A sale of public assets cannot be presumed to be free of State aid when bidders are not treated equally.
When the state sells a company it owns, there is a presumption that no State aid benefits either the buyer or the company that is sold if the sale is open transparent, non-discriminatory, unconditional and the chosen buyer is the one that offers the highest price. Even a small deviation from these principles may have serious consequences with regard to the validity of the sale and the presumed absence of State aid. Unsuccessful bidders can then challenge the sale for containing illegal and possibly incompatible State aid.
On 2 September 2021, the Court of Justice rendered judgments in two cases lodged by two potential buyers of the legendary Nürburgring car racing circuit in Germany. In cases C‑665/19 P, NeXovation v European Commission, and C-647/19 P, Ja zum Nürburgring v European Commission, the Court of Justice examined whether the above criteria had been applied correctly to the sale of Nürburgring. It found a fatal fault.
NeXovation appealed against the judgment of the General Court in case T-353/15, NeXovation v European Commission. Ja zum Nürburgring appealed against the judgment in case T-373/15, Ja zum Nürburgring v European Commission. In both judgments, which were very similar, the General Court dismissed the applications for partial annulment of Commission decision 2016/151 on State aid granted by Germany to Nürburgring.
Nürburgring complex [which in addition to the racing circuit also included hotels and restaurnats] was owned by public undertakings that had benefitted from State aid granted mainly by the Land Rhineland-Palatinate. In 2012 the owners were declared insolvent and their assets were put up for sale by order of a domestic court. The assets were sold via tender to a company called Capricorn.
Subsequently, NeXovation and Ja zum Nürburgring, both unsuccessful bidders, complained to the Commission that the tender process had not been open, transparent, non-discriminatory and unconditional and had not resulted in a market price. They also alleged that Capricorn benefitted from aid corresponding to the difference between the purchase price which it had to pay for the Nürburgring assets and the market price of those assets.
The contested Commission decision had two parts. The first part examined the existence of aid to the previous owners of Nürburgring. The second part examined the existence of aid to the new owner. Although the Commission found that the previous owners had indeed received incompatible State aid, the sale itself was deemed to be free of State aid. In the view of the Commission, the tender process was competitive, the sales price was at a market rate and there was no economic continuity between the sellers and the buyer.
The General Court dismissed the action of NeXovation and Ja zum Nürburgring on the grounds that they failed to prove that they were individually concerned by the Commission decision and that they did not demonstrate that the sale pricess was faulty. The General Court held that it could not be inferred solely from their participation in the administrative procedure that they had standing to bring an action against the Commission decision and that they held no position on the relevant markets that was likely to be affected by the aid to the sellers. NeXovation was not an organiser of car races.
We will see that while NeXovation and Ja zum Nürburgring did not succeed in their arguments that they were “individually concerned” with respect to the merits of the first part of the Commission decision, they did manage to persuade the Court of Justice that they were “interested parties” whose procedural rights were infringed by the fact that the Commission had not opened the formal investigation procedure with respect to the tender process before it concluded the second part of its decision.
Because the reasoning of the Court of Justice on the sale procedure is largely identical in both cases, this article reviews only the judgment in the NeXovation case. However, this article reviews also the reasoning of the Court with respect to the standing of Ja zum Nürburgring.
C‑665/19 P, NeXovation v European Commission
NeXovations’s first plea was that the General Court was wrong to conclude that it was not individually concerned with respect to the merits of the first part of the Commission decision.
The Court of Justice, first, noted that “(26) in addition to the undertaking in receipt of aid, competing undertakings have been recognised as individually concerned by a Commission decision terminating the formal examination procedure where they have played an active role in that procedure, provided that their position on the market is substantially affected by the aid measure which is the subject of the contested decision”.
“(27) The General Court stated that the appellant had itself acknowledged, […], that it was not present on the relevant markets, […], on which competition was liable to be distorted by aid to the sellers. It therefore held, […], that the appellant was not individually concerned”.
“(28) The General Court cannot be criticised for having erred in law, in that it held that the appellant was not individually concerned […] and, therefore, was not entitled to bring an action for annulment […] on the basis of the fourth paragraph of Article 263 TFEU.”
“(31) As regards the argument that the appellant was in competition with Capricorn for the acquisition of the Nürburgring assets and should have won the tender process instead of Capricorn, the General Court did not err in law by not taking that circumstance into account. The first contested decision concerns the aid to the sellers and, in particular, whether it may be recovered from Capricorn. The appellant does not explain the link between the fact that it was in competition with Capricorn for the acquisition of the Nürburgring assets and the alleged adverse effect on its market position by the first contested decision.”
Faulty selection procedure?
Next, NeXovation alleged that, as an interested party, its rights were violated by the non-opening of the formal investigation procedure, given that, in its view, the selection procedure had been compromised by opaqueness and discriminatory elements.
The Court of Justice found, in paragraphs 53-58 of its judgment, that the General Court did not respond sufficiently to the arguments of NeXovation that the deadlines in the tender procedure were not transparent and that the process was discriminatory. Therefore, the Court of Justice upheld the second plea and proceeded to give a final ruling without referring the case back to the General Court.
The Court of Justice, first, recalled that “(61) the second contested decision is a decision not to raise objections under Article 4(3) of Regulation No 659/1999, the legality of which depends on whether the assessment of the information and evidence available to the Commission during the preliminary examination phase of the notified measure should have objectively raised doubts as to the compatibility of that measure with the internal market”.
“(62) Since such doubts must trigger the initiation of a formal investigation procedure in which the interested parties referred to in Article 1(h) of Regulation No 659/1999 can participate, it must be held that any interested party within the meaning of the latter provision is directly and individually concerned by such a decision. If the beneficiaries of the procedural guarantees provided for in Article 108(2) TFEU and Article 6(1) of Regulation No 659/1999 are to be able to ensure that those guarantees are respected, it must be possible for them to challenge before the EU judicature the decision not to raise objections”.
“(63) In the present case, it must be held, […], that the appellant has proven, by participating actively, up to the final stage, in the tender process and by lodging a complaint in that regard with the Commission, its genuine desire to enter the relevant markets and, therefore, its status of being a potential competitor of Capricorn, which had allegedly benefited, according to that complaint, from State aid the existence of which the Commission rejected in the second contested decision. The appellant must therefore be recognised as having the status of an interested party in relation to that decision.”
Then the Court of Justice examined whether the Commission should have had serious doubts and should have opened the formal investigation procedure.
“(73) In order to rule out the existence of unlawful aid granted to Capricorn when it acquired the Nürburgring assets, the Commission had to satisfy itself that that acquisition was made at a price corresponding to the market price, which would be the case if it could be confirmed that the tender process was open, transparent, non-discriminatory and unconditional.”
“(74) One of the factors taken into consideration for the purposes of selecting the buyer of the Nürburgring assets was the confirmation of the financing of its offer.”
“(75) The appellant’s tender, which had offered a higher sale price than that offered by Capricorn, was rejected for lack of evidence of financing.”
“(76) Only two offers were considered to have secured financing, namely Capricorn’s offer and that of another tenderer. Since both the amount of the insured financing available to that other tenderer and the sale price it offered were lower than those of Capricorn, Capricorn’s bid was ultimately successful.”
“(77) It follows that if it were to transpire that it had been wrongly considered that Capricorn had confirmed financing for its tender, whereas, in reality, that was not the case, that fact would be such as to call into question, inter alia, the non-discriminatory nature of the tender process, in so far as it would be capable of showing that Capricorn had received preferential treatment since, unlike in the case of the appellant’s tender, Capricorn’s offer was not rejected.”
“(78) Therefore, in the presence of doubts as to the confirmed nature of the financing of Capricorn’s tender which could not be dispelled, the Commission was obliged to open the formal investigation procedure and could not adopt a decision not to raise objections, such as the second contested decision.”
“(79) It must be held that the matters relied on by the appellant demonstrate the existence of such doubts.” “(80) In the first place, as the appellant submits, the Commission could not consider that the letter from Deutsche Bank of 10 March 2014 contained a binding financing commitment.” “(81) It is apparent from reading the letter from Deutsche Bank of 10 March 2014, as produced by the Commission before the General Court and is included in the file at first instance, that it contains, on the first page, a clear indication that the ‘commitment’ contained in that letter is subject to the conditions set out, inter alia, in the ‘Term sheet’ annexed to that letter as Annex A.” “(82) That annex contains, at the end, an ‘important notice’, which states, inter alia, that ‘this term sheet is for discussion purposes only as it is not intended to create any legally binding obligations between us […] We therefore do not accept any liability for any direct, consequential or other loss arising from reliance on this document’.” “(83) It is clear from that information that the letter from Deutsche Bank of 10 March 2014 was not intended to create a binding financing obligation on the bank which issued it and for the benefit of Capricorn.”
“(85) In the second place, it is apparent from footnote 79 of the final decision that the second instalment of the sale price was not paid by Capricorn within the prescribed period and that, by an agreement concluded on 13 August 2014 between the insolvency administrator of the Nürburgring, the sellers and Capricorn, the payment of that instalment was deferred to a later date, in return for the payment of default interest by Capricorn and for the provision of additional guarantees. If Capricorn’s offer were in fact financed, Capricorn would logically have been able to pay the second instalment of the sale price within the prescribed period and would not have negotiated the deferral of its payment.”
“(86) Accordingly, […], it must be concluded that the assessment of whether the sale of the Nürburgring assets to Capricorn involved the grant to Capricorn of aid incompatible with the internal market raised doubts, within the meaning of Article 4 of Regulation No 659/1999, which should have led the Commission to initiate the procedure referred to in Article 108(2) TFEU.”
“(87) The action must therefore be upheld and the second contested decision annulled.”
C-647/19 P, Ja zum Nürburgring v European Commission
First, the Court of Justice examined whether Ja zum Nürburgring had legal standing by being individually concerned with respect to the first part of the Commission decision. The Court recalled the relevant principles in the case law. “(31) Persons other than those to whom a decision is addressed may claim to be individually concerned only if that decision affects them by reason of certain attributes which are peculiar to them or by reason of circumstances in which they are differentiated from all other persons and by virtue of those factors distinguishes them individually just as in the case of the person addressed by such a decision”.
“(32) If, as in the present case, the appellant calls into question the merits of a decision appraising the aid after the formal investigation procedure, the mere fact that it may be regarded as concerned, within the meaning of Article 108(2) TFEU, cannot suffice to render the action admissible. It must then demonstrate that it has a particular status, for the purposes of the case-law recalled in the preceding paragraph. That applies in particular where the applicant’s position on the market concerned is substantially affected by the aid to which the contested decision relates”.
“(33) In addition to the undertaking in receipt of aid, competing undertakings have been recognised as individually concerned by a Commission decision terminating the formal investigation procedure where they have played an active role in that procedure, provided that their position on the market is substantially affected by the aid which is the subject of the contested decision”. “(34) However, the mere fact that the investor has made investments in a specific infrastructure item does not mean that it is active in any market related to the operation of that infrastructure.” “(35) It follows that the General Court did not err in law by making the finding, […], that the appellant’s arguments relating to the investments which it alleges to have made in the Nürburgring race track were not sufficient to demonstrate that it was individually concerned”.
Then the Court of Justice examined whether Ja zum Nürburgring was an interested party with respect to the second part of the Commission decision.
“(57) While an undertaking in competition with the beneficiary of an aid measure indisputably acts as an ‘interested party’ within the meaning of Article 108(2) TFEU, an undertaking that is not a competitor of the beneficiary of the aid at issue can be categorised as having that status, if it can demonstrate that its interests could be adversely affected by the grant of that aid. According to the Court’s case-law, means demonstrating that aid is likely to have a specific effect on its situation”.
“(66) However, […], the appellant claimed, inter alia, to be an association that defends the interests of German motor sport in relation specifically to the Nürburgring race track, that its central objective is to ensure the operation of that race track under economic conditions oriented towards the public interest so as to allow access to it for sporting and other events and that Capricorn pursues a concept aimed at maximising profits, which is at odds with the appellant’s objectives.”
“(67) In the light of those arguments, which are not disputed by the Commission, it must be accepted that the alleged grant of aid to Capricorn in connection with the acquisition of the Nürburgring could affect the interests of the appellant and its members, such that it must be classified as an ‘interested party’ within the meaning of Article 1(h) of Regulation No 659/1999.”
These two judgments must be a big blow to Capricorn and the administrator of the Nürburgring assets. They cast doubt on the validity of the sale. Under German law, a public measure that grants illegal State aid is automatically void. The tender process was faulty and Capricorn’s offer was lower than that of XeNovation. The judgment must also cause headaches to the Commission. It will have to determine the existence of State aid and, if the sale contains State aid, it must then assess its compatibility with the internal market. I do not think it will be easy to determine the existence of aid despite the difference in prices. This is because it will be difficult to quantify the other differences in the offers of the two companies none of which could provide evidence that it had secure financing. Perhaps the Commission will simply conclude that the faulty sale procedure contained an indeterminate amount of operating and therefore incompatible aid. This implies that the biggest headache will be for the German authorities which ultimately bear the responsibility for quantifying any aid that will have to be recovered.
 The full text of the judgment can be accessed at:
 The full text of the judgment can be accessed at: