A competitor of an aid recipient who wants to challenge a Commission decision authorising State aid must either show that the aid harms it directly and individually – i.e. its interests are seriously affected to a larger extent than anyone else – or that the Commission should have had doubts about the compatibility of the aid during the preliminary examination stage and that its right to submit comments was violated by the decision of the Commission not to open the formal investigation procedure.
In practice, most appeals against Commission decisions authorising aid are brought by direct competitors of the aid recipients. In an unusual case, Deutsche Lufthansa [DLH] lodged action against a Commission decision authorising aid in favour of an airport. The reasoning of DLH was that the aid to Frankfurt-Hahn airport enabled the latter to operate and to provide services to Ryanair who competed with DLH’s flights at its hub at Frankfurt am Main airport. The two airports are 120 km apart. In other words, the gist of DLH’s argument was not only that it was harmed indirectly, but also that passengers could choose to fly from either of those two airports; i.e. their services were interchangeable by being in the same relevant market.
On 14 September 2023, the Court of Justice, in case C-466/21 P, Land Rheinland-Pfalz v Deutsche Lufthansa, considered that the General Court had not assessed correctly the data on the relevant market and returned the case back to the General Court.1
The German Land Rheinland-Pfalz had asked the Court of Justice to set aside the judgment of the General Court in case T-218/18, Deutsche Lufthansa v European Commission by which the General Court annulled Commission decision on State aid SA.47969. That decision had authorised operating aid in favour of Frankfurt-Hahn airport.
That airport had received successive awards of operating aid to cover its losses. The Commission found the aid to be compatible with the aviation guidelines. It also concluded that there was no undue distortion of competition as there were no other airports in the
catchment area of that airport. That is, the Commission considered that the two airports were not competing against each other or that their services were not in the same relevant market.
It is worth recalling that before adopting the decision on SA.47969, the Commission had adopted two other decisions relating to measures taken by Germany for the benefit of Frankfurt-Hahn airport and Ryanair:
1. Decision 2016/788 on SA.32833 [an appeal against it was dismissed by the General Court in case T-764/15, Deutsche Lufthansa v European Commission. This judgment was upheld by the Court of Justice in case C-453/19 P, Deutsche Lufthansa v European Commission];
2. Decision 2016/789 on SA.21121 [an appeal against it was dismissed by the General Court in case T-492/15, Deutsche Lufthansa v European Commission. This judgment was also upheld by the Court of Justice in case C-594/19 P, Deutsche Lufthansa v European Commission].
It should also be noted that an investigation launched by the Commission in October 2018 following a complaint by DLH alleging, State aid in favour of Frankfurt-Hahn airport and Ryanair is still open [SA.43260].
In case T-218/18, concerning decision SA.47969, the General Court held that the Commission had failed to take properly into account all of the criteria laid down in aviation guidelines on the delineation of the catchment area of Frankfurt-Hahn airport. For this reason it partially annulled that decision.
The present judgment of the Court of Justice also addressed and dismissed cross-appeals by DLH and the Commission. These cross-appeals are ignored in this article.
Legal standing under Article 263 TFEU
Before examining the substance of the case, the Court of Justice dealt with the question whether DLH had legal standing in the present proceedings.
“(75) Since the decision at issue was addressed to the Federal Republic of Germany and not to DLH, it must be recalled that the fourth paragraph of Article 263 TFEU provides for two situations in which natural or legal persons are accorded standing to institute proceedings against an EU act which is not addressed to them. First, such proceedings may be instituted if the act is of direct and individual concern to those persons. Second, such persons may bring proceedings against a regulatory act not entailing implementing measures if that act is of direct concern to them”.
“(76) In that regard, it must be recalled, first of all, that, in paragraph 33 of the judgment under appeal, the General Court held that, as the decision at issue concerned an individual aid, that decision could not be regarded as a regulatory act. That finding is not, moreover, disputed in the context of these appeals.”
“(77) As regards, next, the question of whether the decision at issue is of ‘direct and individual’ concern to DLH, within the meaning of the fourth paragraph of Article 263 TFEU, it is clear from the settled case-law of the Court of Justice that 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”.
“(78) Since the action at first instance concerned a Commission decision concerning State aid, it must also be recalled that, in the context of the procedure for reviewing State aid provided for in Article 108 TFEU, the preliminary stage of the procedure for reviewing aid under Article 108(3) TFEU, which is intended merely to allow the Commission to form a prima facie opinion on the partial or complete conformity of the aid measure in question with the internal market, must be distinguished from the stage of the review under Article 108(2) TFEU. It is only in connection with the latter stage, which is designed to enable the Commission to acquaint itself fully with all the facts of the case, that the FEU Treaty imposes an obligation on that institution to give the parties concerned notice to submit their comments”.
“(79) It follows that, as the General Court rightly pointed out in paragraph 36 of the judgment under appeal, where, without initiating the formal investigation procedure under Article 108(2) TFEU, the Commission finds, by a decision taken on the basis of Article 108(3) TFEU, that aid is compatible with the internal market, the persons intended to benefit from those procedural guarantees may secure compliance therewith only if they are able to challenge that decision before the EU judicature. For those reasons, an action for the annulment of such a decision, brought by a ‘party concerned’ for the purposes of Article 108(2) TFEU, is to be declared to be admissible where that person seeks, by instituting proceedings, to safeguard the procedural rights available to him or her under the latter provision”.
“(80) In that regard, it should be noted that the definition of the concept of ‘party concerned’, as set out in the case-law of the Court of Justice, was codified by the EU legislature in Article 1(h) of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article [108 TFEU] (OJ 1999 L 83, p. 1), which was succeeded by Article 1(h) of Regulation 2015/1589. The latter provision defines the analogous concept of ‘interested party’ as ‘any Member State and any person, undertaking or association of undertakings whose interests might be affected by the granting of aid, in particular the beneficiary of the aid, competing undertakings and trade associations’”.
“(81) In the present case, it is common ground that the decision at issue was adopted at the conclusion of the preliminary examination stage, […] and, accordingly, the formal investigation procedure provided for in Article 108(2) TFEU and referred to in Article 4(4) of that regulation was not initiated.”
“(82) Therefore, the General Court was fully entitled to find that the action brought by DLH could be regarded as being admissible to the extent that that airline company, first, had demonstrated that it was an ‘interested party’ within the meaning of Article 1(h) of Regulation 2015/1589 and, second, had submitted that there was an infringement of its procedural rights.”
DLH’s status as an ‘interested party’
In its own judgment, the General Court had found DLH to be an ‘interested party’ in the meaning of Regulation 2015/1589.
The Court of Justice confirmed that “(85) although the concept of ‘interested party’, within the meaning of that provision, includes, in particular, undertakings that compete with the beneficiary of that aid, it is nevertheless the case that, as the General Court rightly pointed out in paragraph 44 of the judgment under appeal, that concept covers an indeterminate group of persons”.
“(86) Thus, it follows from the case-law of the Court of Justice that an undertaking which is not a direct competitor of the beneficiary of the aid may nevertheless be categorised as an ‘interested party’, within the meaning of Article 1(h) of Regulation 2015/1589, provided that that undertaking demonstrates that its interests could be affected by the grant of the aid, which requires that that undertaking establish, to the requisite legal standard, that the aid is likely to have a specific effect on its situation. Therefore, the status as an ‘interested party’ does not necessarily presuppose a competitive relationship”.
The Court of Justice also observed that “(87) in paragraph 55 of the judgment under appeal, the General Court held that the grant of the aid at issue was likely to have a specific effect on DLH’s situation as regards, first, the operation of Frankfurt Main airport, which is its primary ‘hub airport’, and, second, competition in respect of destinations of flights offered by DLH departing from that airport.”
“(89) However, as the Commission correctly observes, […], it is not clear from the application at first instance that DLH relied on that argument as a reason in support of its interest in bringing proceedings. As is recalled in paragraph 86 of this judgment, it is for an applicant alone to demonstrate that the aid measure in question is likely to have a specific effect on its situation.”
“(90) Therefore, paragraph 50 of the judgment under appeal is vitiated by an error of law.”
“(91) Secondly, the General Court stated, […], that, by allowing FFHG to continue its business activities, the grant of aid at issue had offered Ryanair the possibility of maintaining competitive pressure on DLH in departures from Frankfurt-Hahn airport. That finding is based on the fact that those two airline companies are competitors to the extent that they offer flights to the same destinations departing from Frankfurt-Hahn and Frankfurt Main airports, the evidence to support that finding being, […], the lists of destinations which were provided by DLH in its written pleadings and at the hearing before the General Court.”
However, the Court of Justice faulted the General Court on the grounds that “(95) the data submitted by the Commission sought to challenge the relevance of the data provided by DLH, [therefore] in order to satisfy its obligation to state reasons the General Court should have set out the reasons why it considered that that evidence was not capable of calling into question its assessment, which was based on the evidence produced by DLH, that that airline company and Ryanair were active on the same passenger air transport market and were, therefore, competitors.”
“(96) It follows from the foregoing that the General Court erred in law and failed to comply with its obligation to state reasons in finding that DLH was an ‘interested party’ within the meaning of Article 1(h) of Regulation 2015/1589.”
DLH’s procedural rights
First, the Court of Justice observed that “(99) the General Court held, […], that ‘it [was] apparent from an overall analysis of the application’ that the action brought by DLH ‘[concerned] the annulment of the decision not to raise objections, by calling into question the fact that [that] decision [had] failed to carry out a complete investigation of the aid [at issue], which [caused] harm to [DLH] in that it [was] an interested party and [infringed] its right to be heard and its procedural rights’.”
Then the Court of Justice noted that “(101) it is not for the European Union judicature to interpret an action challenging exclusively the merits of the aid assessment decision as seeking, in reality, to ensure the respect of the procedural rights available to the applicant under Article 108(2) TFEU, where the applicant has not expressly raised a plea to that effect, as to do so would change the subject matter of the action”.
“(102) An applicant’s arguments that seek specifically to show that the Commission should have initiated the formal investigation procedure are admissible where the action in support of which those arguments are invoked in effect seeks the annulment of the decision not to initiate that formal procedure and where, according to the actual wording of the application, the applicant submits that the failure to initiate the formal investigation procedure prevented it from benefiting from the procedural guarantees to which it is entitled”.
“(104) However, it should […] be noted that, […], the General Court failed to comply with its obligation to state reasons in restricting itself to stating, […], that the reliance by DLH on an infringement of its procedural rights was clear on an analysis of the whole of the application at first instance. The General Court should have, on the contrary, referred explicitly to the paragraphs of that application on which it based that finding so as to make it possible for the parties, […], to understand the reasons that led it to that finding and for the Court to exercise its powers of review.”
In addition, “(105) the General Court was also required to examine which of the complaints raised by DLH specifically sought to establish that the Commission should have initiated the formal investigation procedure.”
“(106) However, it is not apparent from the judgment under appeal that that examination was carried out by the General Court.”
“(107) It follows that the General Court’s assessment that DLH had alleged an infringement of its procedural rights is vitiated by errors of law and a failure to state reasons.”
On those grounds, the Court set aside the judgment of the General Court in case T-218/18, Deutsche Lufthansa v Commission and referred the case back to the General Court.