component concerns its appropriateness, namely whether it is able to achieve the legitimate objective pursued. The second component concerns its necessity and implies that the legitimate objective in question cannot be achieved by less restrictive but equally appropriate means. Finally, the third component concerns its proportionality, namely the absence of disadvantages disproportionate to the aims pursued.
As regards the complaint alleging infringement of the principle of equal treatment, the Court notes, moreover, that the fact that the eligibility criterion for the German aid scheme, which is based on loss of turnover assessed for the individual undertakings concerned, leads to the undertakings being treated differently depending on whether all or only part of their activities were affected by the COVID-19 pandemic does not, in itself, imply that it is unlawful. On the other hand, the Court must determine whether that difference in treatment is justified in the light of Article 107(3)(b) TFEU, which presupposes that that criterion is appropriate, necessary and proportionate to remedy a serious disturbance in the economy of the Member State concerned. Thus, the complaint alleging infringement of the principle of equal treatment is, in essence, equivalent to the complaints alleging infringement of the principle of proportionality in their various components.
Those clarifications having been made, the Court dismisses the various complaints challenging the appropriateness, necessity and proportionality of the eligibility criterion for the aid scheme approved by the contested decision.
In that context, the Court emphasises in particular that, while the applicants are entitled to challenge the necessity of that eligibility criterion, which has its origin in the Temporary Framework, by proposing an alternative criterion that has been applied by the Commission in other decisions, such a complaint may only be upheld if that alternative criterion clearly demonstrates that the eligibility criterion at issue is not necessary. Furthermore, the applicants’ proposal to use the losses incurred in the business areas affected by the COVID-19 pandemic as an alternative eligibility criterion, without taking into account the situation of the undertaking concerned as a whole, would have greater budgetary implications for Germany than the eligibility criterion used by the Commission. It must therefore be held that the alternative criterion proposed by the applicants does not constitute an ‘equally appropriate’ measure capable of demonstrating that the eligibility criterion used by the Commission was not necessary.
In terms of the restrictive effects on competition that the eligibility criterion for the approved aid scheme entails, according to the applicants, for undertakings for which only certain activities were affected by the COVID-19 pandemic and which, consequently, had to devote some of their resources from activities not affected by the pandemic to the financing of the affected activities, the Court finds that that criterion does not, in any event, give rise to restrictive effects on competition that are manifestly disproportionate to the objective pursued by the German aid scheme of ensuring the viability of the companies affected by the COVID-19 pandemic.
Moreover, contrary to what the applicants asserted, it cannot be held that the Commission failed to fulfil its obligation to carry out an individual examination of the notified aid scheme. In that regard, the applicants have failed to demonstrate the existence of exceptional circumstances specific to the approved aid scheme that would have justified the Commission not applying, in the contested decision, the eligibility criterion set out in the Temporary Framework.
In the second place, the Court also rejects the applicants’ plea alleging infringement of Article 108(2) TFEU. The applicants claimed, in essence, that, by having validated the notified aid scheme without initiating the formal examination procedure, the Commission had infringed the applicants’ procedural rights under that provision.
On that point, the Court notes that this plea is, in reality, raised in the alternative, in the event that it did not examine the complaints relating to the merits of the assessment of the notified aid scheme. However, in so far as those complaints have been examined, that plea is deprived of its stated purpose. Moreover, in so far as that plea repeats in condensed form the arguments raised in the complaints relating to the merits of the assessment of the aid, it lacks any independent content.
In the light of those considerations, the Court dismisses the applicants’ actions.