On 23 November 2023, the Court of Justice, in case C-758/21 P, Ryanair v European Commission, rejected Ryanair’s action against the judgment of the General Court in case T-448/18, Ryanair v European Commission.1 In its judgment, the General Court dismissed Ryanair’s appeal against Commission decision 2018/628. In that decision, the Commission found, among other things, that Austria had granted State aid to Klagenfurt airport that was compatible with the internal market. However, certain agreements between Klagenfurt airport and Ryanair resulted in a preferential treatment that constituted incompatible State aid which had to be recovered. The General Court endorsed the Commission’s conclusion that those agreements did not conform with the private operator principle.
Ryanair raised several pleas, mostly contesting facts and procedural issues. This article reviews only the claims of Ryanair concerning the amount of aid that was embedded in its agreements with Klagenfurt airport. Those agreements included commitments that, as confirmed by the General Court, a private operator would not have assumed. Calculating the amount of aid to be recovered in that context was not a simple task. When a public authority provides a grant, the amount to the recovered is the amount of the grant plus accrued interest. But the services agreements signed between Klagenfurt airport and Ryanair did not grants to Ryanair. The State aid that was embedded in those agreements was the result of insufficient future revenue for offsetting the costs borne by the airport in the services it provided to Ryanair. Since incremental revenue was not sufficient to cover the incremental costs of the airport, such arrangements would not have been acceptable to a private operator. The assessment of conformity with the private operator principle was an ex ante exercise based on the expected revenue and cost at the time the agreements were signed. The actual revenue and cost were realised only afterwards. This immediately raised the question which amount had to be taken into account: that which would have satisfied a private operator ex ante or the amount that was realised ex post, even if the actual result was worse or better than expected?
The answer of the Commission in section 11 of decision 2018/628 was that the amount of aid to be recovered was that which would have turned the expected negative outcome of the
agreement into positive and therefore, would have been acceptable ex ante to a private operator.
The private operator principle
The Court of Justice, first, recalled the basic principles applying to a public authority or agency of the state that manages infrastructure as a private operator.
“(140) Measures that, whatever their form, are likely directly or indirectly to favour certain undertakings, or fall to be regarded as an economic advantage that the recipient undertaking would not have obtained under normal market conditions are regarded as State aid.”
“(141) Thus, having regard to the objective of Article 107(1) TFEU of ensuring undistorted competition, the definition of ‘aid’, within the meaning of that provision, cannot cover a measure granted to an undertaking through State resources where it could have obtained the same advantage in circumstances which correspond to normal market conditions. The assessment of the conditions under which such an advantage was granted is therefore made, in principle, by applying the private operator principle”.
Normal market conditions are the conditions that prevail before the state intervenes. They do not correspond to some ideal state of the market or conditions of perfect competition.
“(142) In order to assess whether the same measure would have been adopted in normal market conditions by a private operator, reference should be made to such an operator in a situation as close as possible to that of the State”.
Next, the Court highlighted the tasks of the Commission and specifically stressed its obligation to gather full and correct information.
“(143) It is for the Commission, in that context, to carry out an overall assessment, taking into account all relevant evidence in the case enabling it to determine whether the recipient company would manifestly not have obtained comparable facilities from such a private operator”.
With respect to the information that the Commission ought to gather in order to assess the behaviour of the airport, the Court reiterated that “(144) all information liable to have a significant influence on the decision-making process of a normally prudent and diligent private operator, in a situation as close as possible to that of the State, must be regarded as being relevant. Consequently, for the purpose of applying the private operator principle, the only relevant evidence is the information which was available, and the developments which were foreseeable, at the time when the decision to proceed with the grant of the measure at issue was taken … That is especially so where the Commission is seeking to determine whether there has been State aid in relation to a measure which was not notified to it and which, at the time when the Commission carries out its examination, has already been implemented by the Member State concerned”.
No ex post adjustment
Next, the Court emphatically confirmed that “(145) factors arising after the measure at issue has been adopted cannot be taken into account for the purpose of applying the private operator principle.”
“(146) As the Court of Justice has already held, … a line of argument disputing the merits of the General Court’s appraisal relating to the assessment of the aid to be recovered, where it is based on the taking into account of events subsequent to the grant of the aid measure at issue, is ineffective.”
“(147) The appellants submit, in essence, that the General Court erred in law in its assessment of the amount of aid to be recovered, as determined in the decision at issue. They claim, in that regard, that the General Court should have considered that the Commission, in order to determine that amount, was required to take into account ‘ex post data in the file when the decision at issue was adopted’, instead of relying on ‘ex ante evidence’, namely, as the General Court stated in paragraph 420 of the judgment under appeal, on developments foreseeable, for a private investor in a market economy, at the time the agreements at issue were concluded.”
“(148) The General Court thus pointed out in that paragraph that in the decision at issue the Commission had determined 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’. The appellants claim, however, in essence, that the costs and revenues expected for Klagenfurt Airport at the time of conclusion ultimately proved to be different from those which were foreseeable at the time of that conclusion.”
“(149” In addition, it is common ground, in the present case, that the aid measures at issue were granted by the conclusion of the respective agreements at issue.”
“(150) It must therefore be held that, …, the appellants dispute the merits of the General Court’s appraisal of the assessment of the amount of aid to be recovered, basing their argument on events subsequent to the grant of the aid measures at issue. Consequently, this fourth ground of appeal must, in any event, be rejected as ineffective, in accordance with … paragraph 146 above.”
The irrelevance of the form of aid
The Court of Justice also explained that the form of aid makes no difference to the assessment of whether the private investor principle is applicable or whether it has been applied correctly.
“(151) In that regard, the argument made by the appellants, in essence, that that case-law is not applicable to the present case, since it concerns only State aid in the form of a guarantee, cannot be accepted. As is apparent from that case-law, it is not the nature of the aid under
consideration but the actual application of the principle of the private operator in a market economy – whose applicability is indeed not disputed in the present case – which requires that, for the purpose of identifying a possible advantage in terms of Article 107(1) TFEU, the only relevant evidence is the information which was available and the developments which were foreseeable at the time the decision to proceed with the grant of the measure at issue was taken.”
“(152) Similarly, the appellants cannot derive any useful argument in support of the present ground of appeal from the fact that, … the amount of aid to be recovered could be adjusted at a later stage, using evidence provided by the Republic of Austria. As the General Court stated in paragraph 425 of the judgment under appeal, it was apparent from the decision at issue that that Member State had claimed during the administrative procedure that that agreement had never entered into force, without having been able to provide, during the administrative procedure, a written document attesting to the accuracy of that statement.”
“(153) Accordingly, the statement made by the Commission in recital 570 of the decision at issue was solely intended, as the General Court found in the aforementioned paragraph 425, to enable that Member State to adduce evidence to that effect and, if necessary, to exclude the aid that was due to be paid under that agreement from the amount of aid to be recovered, provided that it was established that – since the agreement had not entered into force – the aid contained therein had not been paid to the beneficiary, such that no economic advantage had been granted by means of that agreement and that, consequently, it was not necessary to recover any aid on the basis of it.”
“(154) By contrast, by their arguments submitted to the General Court and, in essence, reiterated in the present ground of appeal, the appellants in reality do not claim that aid contained in one of the agreements at issue was not granted to them, but that the advantage contained in those agreements should have been reassessed at the time of recovery on the basis of the actual economic results of the agreements concerned for the parties to those agreements. That line of argument is, however, contrary to the case-law referred to in paragraphs 140 to 145 above, and, moreover, to the established case-law of the Court of Justice, to the effect that the recovery of unlawful aid entails the restitution of the advantage procured by the aid for the recipient in order to eliminate the distortion of competition caused by that advantage”.
On the basis of the above reasoning, the Court of Justice dismissed this plea of Ryanair. It also dismissed all other pleas and, therefore, the appeal in its entirety.