Market Economy Operator

Comparing prices charged by different airports is not a suitable method for detecting the existence of selective advantages.

Introduction

Airports enter into complex agreements with airlines. When airports are in public ownership or operate under a mandate by the state, their agreements with airlines may contain State aid. It is, however, very difficult to detect State aid in these agreements because what airports charge or not charge varies from airline to airline, depending on the frequency of flights, the number of routes which are served, the volume of passengers and on other things such as the extent to which the airline can promote the airport. Comparison of charges by different airports is further complicated by the fact that price differentiation is a standard practice in the sector.

The judgment of the General Court of 29 September 2021, in case T‑448/18, Ryanair v European Commission, demonstrates the complexity of such agreements.[1]

Ryanair sough the partial annulment of Commission decision 2018/628 concerning State aid granted by Klagenfurt airport [KLU] in Austria. KLU is owned and operated by Kärntner Flughafen Betriebsgesellschaft [KFBG] which is majority owned by the province of Carinthia.

The relationship between Ryanair and KLU involved several other entities: Destinations Management [DMG], a wholly owned subsidiary of KFBG, provides various services to KLU; Leading Verge.com [LV] is a subsidiary of Ryanair which develops internet-based tourism concepts and focuses in particular on air-based tourism; Airport Marketing Services [AMS], is a subsidiary of Ryanair providing marketing strategy solutions, with the bulk of its activity consisting in the sale of advertising space on the Ryanair website.

Between 2002 and 2006 Ryanair concluded several agreements with KLU. On 22 January 2002, KFBG and Ryanair concluded an airport services agreement [the 2002 ASA]. On the same date, DMG and LV concluded a marketing agreement [the 2002 MSA between DMG and LV]. DMG commissioned LV to generate a promotional plan, arrange for the provision of links to DMG’s homepage and undertake other promotional activities in return for a fixed annual payment. Again on the same date, DMG and AMS concluded another marketing agreement [the 2002 MSA between DMG and AMS]. DMG appointed AMS to promote the attractions of the province of Carinthia.

On 23 August 2006, KFBG and Ryanair entered into a new agreement [the 2006 ASA]. That agreement established an incentive scheme by which Ryanair received EUR 7.62 per departing passenger. On 21 December 2006, DMG and AMS concluded a marketing agreement [the 2006 MSA].

In October 2007, following a complaint by a competitor of Ryanair, the Commission requested information from the Austrian authorities and in February 2012 decided to open the formal investigation procedure. The investigation also covered agreements between KLU and Austrian Airlines, Hapag Lloyd Express, TUIfly and Air Berlin.

On 11 November 2016, the Commission adopted decision 2018/628. The Commission found that the agreements at issue granted State aid to Ryanair because they failed the market economy operator test. The aid, which amounted to about EUR 2 million, was incompatible with the internal market and had to be recovered.

Limitation period

Ryanair claimed that Commission should have not assessed the 2002 agreements, as they were outside the 10-year limitation period. According to Ryanair, the 10-year period expired in August 2012.

The General Court, first, noted that “(70) under Article 17(1) of Regulation 2015/1589 the powers of the Commission to recover aid are to be subject to a limitation period of 10 years. Article 17(2) of that regulation provides that the limitation period begins to run on the day on which the unlawful aid is awarded to the beneficiary, either as individual aid or as aid under an aid scheme, and that any action taken by the Commission or by a Member State, acting at the request of the Commission, with regard to the unlawful aid interrupts the limitation period. Furthermore, it is apparent from the case-law that a simple request for information from the Commission, addressed to the authorities of the Member State concerned and concerning the measures at issue, is sufficient to interrupt the limitation period of 10 years”. “(71) The mere fact that an aid beneficiary and a third party are not aware of the existence of the Commission’s requests for information from the authorities of the Member State concerned does not have the effect of depriving them of legal effect vis-à-vis those first parties”.

In the present case, the limitation period of 10 years began to run on 9 August 2002, the date when LV received an one-off payment of EUR 1 000 000 from DMG. Between 2007 and 2016, the Commission sent several requests for information to Austria. In 2011, the Commission also sent requests for information directly to Ryanair.

The General Court concluded that “(75) the information letters constituted actions within the meaning of Article 17(2) of Regulation 2015/1589 capable of interrupting the limitation period of 10 years.”

Infringement of the principle of good administration enshrined in Article 41 of the Charter of Fundamental Rights

Ryanair argued that the Commission infringed the principle of good administration enshrined in Article 41(1) and (2) of the Charter by refusing to give it access to its administrative file.

The General Court explained that “(96) Article 41 of the Charter provides for the right of good administration. As set out in paragraph 1 of that article, every person has the right to have his or her affairs handled impartially, fairly and within a reasonable time by the institutions of the Union. In addition, under Article 41(2) of the Charter, that right includes, inter alia, first, the right of every person to be heard, before any individual measure which would affect him or her adversely is taken, and, secondly, the right of every person to have access to his or her file, while respecting the legitimate interests of confidentiality and of professional and business secrecy.”

At the same time, however, the General Court pointed out that “(100) the procedure for reviewing State aid provided for in Article 108 TFEU is a procedure opened only against the Member State responsible for granting the aid. Only the Member State concerned, as the addressee of the future Commission decision, may therefore rely on actual rights of the defence. By contrast, the recipient undertakings of aid and their competitors are considered only to be parties concerned in the procedure for the purpose of Article 108(2) TFEU. No provision reserves any special role to the recipients of aid, among all the parties concerned. They cannot rely on rights as extensive as the rights of the defence as such and cannot seek to engage in an adversarial debate with the Commission”.

“(101) Thus, the parties concerned, unlike the Member State responsible for granting the aid, do not have a right under the procedure for reviewing State aid to consult the documents of the Commission’s administrative file”.

“(102) The parties concerned have essentially the role of information sources for the Commission in the procedure for reviewing State aid.”

In the present case, the General Court noted “(104) that the applicants, as parties concerned within the meaning of Article 108(2) TFEU, have a right to see the Commission’s investigation into the agreements at issue conducted impartially and fairly within the meaning of Article 41(1) of the Charter, especially since classifying those agreements with KFBG and DMG as State aid is liable to result in financial consequences for them in terms of the recovery of the amounts received.”

“(108) The Charter was not intended to alter the nature of the review of State aid established by the FEU Treaty or to confer on third parties a right of scrutiny which Article 108 TFEU did not provide”.

“(109) In that regard, the Court of Justice has held that if the persons concerned in a procedure for reviewing State aid were able to obtain access to the documents in the Commission’s administrative file, the system for the review of State aid would be called into question. Whatever the legal basis on which it is granted, access to the file enables the parties concerned to obtain all the observations and documents submitted to the Commission and, as the case may be, to adopt a position on those matters in their own observations, which is likely to modify the nature of that procedure”.

The General Court drew on the judgment of the Court of Justice in case C-139/07 P, Commission v Technische Glaswerke Ilmenau, and in particular paragraphs 58 and 59. In fact, the General Court cited repeatedly that judgment. Indeed the Court of Justice held that access to file by interested parties would modify the nature of the investigation procedure. But a reading of that judgment of the Court of Justice does not reveal how the procedure would be modified, except that in the following paragraph of the present judgment the General Court stated that it would result in “adversarial debate” [see below]. But apart from the inevitable delay and the certain prolongation it would cause, it does not necessarily follow that the adversarial debate would be interminable or that it would not contribute to the impartiality and fairness of the Commission decision.

“(110) Similarly, the obligation for the Commission to send the applicants prior notification of the evidence on which it intends to base its final decision would amount to establishing an adversarial debate such as that initiated for the Member State responsible for granting the aid”.

Then the General Court went on, in paragraphs 112-123 to reject all the arguments put forth by Ryanair.

But the General Court acknowledged that “(124) since an infringement of the rights of the defence has been raised in the present plea, it is necessary to examine the right which the parties concerned, within the meaning of Article 108(2) TFEU, have to be involved in the administrative procedure to the extent appropriate in the light of the circumstances of the case”.

“(125) In that regard, […], in the context of an examination under Article 108(2) TFEU, the Commission is obliged to give the parties concerned notice to submit their comments […] [through publication of a notice in the Official Journal], while also pointing out that the sole aim of this communication is to obtain from persons concerned all information required for the guidance of the Commission with regard to its future action”.

After examining the various exchanges of letters and documents, the General Court concluded, in paragraph 133 of the judgment, that Ryanair did not prove that its right to submit its observations during the formal investigation was violated.


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Imputation of the agreements to Austria

Ryanair argued that the Commission erroneously concluded that the measures were imputable to Austria.

The General Court, first, recalled that “(142) measures adopted by infra-State entities (decentralised, federated, regional or other) of the Member States, whatever their status and description, fall, in the same way as measures taken by the federal or central authority, within the ambit of Article 107(1) TFEU, if the conditions of that provision are satisfied”.

Then the General Court pointed out that the Commission had considered the KFBG and its subsidiary DMG, both of which were owned 100% by the state, to be public undertakings whose funds were state resources.

With respect to the imputability of the agreement to the state, the Commission had noted that the province of Carinthia was involved in the conclusion of all the marketing agreements between the airlines concerned and KFBG and DMG. Austria had also confirmed that the agreements between KFBG and DMG, and Ryanair and its subsidiaries were imputable to the province of Carinthia.

For these reasons the General Court rejected Ryanair’s plea.

Existence of selectivity

Ryanair disputed that the agreements were selective.

The General Court, first, clarified that “(156) the requirement as to selectivity under Article 107(1) TFEU must be clearly distinguished from the concomitant detection of an economic advantage in that, where the Commission has identified an advantage, understood in a broad sense, as arising directly or indirectly from a particular measure, it is also required to establish that that advantage specifically benefits one or more undertakings.”

“(157) It must, however, be observed that the selectivity requirement differs depending on whether the measure at issue is envisaged as a general scheme of aid or as individual aid. In the latter case, the identification of the economic advantage is, in principle, sufficient to support a presumption of selectivity. By contrast, when examining a general scheme of aid, it is necessary to identify whether the measure at issue, notwithstanding the finding that it confers an advantage of general application, does so to the exclusive benefit of certain undertakings or certain sectors of activity”.

“(158) In the present case, it is apparent from the contested decision that the Commission considered that the agreements at issue involved individual aid.” “(159) In addition, the Commission found […] that, as regards the 2002 agreements, the economic advantage had been granted on a selective basis, since only one airline, namely Ryanair, had benefited from it. The Commission also observed that the various agreements with Ryanair diverged from the schedule of charges and also from agreements with other airlines, and that they therefore contained individually negotiated conditions.” “(160 ) Furthermore, as regards the 2006 agreements, the Commission found […] that the economic advantage had also been granted on a selective basis, since only one airline, namely Ryanair, had benefited from it. As with the 2002 agreements, the Commission stated that the 2006 agreements with Ryanair diverged from both the schedule of charges and from agreements concluded with other airlines.” “(161) That analysis must be upheld. As is apparent from the agreements on airport services and the corresponding marketing agreements, those agreements included terms which were individually agreed between the parties.”

Existence of advantage

Ryanair contented that the agreements at issue did not confer any advantage on it.

“(179) In the present case, the Commission concluded, […], that KFBG and DMG were not acting as a private investor in a market economy when the agreements at issue were signed since the expected discounted result, taking account of those agreements, was negative. It must also be stated that it did not envisage the possibility that the purchase of the marketing services, at least in part, could have corresponded to general interest purposes pursued by the regional and local authorities.”

Rejection of the comparative analysis as a method of applying the test of the private investor

The “comparative analysis” compares the fees paid by airlines at different airports. The Commission normally does not rely on a comparative analysis to identify the possible existence of advantage because airports vary significantly. For this reason, it prefers to rely on an ex ante profitability analysis. As explained by the General Court at a later point in the judgment, “(250) the structure of costs and revenues tended to differ greatly from one airport to another. That difference is due to the fact that costs and revenue depend on how developed an airport is, the number of airlines which use the airport, its capacity in terms of passenger traffic, the state of the infrastructure and related investments, the regulatory framework, which can vary from one Member State to another, and any debts or obligations entered into by the airport in the past.”

Ryanair argued that the Commission should have used the comparative analysis and that an agreement which is not profitable for the public airport because of its own inefficiency does not grant an advantage to the airline.

First, the General Court stressed that “(192) determining whether a market economy operator would have made an arrangement such as that in question cannot necessarily imply for the Commission the obligation to use the comparative analysis.” Then the Court examined the various specific pleas of Ryanair claiming that the Commission was wrong to reject the comparability analysis.

Diversity among airports

With respect to costs and revenue, the General Court noted that “(209) the Commission found, […], that the cost and revenue structure tended to differ significantly from one airport to another”.

With respect to charges in the various agreements between airlines and airports, the General Court pointed out that “(211) the Commission considered that airport charges between airports were not comparable [because] […] commercial relationships between airports and airlines were not always based on a published scheduled of charges, but varied widely and were therefore difficult to compare on the basis of a price per rotation or per passenger.”

With respect to the similarity of the provisions of the agreements, “(215) even if a sample of [comparator] airports had been available, the comparative method would not have been applied in the present case. In particular, [the Commission] noted that the marketing agreements between the airport operator and the airline and its subsidiaries included transactions in airport services and marketing services, leading to a complex set of financial flows. The Commission concluded that it would be impossible to find a sample of comparable transactions because of the complexity and specific nature of the transactions which are the subject of the procedure at issue.”

With respect to the alleged deviation of the Commission from past practice of using the comparative method, the General Court replied that “(216) the concept of State aid is a legal concept and must be interpreted solely on the basis of Article 107(1) TFEU, and not on the basis of any previous administrative practice of the Commission, assuming that it is established”.

The influence of prices charged by publicly subsidised airports on prices charged by comparator airports

In the contested decision, the Commission considered that the prices charged by comparator airports could not be equated to market prices because they were influenced by the prices charged by publicly subsidised airports.

The General Court acknowledged that “(224) the Commission did indeed state in point 58 of the 2014 [Aviation] Guidelines that the prices charged by airports which are privately owned or managed could be strongly influenced by the prices charged by the majority of publicly subsidised airports, since the latter prices are taken into account by airlines during their negotiations with the privately owned or managed airports. It identified that risk as one of the reasons why it had strong doubts whether it was currently possible to identify an appropriate benchmark to establish a true market price for services provided by airports.”

Then the Court held that “(225) the existence of limited competition between airports to secure a contract with Ryanair, even if established, is insufficient to call into question the Commission’s conclusions”.

But the approach of the Commission and the findings of the Court seem to suffer from a logical inconsistency. On the one hand, the Commission takes the view that a fee that covers the costs incurred by airports can be considered to be a market price conferring no advantage to airlines. In fact, a fee that covers all costs plus a margin is considered to be a price free of State aid, regardless of whether the airport has received any State aid and regardless of whether the fee varies from airline to airline [the Aviation Guidelines do allow “price differentiation”]. If the users of an airport that charges such a fee do not receive any abnormal advantage, why can the fees they pay not be accepted as a comparator, provided of course that the airports are otherwise comparable?

More significantly, even if fees charged by private airports are depressed by the competition from subsidised airports, the fundamental tenet of the MEOT is that no private operator would offer a service at a loss, except in rare circumstances. [In para 241, the General Court states “according to the Commission, a market economy operator would have no interest in offering goods or services at the market price if that led to an incremental loss (recital 273 of the contested decision)]. Therefore, it must be presumed that the fees of private airports cover their full costs and, consequently, they represent market prices, even if they are lower than otherwise. If fact, the reasoning of the Court and the Commission suggests that in the absence of competition by subsidised airports, private airports would charge higher prices. Would those prices be regarded as market prices reflecting sufficient competition?

Single transactions?

Then the General Court turned its attention to how different transactions could be compared. Ryanair argued that the Commission was wrong to analyse both the 2002 and 2006 agreements together, as single transactions.

The General Court agreed with the approach of the Commission. “(228) When the Commission reviews whether a specific transaction contains State aid elements, it is required to take into account the context in which that transaction takes place […] The examination of a transaction outside its context could lead to purely formal results which do not correspond to economic reality”. “(229) When applying the private investor test, it is necessary to envisage the commercial transaction as a whole in order to determine whether the public entity has acted as a rational investor in a market economy. When assessing the measures at issue, the Commission must examine all the relevant features of the measures and their context”.

The sufficiency and reliability of the data used in the Commission’s assessment

The General Court noted that “(297) KFBG and DMG did not carry out any ex ante market studies, business plans or profitability calculations before the conclusion of individual airport services agreements with various airlines, or before the conclusion of individual marketing agreements. Moreover, […], the cost accounting system put in place in 2002 did not allow for the extraction of sufficiently detailed data to reconstruct the relevant information properly.”

“(314) In that regard, it should be borne in mind that the conduct of a prudent private investor in a market economy is guided by prospects of profitability in the longer term […] Such an operator wishing to maximise profits is prepared to take calculated risks in determining the appropriate return to be expected for its investment.”

“(321) Indeed, a normally prudent and diligent private investor in a market economy which operates an airport may be willing to take a commercial risk by concluding an agreement which is loss-making throughout its planned duration, in the real expectation of renewing the agreement and continuing to operate the route and, thus, of making future profits to offset those losses. That behaviour of seeking long-term profitability may correspond to economic rationality.”

“(322) Such an investor, acting in the place of the manager of KLU, would have decided that the only tangible advantage that a prudent private investor in a market economy would expect from a marketing agreement, and which it would take into account in a quantifiable manner when assessing the value of entering into such an agreement coupled with an airport services agreement, would be a possible positive effect of the marketing services on the number of passengers using the routes covered by the agreements in question for the term of operation of those routes, as set out in the agreements, and that other possible benefits would be too uncertain to be quantified and taken into account.”

“(330) Where it appears that the private investor test might be applicable, it is for the Commission to ask the Member State concerned to provide it with all the relevant information enabling it to determine whether the conditions for applying that test are satisfied”.

“(338) The conditions which a measure must meet in order to be treated as ‘aid’ for the purposes of Article 107 TFEU are not met if the recipient undertaking could, in circumstances which correspond to normal market conditions, have obtained the same advantage as that which has been made available to it through State resources. Furthermore, the concept of normal market conditions within the meaning of that settled case-law is to be interpreted as referring to the conditions governing the economy of a Member State when the latter is not intervening in favour of the recipient undertaking”.

The General Court clarified that “(339) the subsidy granted by the province of Carinthia to KFBG was clearly separate from the marketing agreements which they entered into with KFBG and DMG. It should be observed that a public entity can be the recipient of State aid once the undertaking is active in the marketplace. However, nothing prevents a public body, which has been invested with general interest missions and, in that context, has been exercising an economic activity under the supervision of the State, which forms part of the public administration, like KFBG, […], from also granting aid to undertakings, such as the applicants, by way of a separate measure”.

The General Court pointed out that the public “(341) contributions were partly granted to cover losses that were caused by the costs incurred by KFBG through marketing contracts concluded between KFBG and DMG with different airlines’ and that they were motivated ‘by the will to economically invigorate the region and underlined the importance of the airport for the regional economy’.”

“(342) The fact that the financial contributions granted by the province of Carinthia to KFBG were intended to cover the annual operating losses of KFBG and DMG resulting from costs associated with marketing contracts concluded by them with various airlines, enabling KLU ultimately to remain in operation, does not mean that, at the same time, those contributions were also to be taken into account as incremental revenue when applying the ex ante profitability analysis of the agreements at issue.”

“(343) The application of the test of the private investor in a market economy is intended to enable the Commission to answer the question whether the applicants could, in the present case, obtain the same advantage as that made available to them by means of the agreements at issue in circumstances which correspond to normal market conditions. It is therefore reasonable that, when applying the ex ante profitability analysis, the Commission may take into account only the incremental revenue and costs resulting from each agreement at issue and the activity of the airline concerned being present at KLU.”

“(344) The airport should demonstrate that […] it is capable of covering all costs stemming from the arrangement […] If additional support is needed, the MEO test is not fulfilled. This implies that any public support cannot be considered incremental revenue, failing which the provision would be void of meaning.”

“(345) To hold that aid granted to the manager of an airport in order partly to finance marketing agreements which that airport enters into with an airline constitutes incremental revenue resulting from that agreement would run counter to the objective pursued by the use of the test of the private investor in a market economy. If that were not the case, a public authority could, in order for a positive ex ante profitability analysis to be found for an agreement between the manager of an airport and an airline, grant subsidies to the airport for the operating losses that the agreement would generate for it. In other words, if the operating aid granted to KFBG in the present case were taken into account as incremental revenue, that would result in an artificial reduction in the incremental costs of each agreement at issue.”

The value of the marketing services provided by Ryanair

Ryanair argued that the Commission did not consider all benefits to KLU from being promoted via the marketing agreements.

The General Court agreed with the approach of the Commission. “(352) The Commission analysed the advantages that a private investor in a market economy, acting in the place of KFBG and DMG, could have expected from the marketing agreements. In particular, it found that the marketing services were capable of boosting passenger traffic on the routes covered by the agreements at issue. It added that an increase in passenger traffic could lead to an increase in revenue generated by certain airport charges for the airport operator and an increase in non-aeronautical revenue, in particular from car parks, restaurants and other businesses. It concluded from this that, when assessing the value in entering into those agreements, a private investor in a market economy would have been able to take that positive effect into account […] However, the Commission rejected as being too uncertain all the benefits from the marketing agreements which went beyond the routes covered by those agreements and their term”.

“(367) The airport services agreements and the marketing agreements were closely linked in that the marketing services were essentially designed to promote the air routes […] Under that approach, […], the Commission was entitled, without committing a manifest error of assessment, to consider the purchase price of the marketing services as an incremental cost to be deducted from the incremental revenue deriving from the air routes at issue” […] “(372) and not as being offset by the value of the marketing services.”

Indeed, the Commission was right that there was an element of double-counting in the airport services and marketing agreements. The fee paid by Ryanair in the airport services agreement was linked to the number of passengers it would generate for the airport. There was no need for the airport to pay Ryanair separately in order to promote it through a marketing agreement, unless Ryanair would increase the number of passengers on routes other than those covered by its airport services agreement. Later on, the General Court in paragraph 387 noted that the Commission did not dispute that regional airports had an interest in purchasing marketing services or even require them. But in the contested case, the Commission found that the marketing services provided by Ryanair were not likely to enhance KLU’s image in the long term.

The Court also agreed with the Commission that a private investor would not take into account other potential benefits that were too uncertain, unreliable and unquantifiable.

Furthermore, the Court rejected Ryanair’s argument that the Commission deviated from its own past practice. In this connection, the General Court recalled that “(381) the classification of a measure as State aid cannot depend on a subjective assessment by the Commission and must be determined regardless of any previous administrative practice of that institution, assuming it to have been established”.

Network externalities?

Ryanair submitted that the Commission failed to take into account in its profitability analysis the positive network externalities from Ryanair’s operations at the airport.

“(403) In that regard, it should be noted that, as the Commission states, the concept of network externalities, as invoked by the applicants, is linked to the prospect of a larger number of passengers.”

“(404) It follows from the foregoing that the Commission was entitled to take the view, without committing any manifest error of assessment, that a prudent private investor in a market economy acting in the place of KFBG would not rely on the commercial relationship with Ryanair extending beyond the operation of the air routes covered by the agreements at issue.” “(405) Similarly, a rational private investor in a market economy would not count on the arrival of other airlines or commercial outlets within the airport concerned beyond the duration of the agreements and side letters concluded with Ryanair.”

While the Commission was most likely right that the airport could not rely on benefits arising outside the scope of the agreement with Ryanair, it is not obvious why benefits from attracting other operators during the agreement with Ryanair were disregarded. Perhaps it was because those “network effects were too uncertain”.

Amount of State aid to be recovered

Ryanair claimed that the Commission committed an error in determining the amount of State aid that Austria had to recover from it.

The General Court, first, recalled the relevant principles from the case law. “(414) The obligation on the Member State concerned to abolish, through recovery, aid considered by the Commission to be incompatible with the single market has as its purpose, […], the restoration of the situation as it was before the aid was granted. That objective is attained once the aid in question, together with default interest, where appropriate, has been repaid by the recipient, or, in other words, by the undertakings which actually enjoyed the benefit of the aid. By repaying the aid, the recipient forfeits the advantage which it had enjoyed over its competitors on the market, and the situation prior to payment of the aid is restored”.

“(415) It must also be recalled that no provision of EU law requires the Commission, when ordering the recovery of aid declared incompatible with the internal market, to fix the exact amount of the aid to be recovered. It is sufficient for the Commission’s decision to include information enabling the recipient itself to work out that amount without overmuch difficulty”.

“(416) However, if the Commission, pursuant to its obligation to conduct a diligent and impartial examination of a case under Article 108 TFEU, does decide to order the recovery of a specific amount, it must assess, as accurately as the circumstances of the case will allow, the actual value of the benefit received from the aid by the beneficiary”.

“(417) The Commission is, on the one hand, obliged to ensure that the real advantage resulting from the aid is eliminated and thus to order recovery of the aid in full. The Commission may not, out of sympathy with the beneficiary, order recovery of an amount which is less than the value of the aid received by the latter. On the other hand, the Commission is not entitled to mark its disapproval of the serious character of the illegality by ordering recovery of an amount in excess of the value of the benefit received by the recipient of the aid”.

“(420) Consequently, and contrary to what is claimed by the applicants, the Commission did not make an error of assessment in determining the amount of aid to be recovered concerning the agreements at issue by taking into account ‘the negative part of the projected incremental flow (revenues less costs) at the time when the transaction was concluded’. In other words, the Commission rightly determined the amount of the aid to be recovered solely on the basis of ex ante evidence, that is to say, on developments foreseeable for a private investor in a market economy at the time the agreements were concluded.”

“(421) As the Commission has rightly pointed out, if the applicants’ line of argument concerning the possibility of quantifying aid after it was granted were to be accepted, the amount of aid to be recovered could vary according to totally fortuitous developments, such as the economic climate or the economic benefit possibly gained by the recipient of the aid through exploiting the advantage originally granted.”

Given that none of Ryanair’s pleas were successful, the General Court rejected the appeal in its entirety.


[1] The full text of the judgment can be accessed at:

https://curia.europa.eu/juris/document/document.jsf?text=&docid=246726&pageIndex=0&doclang=en&mode=lst&dir=&occ=first&part=1&cid=17067843


 

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Phedon Nicolaides

Dr. Nicolaides was educated in the United States, the Netherlands and the United Kingdom. He has a PhD in Economics and a PhD in Law. He presently holds positions at the College of Europe and the University of Maastricht. He has published extensively on European integration, competition policy and State aid. He is also on the editorial boards of several journals. Dr. Nicolaides has organised seminars and workshops in many different Member States, and has acted as consultant to several public authorities.

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State Aid Uncovered von Phedon Nicolaides

“Global” Assessment of Tax Schemes

It is incumbent on the Commission to carry out a global assessment of tax schemes. But it must take into account only those provisions of schemes that apply ex ante and do not depend on the circumstances of individual tax payers. Only when aid has to be recovered must the provisions that apply to the specific circumstances of individual tax […]
09. Feb 2021
State Aid Uncovered von Phedon Nicolaides

The State Acting as a Regulator

When the state acts as a regulator, it does not have to charge a licence fee that maximises its revenue. Introduction Governments can influence the allocation of resources with at least three instruments: subsidisation, taxation and regulation. All three may contain State aid; if subsidies are selective, if taxes allow for exemptions and if regulation involves charges which are not […]
21. Jul 2020
State Aid Uncovered von Phedon Nicolaides
MacBook on Table

Taxation of Multinational Companies: The Apple Case – A Political Setback for the Commission, but a Victory on Principle

Defects, incompleteness and inconsistencies in tax rulings are not sufficient to prove the existence of an advantage in the meaning of Article 107(1) TFEU. Update on Temporary Framework: Number of approved and published covid-19 measures, as of 17 July 2020: 213* Legal basis: Article 107(2)(b): 21; Article 107(3)(b): 179; Article 107(3)(c): 18 Five Member States have implemented 13 or more […]