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Public funds managed by private airport operators can be classified as state resources. Prices charged by airport operators can be used as a benchmark for market prices only if their activities and size are comparable and their costs are not subsidised by State aid. Before a private investor enters into any commercial arrangement, it takes into account all relevant information, considers the revenue and costs of all related obligations and does not accept any obligation that generates less revenue than the costs it incurs. Individually negotiated agreements are selective.

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The EStAL Seminar 2019: The Evolving Concept on the Notion of Aid (Economic Activity - Effect on Trade - Infrastructure - SGEI) on 11-13 April 2019 in Barcelona provides an in-depth examination and discussion of the most important developments and recent judgments related to the notion of aid and the question of how to determine whether a measure constitutes State aid.

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Part II: State resources and selectivity

Case T‑53/16, Ryanair v European Commission, was more complex than the other two cases because the airport was operated by a subsidiary of Veolia (VTAN), the multinational utilities and transport company, on behalf of the local Chamber of Commerce and Industry (CCI) and a public body responsible for the development of the airport and region (SMAN). Both CCI and VTAN had entered into various agreements with Ryanair. Those agreements covered both the use of the airport by Ryanair and the marketing and promotion of the airport by Ryanair.

Nîmes airport was initially operated only by CCI. On 1 February 2006, responsibility for the operation and development of the airport was transferred to SMAN which, subsequently, subcontracted that operation to VTAN under a public service contract that took effect on 1 January 2007.

 

Imputability of the agreements signed by CCI to the French state

Ryanair claimed the Commission was wrong to impute to the French state the decisions of CCI, VTAN and SMAN. Ryanair acknowledged that decisions of a public authority are always imputable to the state. However, decisions taken by public undertakings may be imputable to the state only if the state is involved in the adoption of the measures. (This is based on the landmark Stardust Marine judgment, case C‑482/99, France v Commission)

The General Court first recalled that “(84) for advantages to be capable of being categorised as aid within the meaning of Article 107(1) TFEU, they must be granted directly or indirectly through State resources and be imputable to the State” and that “(85) intervention by a Member State or through State resources is not necessarily effected by the central State authority of the respective Member State. It may equally be effected by an authority situated below the national level. According to settled case-law, a measure adopted by a regional or local authority and not the central authorities can constitute aid if the conditions laid down by Article 107(1) TFEU are satisfied […] In other words, 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 laid down by that provision are satisfied”.

“(86) In the present case, […] it is common ground that the property of Nîmes airport is the property of the French Republic. The airport management was ensured until 31 January 2006 by the CCI of Nîmes-Uzès-Le Vigan”. “(87) Furthermore, […] the basic principles of the French legislation on CCIs had remained unchanged during the period under review. […] they are public bodies set up by law, administered by elected managers and supervised by the State. Moreover, the French Commercial Code classifies CCIs as intermediate State authorities, their primary objective being to fulfil the general interest missions conferred on them by law”. “(89) In that context, […], the Commission was correct to take the view, […], that CCIs such as that at issue had to be considered as public authorities all of whose decisions, just like those of the central administration or local authorities, were imputable to the State.”

In response to Ryanair’s argument that CCI was carrying out economic activity, the General Court responded that “(90) there is nothing to preclude an economic activity being carried out by a State body […], irrespective of the position of that body in the organisation of the State, whether it belongs to the central administration or whether it is a decentralised entity such as the CCI at issue.”

“(91) Moreover, since the agreements in question had been concluded by the CCI of Nîmes-Uzès-Le Vigan, which is a State body, it was not necessary for the Commission to determine the imputability of the State in the light of the criteria set out in the judgment of 16 May 2002, France v Commission (C‑482/99).”

At the same time, the General Court pointed out that the fact that CCI was also a recipient of State aid did not undermine the finding that CCI had also acted as a public authority. “(105) It must be stated that the Commission considered that, through its business activity, the CCI of Nîmes-Uzès-Le Vigan had received State aid, in this case exceptional operating subsidies and repayable advances from equipment subsidies, and was, in addition, an entity which, forming part of the public administration, had consented to the granting of aid to the applicants, in the present case by the conclusion of the agreements at issue.” “(106) Nevertheless, […] the State aid at issue is distinct and was examined separately in the contested decision […] A public entity can be the recipient of State aid once the undertaking is active in the marketplace. However, nothing prevents the public body having been invested with general interest missions under the supervision of the State and exercising an economic activity within that context from not only forming part of the public administration, but also from granting aid to undertakings such as the applicants by way of a separate measure”.

“(107) In that regard, it should be borne in mind that nothing prevents the exercise of an economic activity from being integrated into the context of public administration organisations […] Similarly, the fact that an entity is engaged in economic and non-economic activities at the same time does not prevent it from being classified as an undertaking within the meaning of the State aid rules as regards the first activities”.

“(108) In addition, the inclusion of an entity, such as the operator of an airport, in the public administration does not preclude that entity from being able to be a beneficiary of State aid. It should be recalled that the existence or otherwise of legal personality distinct from that of the State, conferred by national law on a body carrying out economic activities, does not prevent the existence of financial relations between the State and that body and, consequently, the possibility that that body will benefit from State aid within the meaning of Article 107(1) TFEU”.

“(109) It follows that, contrary to what the applicants claim, the contested decision is not vitiated by contradiction or an error of law or by a failure to state reasons in so far as it classifies the CCI of Nîmes-Uzès-Le Vigan as both a recipient of aid and as an entity forming part of the public administration.”

 

Imputability of SMAN’s decisions to the French state

Ryanair claimed that SMAN was a public undertaking and that the Commission was required to apply the Stardust Marine test to verify whether public authorities were involved in the adoption of the measures which SMAN took in favour of Ryanair.

The General Court noted at the outset that “(113) in its analysis of the imputability to the State of the agreements at issue, the Commission takes into account, in respect of the agreements concluded with the CCI of Nîmes-Uzès-Le Vigan, only the latter’s public authority character without assigning any role to the SMAN. Consequently, the applicants’ complaint is ineffective in so far as it seeks to criticise the analysis of the imputability to the State of those agreements. By contrast, in respect of the agreements concluded with VTAN, it should be noted that the Commission found, […], that VTAN’s commercial policy towards the applicants had been largely influenced by a framework established by the SMAN, which had led VTAN to deviate from the normal conduct of an airport operator free to decide its commercial policy and motivated by the prospect of profits. At the end of its analysis, the Commission concluded, […], that the agreements concluded with VTAN had to be regarded as imputable to the SMAN, and therefore to the French Republic in the broad sense.”

“(116) In the present case, it must be noted that the Commission emphasised, […], that the SMAN was a public body which brought together three local and regional authorities”. “(117) Moreover, the Commission stated, […], that decisions of local authorities had to be regarded as imputable to the State in the broad sense and that that conclusion was valid, by extension, for a group of local authorities such as the SMAN.” “(118) In addition, the Commission observed, […], that the SMAN was managed by a board consisting solely of representatives of its member local authorities.” “(119) The Commission concluded from this, […], that all decisions of the SMAN were imputable to the State.”

The General Court considered that it was “(120) necessary to confirm that conclusion.” The Court added that “(121) that conclusion is not invalidated by the applicants’ argument that the SMAN is a company providing airport services and that, therefore, the Commission was required to assess the imputation to the State of the SMAN’s decisions on the basis of the criteria established in the (Stardust Marine) judgment”.

 

Imputability of VTAN’s decisions to the state

Ryanair argued that the decisions of a private undertaking such as VTAN were not imputable to the state, especially in the absence of any state shareholding in that undertaking.

The General Court recalled that “(127) no distinction is to be drawn between cases where the aid is granted directly by the State and those where it is granted by public or private bodies which the State establishes or designates with a view to administering the aid. EU law cannot permit the rules on State aid to be circumvented merely through the creation of autonomous institutions charged with allocating aid”.

“(128) Similarly, the appointment by the State of a private entity to grant aid cannot in itself allow the measures adopted by that entity to escape the application of those rules.”

“(129) As regards the condition that the measure must be attributable to the State, it is necessary to examine whether the public authorities must be regarded as having been involved in the adoption of that measure. Therefore, it is necessary to examine whether […] the SMAN was involved in the conclusion of contracts entered into by VTAN with the applicants.”

Then the General Court listed and agreed with the indicators identified by the Commission, which demonstrated SMAN’s involvement (Paragraphs 131-132 of the judgment):

  1. VTAN was contractually obliged, in addition to running the airport, to develop traffic at the airport. This constrained and influenced VTAN’s commercial policy towards airlines.
  2. VTAN was aware that the commercial relationship with Ryanair was likely to harm the profitability of the operation of Nîmes airport but that it was prepared to pursue that relationship because of commitments it made to SMAN in order to win the airport concession and the contribution by SMAN that ensured the concession’s financial stability.
  3. The profitability of VTAN’s concession relied on SMAN’s contribution.

All of the above taken together, first, obliged VTAN to act to further public policy objectives and, then, compensated VTAN for its loss of profits from doing so.

 

Could VTAN’s resources be classified as state resources?

Ryanair argued that the contribution paid by SMAN to VTAN remained under VTAN’s control and VTAN had a discretion as to whether or not to use it and whether or not to transfer it to the applicants. VTAN’s resources did not, therefore, remain under constant public control, within the meaning of the case-law.

The General Court recalled that “(144) the concept of ‘intervention through State resources’ is intended to cover, in addition to advantages granted directly by the State, those granted through a public or private body appointed or established by that State to administer the aid”. “(145) Therefore, even if the sums corresponding to the measure in question are not permanently held by the Treasury, the fact that they constantly remain under public control, and therefore available to the competent national authorities, is sufficient for them to be categorised as State resources”. “(146) The fact that the resources concerned may be administered by entities separate from the public authorities is irrelevant in that respect”.

The General Court applied the above principles to the present case and took into account that state resources had been transferred from SMAN through the contribution to VTAN. It also considered that the financial stability of the operation of Nîmes airport relied on the contribution by SMAN, which was intended to allow Ryanair to continue its flights from and to Nîmes airport under the same conditions as when CCI was operating the airport. These considerations led the General Court to concluded that “(150) without that contribution VTAN would have borne the full burden of the advantages conferred on the applicants through the agreed agreements.”

More importantly, the General Court found that “(151) the fact that VTAN enjoyed a certain freedom when negotiating its agreements with the applicants and that there was no mechanical link between the amount of the flat-rate contribution and the parameters of the contracts negotiated does not mean that the connection between that contribution and the advantage given to the applicants has been eliminated. It must be found that, in economic terms, the flat-rate contribution in favour of VTAN made the conclusion of the agreements with the applicants possible and enabled VTAN to not have to bear the cost of the advantages conferred on the applicants through those agreements. Thus, those advantages are the result of the payment of the flat-rate contribution to VTAN”.

 

Selectivity

In case T‑165/16, Ryanair v European Commission, after considering pleas concerning several procedural issues, the General Court examined whether the agreements in question provided a selective advantage to Ryanair. With respect to the concept of selectivity, the Court noted that “(82) 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 was also required to establish that that advantage specifically benefited one or more undertakings. It falls to the Commission to show that the measure, in particular, creates differences between undertakings which, with regard to the objective of the measure, are in a comparable situation. It is necessary therefore that the advantage be granted selectively and that it be liable to place certain undertakings in a more favourable situation than that of others.”

Then the Court added that “(83) a distinction must be made according to whether the measure in question 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 the presumption that it is selective. By contrast, when examining a general scheme of aid, it is necessary to identify whether the measure in question, 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”.

“(85) In the present case, the combination of the airport services agreement […] and the marketing services agreements […], must be envisaged as involving individual aid.” “(86) The Commission concluded that those agreements constituted selective measures for the purposes of Article 107(1) TFEU.” “(87) That analysis must be upheld. The agreements in question include terms which were individually agreed by the parties.” “(90) It is therefore not necessary to establish whether the agreements in question provide advantages to the applicants in relation to other operators which are in a comparable legal and factual situation”.

The General Court further clarified that “(91) the test requiring a comparison of the beneficiary with other operators in a comparable factual and legal situation in the light of the aim pursued by the measure in question is based on, and justified by, the assessment of whether measures of potentially general application are selective. That test is therefore irrelevant where, as in the present case, it would amount to assessing the selective nature of an ad hoc measure which concerns just one undertaking and is intended to modify certain competitive constraints which are specific to the undertaking”.

The Court concluded that “(92) contrary to what the applicants claim, the Commission was not obliged to examine whether other airlines wishing to operate flights to Altenburg-Nobitz airport could have concluded similar or identical agreements to those concluded by the applicants.”

 

In case T‑77/16, Ryanair v European Commission, one of the main issues of contention was also whether the arrangements between Ryanair and Zweibrücken airport were selective.

The General Court, first, recalled the Commission’s reasoning in using the private investor principle to find whether incremental revenues exceeded incremental costs for the airport and on the basis of that result to determine whether the arrangements in question conferred a selective advantage to Ryanair. (Paragraphs 31-36)

Then the General Court noted that “(38) thus, the Commission considered […] that the economic advantage […] had been granted selectively, given that only airlines operating out of Zweibrücken airport had benefited from them. In that context, in reply to the argument of the German authorities that the discounts on the charges were offered to all airlines wishing to operate out of Zweibrücken, which made them allegedly non-selective …, the Commission noted … that the various agreements concluded with the airlines diverged from the schedule of charges as well as from one another […], and thus contained individually negotiated conditions. It concluded that the advantage granted was selective with regard to each airline viewed separately. Moreover, the Commission considered, […], that even if the schedule of charges had been applied in the same way to each airline wishing to operate out of Zweibrücken airport, any advantage conferred would still have to be considered selective. In that regard, it referred to the Opinion of Advocate General Mengozzi in Deutsche Lufthansa (C‑284/12, EU:C:2013:442, points 50 to 52), to the effect that to accept Germany’s argument would have led to radically denying the possibility of classifying as State aid the conditions on which an undertaking offers its services where those conditions are applicable to all its contracting parties without distinction, such an exclusion not being in line with the case-law of the Court of Justice.”

“(39) It must be noted that the advantage, in respect of which the Commission examined selectivity in recitals 388 to 391 of the contested decision, differs from that highlighted in recitals 376 to 386 of that decision. Thus, in recitals 388 to 391 of the contested decision, the Commission examined the selective nature of the advantage that allegedly resulted from the granting of discounts on airport charges to Ryanair. However, those discounts constitute merely an element of the advantage identified by the Commission in recitals 376 to 386 of that decision, which corresponds to the negative expected discounted result (revenues less costs) resulting from the agreement concluded by Ryanair. The Commission did not therefore examine the selective nature of that advantage in the contested decision.”

“(40) In those circumstances, the applicants are justified in claiming that the Commission failed to establish the selective nature of the advantage from which they benefited.” “(41) In any event, it should be noted that the grounds set out in recitals 388 to 391 of the contested decision — in addition to the fact that they appear difficult to reconcile or contradictory — are not such as to establish the selective nature of an advantage which consisted in granting discounts on airport charges.”

The General Court observed that “(42) first, the ground set out in recital 388 of the contested decision, to the effect that airlines operating from Zweibrücken Airport benefited from discounts on airport charges, is not, in itself, a decisive criterion for establishing that the economic advantage identified in the present case is selective”. This is because  the Commission adopted its decision on Zweibrücken airport in October 2014 while the Court of Justice ruled in December 2016, in case C‑524/14 P, Commission v Hansestadt Lübeck, that charges levied by individual airports were not selective, as long as airports had autonomy in setting their own charges. In this case, the critical issue of autonomy was not examined.

“(43) Second, nor does the ground set out in recital 390 of the contested decision suffice to consider that the economic advantage identified is selective. It follows from that recital of the contested decision that the Commission examined whether ‘the individual agreements concluded with the airlines diverge from the schedule of charges and from each other [...], thus containing individually negotiated conditions’, with the result that the advantage granted appears to be selective with regard to each company viewed individually. However, it is not apparent from any evidence in the case file that the discounts on the schedules of charges granted to Ryanair differed from those generally applicable to all airlines using the airport. Contrary to what the Commission claims in response to a written question put by the Court in that regard, it was not for the applicants to establish that the conditions they obtained were accessible to all airlines operating out of that airport, but it was for the Commission itself to establish that such conditions were more favourable than those applicable to other airlines using the airport and that they were, accordingly, selective.”

“(44) Third, the ground set out in recital 391 of the contested decision, to the effect that, even if the schedule of charges had been applied in the same way to each airline wishing to operate out of Zweibrücken airport, any advantage conferred would still have to be considered selective is also incorrect. The Court of Justice has expressly rejected the Commission’s view that a measure laying down the conditions on which a public undertaking offers its own goods or services always constitutes a selective measure (judgment of 21 December 2016, Commission v Hansestadt Lübeck, C‑524/14 P, EU:C:2016:971, paragraph 50).”

In the end the General Court found that “(45) the Commission’s conclusion that the economic advantage identified in the contested decision was selective is, in the light of the reasons given in that decision, incorrect” and proceeded to annul the relevant part of the contested decision.

 

In case T‑53/16, Ryanair v European Commission, Ryanair also argued that the Commission failed to demonstrate the existence of a selective advantage.

The General Court recalled that “(162) 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. It falls to the Commission to show, in particular, that the measure at issue creates differences between undertakings which, with regard to the objective of the measure, are in a comparable situation. It is necessary therefore that the advantage be granted selectively and that it be liable to place certain undertakings in a more favourable situation than that of others.”

“(163) It must, however, be observed that the selectivity requirement differs depending on whether the measure in question 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 the presumption that it is selective. By contrast, when examining a general scheme of aid, it is necessary to identify whether the measure in question, 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”.

[I wish EU courts would stop referring to “general scheme of aid” when they do not mean a general measure that is not selective because it is general.]

 

“(164) In the present case, the agreements in question, which were concluded between the operators of Nîmes airport and the applicants and as analysed in the contested decision, must be considered as involving individual aid.” Moreover, “(165) the agreements at issue, which must be examined as a single measure […], include terms that were individually agreed between the parties.”

Then the Court added that “(167) the fact that the agreements at issue were concluded on a non-exclusive basis is not such as to alter that conclusion.” “(168) Therefore, contrary to the applicants’ claim, it is not necessary to establish whether the agreements in question provide advantages to them in relation to other operators which are in a comparable legal and factual situation”. “(169) The test requiring a comparison of the beneficiary with other operators in a comparable factual and legal situation in the light of the aim pursued by the measure in question is based on, and justified by, the assessment of whether measures of potentially general application are selective. That test is therefore irrelevant where, as in the present case, it would amount to assessing the selective nature of an ad hoc measure which concerns just one undertaking and is intended to modify certain competitive constraints which are specific to the undertaking”.

 

 

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