Cases T-443/08 and T-455/08

Freistaat Sachsen and Others

v

European Commission

(State aid – Aid for Leipzig-Halle Airport – Funding of investments relating to the construction of the new southern runway – Decision declaring aid compatible with the common market – Actions for annulment – No interest in bringing proceedings – Inadmissibility – Concept of ‘undertaking’ – Concept of ‘economic activity’ – Airport infrastructure)

Summary of the Judgment

1.      Actions for annulment – Interest in bringing proceedings – Action by State aid beneficiary against the Commission decision declaring it compatible with the common market – Decision not adversely affecting the beneficiary undertaking

(Arts 87(1) EC, 88(3) EC, 230 EC and 234 EC)

2.      State aid – Planned aid – Grant of aid in breach of the prohibition laid down by Article 88(3) EC – Subsequent Commission decision declaring the aid compatible with the common market – Obligations of national courts hearing a claim for recovery

(Art. 88(3) EC)

3.      Competition – Community rules – Addresses – Undertakings – Concept – Exercise of an economic activity – Management of airport infrastructures – Construction or extension of runways – Included

4.      State aid – Concept – Legal nature – Interpretation on the basis of objective factors – Possibility of the Commission adopting guidelines – Economic and competitive development of the airports sector referred to by guidelines – Effects

(Art. 87(1) EC)

5.      State aid – Provisions of the Treaty – Scope – Private or public undertakings – Applicability to public investment vehicles

(Arts 86(2) EC and 87 EC)

6.      State aid – Concept – Aid provided through State resources – Possibility of classifying a public body as both a provider and a recipient of State aid

(Art. 87(1) EC)

7.      State aid – Existing aid and new aid – Evolution of the common market – Concept – Change in the economic and legal framework of the sector concerned by the measure in question

(Art. 88 EC; Council Regulation No 659/1999, Art. 1(b)(v))

8.      State aid – Role conferred on the Commission by the Treaty – Judicial review

(Arts 7(1), second para., EC, 87 EC and 88 EC)

9.      Acts of the institutions – Statement of reasons – Contradiction – Effects – Commission decision declaring State aid compatible with the common market – Contradiction between the amount of the aid indicated in the operative part of the decision and the statement of reasons for the decision

(Art. 253 EC)

1.      An action for annulment brought by a natural or legal person is not admissible unless the applicant has an interest in seeing the contested measure annulled. That interest must be vested and present and is evaluated as at the date on which the action is brought.

In the area of State aid, the mere fact that a Commission decision declares that aid is compatible with the common market and thus, in principle, does not have an adverse effect on the undertakings receiving the aid, does not dispense the European Union judicature from examining whether the Commission’s finding has binding legal effects such as to affect those undertakings’ interests.

In that regard, the fact that the Commission decision does not correspond to the position put forward by the applicants during the administrative procedure does not in itself produce binding legal effects such as to affect their interests and cannot therefore, in itself, be the basis of their interest in bringing proceedings. The procedure for reviewing State aid is, in view of its general scheme, a procedure initiated in respect of the Member State responsible for granting the aid. Undertakings that receive aid and the local authorities within that State which grant the aid are considered, in the same way as competitors of the recipients of the aid, only to be ‘interested parties’ in that procedure. Moreover, such applicants are not in the least deprived of any effective judicial protection against the Commission decision classifying a capital contribution as State aid. Even if the annulment action is declared inadmissible, nothing would prevent them requesting a national court, in the course of any proceedings before it in which they were called upon to accept the consequences of the alleged nullity of the capital contribution to which they refer, to make a reference for a preliminary ruling under Article 234 EC putting in issue the validity of the Commission’s decision in so far as it finds that the measure in question is State aid.

Furthermore, an applicant cannot rely upon future uncertain circumstances to establish his interest in applying for annulment of the contested act. For an applicant to refer to the ‘possible’ consequences of the alleged nullity of a capital contribution under company law and the law on insolvency, and not to consequences which are certain, is thus insufficient for such an interest to be recognised.

(see paras 46, 49-50, 55, 58, 63)

2.      Where aid has been granted to a recipient in disregard of the last sentence of Article 88(3) EC, the national court may be required, even after the Commission has adopted a positive decision, to rule on the validity of the implementing measures and the recovery of the financial support granted. In such a case, European Union law requires the national court to order the measures appropriate effectively to remedy the consequences of the unlawfulness, but, even in the absence of exceptional circumstances, it does not impose an obligation of full recovery of the unlawful aid. In such a situation, pursuant to European Union law, the national court must order the aid recipient to pay interest in respect of the period of unlawfulness. Within the framework of its domestic law, it may, if appropriate, also order the recovery of the unlawful aid, without prejudice to the Member State’s right to re-implement it subsequently. It may also be required to uphold claims for compensation for damage caused by reason of the unlawful nature of the aid. Therefore, in a situation where the unlawful putting into effect of aid is followed by a positive Commission decision, European Union law does not appear to preclude the recipient from, on the one hand, demanding the disbursement of aid payable for the future and, on the other hand, keeping aid received that was granted prior to the positive decision, subject always to the consequences arising from unlawfulness of aid disbursed prematurely.

(see para. 60)

3.      In the context of competition law, the concept of ‘undertaking’ covers any entity engaged in an economic activity, irrespective of its legal status and the way in which it is financed. Any activity consisting in offering goods and services on a given market is an economic activity.

The management of airport infrastructure is an economic activity, particularly where the undertaking provides airport services for money, coming from airport taxes, which must be regarded as remuneration for the provision of services rendered by the concession holder of the airport.

The fact that an undertaking manages a regional airport and not an international airport does not alter the economic nature of its activity inasmuch as that activity consists of providing services for remuneration in the regional airport market.

The operation of a runway is part of the economic activity of the managing undertaking, particularly where it is commercially exploited.

For the purposes of examining the economic nature of the undertaking’s activities in the context of the public financing of the development of a runway, there is no cause to dissociate the activity of building or enlarging infrastructure from the subsequent use to which it is put, and the nature of the development activity must be determined according to whether or not the subsequent use of the infrastructure which has been built amounts to an economic activity. Runways are essential elements for the economic activities engaged in by an airport operator. The construction of landing and takeoff runways thus permit an airport to engage in its principal economic activity or develop that activity, where what is in question is the construction of an additional runway or the development of an existing runway.

(see paras 88-89, 93-96)

4.      The question whether aid is State aid within the meaning of the Treaty must be determined on the basis of objective elements, which must be appraised on the date on which the Commission takes its decision. Although the Commission is bound by the guidelines and notices that it issues in the field of State aid, that is so only to the extent that those texts do not depart from the proper application of the rules in the Treaty, since the texts cannot be interpreted in a way which reduces the scope of Articles 87 EC and 88 EC or which contravenes the aims of those articles.

As regards the airports sector, in its Communication on the application of Articles 87 EC and 88 EC and Article 61 of the EEA Agreement to State aids in the aviation sector, the Commission has considered, in the past, that the construction of infrastructure projects represents a general measure of economic policy which cannot be controlled by the Commission under the Treaty rules on State aid.

There have been developments in the airports sector concerning, in particular, the organisation of the sector, and its economic and competitive situation. Furthermore, Case T-128/98 Aéroports de Paris v Commission [2000] ECR II- 3929, confirmed by Case C-82/01 P Aéroports de Paris v Commission [2002] ECR I-9297, has recognised, as of 2000, that airport operators, in principle, are engaged in an economic activity within the meaning of Article 87(1) EC, to which the rules of State aid apply, and that was confirmed by the judgment in Case T-196/04 Ryanair v Commission [2008] ECR II 3643. Consequently, as of 2000, there is no further cause, a priori, to exclude the application of State aid rules to airports. The Commission must, when adopting a decision concerning the airports sector, take account of those developments and that interpretation and their implications for the application of Article 87(1) EC to the financing of infrastructure related to airport operations.

(see paras 103-106)

5.      Article 87 EC covers all private and public undertakings and all their production, save for the reservation in Article 86(2). The existence or otherwise of legal personality distinct from that of the State, conferred by national law on an organ carrying out economic activities, does not prevent the existence of financial relations between the State and that organ, and consequently the possibility that that organ might receive State aid within the meaning of Article 87(1) EC.

Thus, just as it cannot be accepted that the rules on State aid can be circumvented merely through the creation of autonomous institutions charged with allocating aid, it cannot be tolerated that the mere fact of creating a vehicle for public investment (‘single purpose vehicle’), the sole purpose of which is the management and operation of public airport infrastructures, could exempt the latter from those rules. It must be considered whether that body carries on an economic activity and may therefore be classified as an undertaking and whether it obtained a transfer of State resources.

(see paras 128-130)

6.      The classifications as recipient and donor of aid are not a priori incompatible. A public undertaking can be the recipient of aid once the undertaking is active in the marketplace. However, nothing prevents the said undertaking from also granting aid by way of a separate measure. Thus, aid can be granted, not only directly by the State, but also by public or private bodies which the State establishes or designates with a view to administering the aid. The State is perfectly capable, by exercising its dominant influence over public undertakings, of directing the use of their resources in order, as occasion arises, to finance specific advantages in favour of other undertakings.

(see para. 143)

7.      The Treaty establishes different procedures according to whether the aid is existing or new. Whereas new aid must, under Article 88(3) EC, be notified in advance to the Commission and cannot be implemented before the procedure has culminated in a final decision, existing aid may, under Article 88(1) EC, be duly implemented as long as the Commission has not found it to be incompatible. Existing aid may therefore only be the subject, should the situation arise, of a decision of incompatibility producing effects for the future.

In accordance with Article 1(b)(v) of Regulation No 659/1999 laying down detailed rules for the application of Article 88 EC, existing aid is ‘aid which is deemed to be an existing aid because it can be established that at the time it was put into effect it did not constitute an aid, and subsequently became an aid due to the evolution of the common market and without having been altered by the Member State’. That concept of ‘evolution of the common market’ can be understood as a change in the economic and legal framework of the sector concerned by the measure in question. Such a change can, in particular, be the result of the liberalisation of a market initially closed to competition.

(see paras 187-188)

8.      The second subparagraph of Article 7(1) EC requires each institution to act within the limits of the powers conferred upon it by the Treaty. In the area of State aid, the Treaty, in providing through Article 88 EC for aid to be kept under constant review and supervised by the Commission, intends that the finding that aid may be incompatible with the common market is to be arrived at, subject to review by the European Union judicature, by means of an appropriate procedure which it is the Commission’s responsibility to set in motion. Articles 87 EC and 88 EC thus reserve a central role for the Commission in determining whether aid is incompatible.

(see paras 201-202)

9.      A contradiction in the statement of the reasons on which a decision is based constitutes a breach of the obligation laid down in Article 253 EC such as to affect the validity of the measure at issue if it is established that, as a result of that contradiction, the addressee of the measure is not in a position to ascertain, wholly or in part, the real reasons for the decision and, as a result, the enacting terms of the decision are, wholly or in part, devoid of any legal justification. In addition, only the operative part of an act is capable of producing binding legal effects.

A Commission decision declaring State aid compatible with the common market is contradictory where it states, on the one hand, that certain costs connected with the capital contribution fall within the public policy remit and cannot therefore be regarded as State aid within the meaning of Article 87(1) EC, and that, on the other hand, the Commission considers that the entire capital contribution constituted State aid.

No provision of European Union law requires the Commission, when it orders restitution of aid declared incompatible with the common market, to fix the precise amount of the aid to be reimbursed. It is sufficient for the decision to include information enabling the recipient to calculate that amount himself, without overmuch difficulty. However, where it decides to state, in the operative part of a decision, an amount of State aid within the meaning of Article 87(1) EC, the Commission must indicate the correct amount.

The correctness of the amount of unlawful aid stated by the Commission in the operative part of a final decision finding that the aid is compatible with the common market within the meaning of Article 87 EC is all the more important as it is likely to affect the amount of interest that the recipient can be required to pay for having received the aid before the Commission ruled in its regard. Pursuant to European Union law, national courts before which proceedings might be brought are required to order the recipient of the aid to pay interest in respect of the period of illegality. The amount of that interest depends, inter alia, on the amount of the State aid as such. The interest in question must be calculated on the basis of the total amount of the State aid within the meaning of Article 87(1) EC and not merely on the amount of the unlawful aid regarded as compatible with the common market.

(see paras 222-223, 226-229)