Case T‑901/16
Elche Club de Fútbol, SAD
v
European Commission
Judgment of the General Court (Fourth Chamber), 12 March 2020
(State aid — Aid granted by Spain in favour of certain professional football clubs — Guarantee — Decision declaring the aid incompatible with the internal market — Indirect beneficiary — Whether imputable to the State — Advantage — Private investor test)
1. State aid — Examination by the Commission — Determination of the aid beneficiary — Effective benefit — State guarantee granted to a non-profit foundation covering bank loans aimed solely at the recapitalisation of a firm in difficulty — Identification of the undertaking as the beneficiary of the aid — Whether permissible — Whether necessary to classify in advance the State guarantee as State aid — Not necessary
(Art. 107(1) TFEU)
(see paragraphs 36-41)
2. State aid — Definition — Aid granted by a public undertaking — Undertaking controlled by the State — Imputability to the State of the aid measure — Set of indicators to be taken into consideration — Bank guarantee granted by a public finance institution pursuing an objective of public policy under the supervision of representatives of a public body — Included — Commercial activities carried out in competition with other private operators — Irrelevant
(Art. 107(1) TFEU)
(see paragraphs 48-62)
3. Judicial proceedings — Application initiating proceedings — Formal requirements — Brief summary of the pleas in law on which the application is based — Abstract statement — Plea alleging absence or inadequacy of the statement of reasons — Separate ground from the one concerning substantive legality — Inadmissibility
(Arts 263 and 296 TFEU; Statute of the Court of Justice, Art. 21; Rules of Procedure of the General Court, Art. 76(d))
(see paragraphs 76-80)
4. State aid — Definition — Grant of an advantage to the beneficiaries — State guarantee — State guarantee granted to a non-profit foundation covering bank loans aimed solely at the recapitalisation of a firm in difficulty — Burden of proving an advantage on the Commission — Overall assessment taking into account all relevant evidence — Judicial review — Account taken of the economic and financial situation of the non-profit foundation — Failure — Manifest error of assessment
(Art. 107(1) TFEU)
(see paragraphs 84-95)
5. State aid — Definition — Assessment according to the criterion of the private investor — Assessment of all factors relevant to the transaction at issue and its context — Account taken of available information and foreseeable developments at the time the decision on the measure in question was taken — State guarantee granted to a non-profit foundation covering bank loans aimed solely at the recapitalisation of a firm in difficulty — Account taken of the value of the undertaking’s shares pledged as loan security — Failure — Manifest error of assessment
(Art. 107(1) TFEU)
(see paragraphs 113-115)
6. State aid — Definition — Grant of an advantage to the beneficiaries — State guarantee — State guarantee granted to a non-profit foundation covering bank loans aimed solely at the recapitalisation of a firm in difficulty — Burden of proving an advantage on the Commission — Overall assessment taking into account all relevant evidence — Judicial review — Account taken of a mortgage on a land plot given as a counter-guarantee — Failure — Manifest error of assessment
(Art. 107(1) TFEU; Commission Notice 2008/C 155/02, point 3.2(d))
(see paragraphs 117-120)
7. State aid — Definition — Grant of an advantage to the beneficiaries — State guarantee — State guarantee granted to a non-profit foundation covering bank loans aimed solely at the recapitalisation of a firm in difficulty — Consideration in the form of payment of a guarantee premium — Assessment according to the criterion of the private investor — Assessment of all factors relevant to the transaction at issue and its context — Presumption of non-conformity of the guarantee premium with market conditions — Not permissible — Breach of the Guarantee Notice — Manifest error of assessment
(Art. 107(1) TFEU; Commission Notice 2008/C 155/02, points 3.2(d) and 4.1)
(see paragraphs 124-132)
8. State aid — Definition — Grant of an advantage to the beneficiaries — State guarantee — State guarantee granted to a non-profit foundation covering bank loans aimed solely at the recapitalisation of a firm in difficulty — Assessment according to the criterion of the private investor — Burden of proof on the Commission — Scope — Failure to comply with the obligation to ask for information about the existence of similar transactions carried out under market conditions — Manifest error of assessment
(Art. 107(1) TFEU)
(see paragraphs 137-140)
Résumé
By judgment of 12 March 2020 in Case T‑901/16 Elche Club de Fútbol v European Commission, the Court annulled, in so far as it concerns the applicant, Decision 2017/365, (1) finding, inter alia, that the guarantee granted to the Fundación Elche Club de Fútbol (‘the Fundación Elche’) covering bank loans for the subscription of shares in the Fundación Elche constituted unlawful aid incompatible with the internal market.
The applicant, Elche Club de Fútbol is a Spanish professional football club. The Fundación Elche is a non-profit foundation linked to the activities of that football club. On 17 February 2011, the Instituto Valenciano de Finanzas (‘the IVF’), the financial institution of the Generalitat Valenciana (Regional Government of Valencia, Spain), provided the Fundación Elche with a guarantee for two bank loans totalling EUR 14 million for the purposes of acquiring some shares issued by the applicant in the context of the capital increase decided by the latter (‘the guarantee’). In return, an annual guarantee premium of 1% had to be paid to the IVF and the IVF received, as a counter-guarantee, a pledge on the shares in the applicant.
In the contested decision, the Commission considered that (i) the guarantee granted by the IVF to the Fundación Elche involved State resources and was imputable to the Kingdom of Spain, (ii) the recipient of the aid was the applicant and not the Fundación Elche, which acted as a financial vehicle, and (iii) the applicant’s financial situation at the time the measure was granted was that of a firm in difficulty within the meaning of the Community guidelines on State aid for rescuing and restructuring firms in difficulty. (2) With regard to the criteria laid down in its Notice on the application of Articles [107] and [108 TFEU] to State aid in the form of guarantees, (3) the Commission concluded as to the existence of aid incompatible with the internal market.
In its judgment, the Court, first of all, confirmed the Commission’s analysis identifying the applicant as the effective recipient of the aid measure consisting of the guarantee, in so far as it actually benefited from it. The purpose of that measure was to secure two loans to the Fundación Elche aimed solely at funding the foundation’s capital increase, and the sums obtained have in fact been set aside for the foundation’s recapitalisation. Next, the Court acknowledged that the guarantee provided by the IVF was imputable to Spain. Established by law in the form of a legal body, the IVF pursues a public policy objective consisting in maintaining, by public financing, the economy of the region of Valencia and assists the Regional Government of Valencia in the exercise of its powers to supervise the local finance system. Furthermore, the organic links between the IVF and the Regional Government of Valencia and the intensity of the supervision exercised by the latter are evident from the presence of representatives of the Regional Government of Valencia in several of the IVF’s governance structures and from the IVF’s attachment to the department responsible for economic affairs.
However, the Court held that, in its assessment of the existence of an advantage resulting from the guarantee, the Commission committed five manifest errors of assessment.
In the first place, the Commission erred by failing to take account of the financial situation of the Fundación Elche for the purposes of assessing the existence of an advantage. In so far as the Fundación Elche is a party to the guarantee contract entered into with the IVF and is identified as the sole beneficiary, it must be accountable to the IVF for the consequences of non-payment of the loans and for the invocation of the guarantee by the lending banks. The financial and economic situation of the Fundación Elche therefore constitutes, in principle, a relevant characteristic to be taken into account by the Commission for the purposes of evaluating the risk taken by the State guarantor and, thereby, the guarantee premium which a private operator would claim in those circumstances.
In the second place, while the Commission rightly considered that the applicant was a firm in difficulty on the date the guarantee at issue was adopted, in accordance with the Rescue and Restructuring Guidelines, it nonetheless committed several errors in its assessment of the consequences to be drawn from the existence of an advantage.
First, the Commission erred by finding that, at the time the guarantee was adopted, the value of the applicant’s shares was close to zero, without taking the applicant’s recapitalisation into account. Since that recapitalisation was the purpose and the intended effect of the guarantee, it was a predictable factor at the time the guarantee was granted and which a private operator in the IVF’s situation would have taken into account for the purposes of assessing the value of the pledged shares. Second, the Commission also erred by failing to take account of the mortgage on a land plot given as a counter-guarantee by the Fundación Elche. The mortgage given by the Fundación Elche constitutes a characteristic of the guarantee which the Commission is required to examine in accordance with the Guarantee Notice. Third, in presuming that no financial establishment would act as a guarantor for a firm in difficulty and, therefore, that it was not necessary to determine whether the guarantee premium payable by the Fundación Elche, set at 1% of the amount covered, complied with market conditions, the Commission failed to have regard to the Guarantee Notice. The Commission was in fact required to carry out an overall assessment, taking into account all relevant evidence in the case, enabling it to determine whether the applicant would manifestly not have obtained comparable facilities from such a private creditor. Lastly, fourth, the Commission failed sufficiently to substantiate its conclusion concerning the lack of comparable transactions to establish the market price of a similar non-guaranteed loan. The burden of proving that the criteria pertaining to the application of the private operator test have been fulfilled lies in fact with the Commission and it is therefore for the Commission to exercise its powers during the administrative procedure to request and obtain all the relevant information necessary.