The General Court of the EU supports the rescue of SEPI to Air Europa, but not the aid to TAP and KLM

The General Court of the European Union hhas endorsed the Spanish company rescue mechanism in difficulties due to the pandemic, the Fund to support the solvency of strategic Spanish companies that manages the QUIET. In failure, motivated by a Ryanair resource, he sees it in accordance with European Union law. Justice has considered that this State aid, for which the Government will provide up to 10,000 million euros charged to the General State Budgets to companies that demand it and comply with a series of requirements, it is proportionate and non-discriminatory.

However, Ryanair’s battery of resources against the aid that large airlines have received in Europe during the current crisis has had an effect in the case of support from Portugal to TAP Air or from the Netherlands to KLM. The expanded Tenth Chamber of the General Court has annulled, for insufficient motivation, the decision of the European Commission that declared the aforementioned aid compatible with the internal market. In any case, the effects of the cancellations, which entail the recovery of financial support, are suspended pending a new decision from the EC.

It is a matter, as argued in the judgments, of not causing serious harm to the countries or to the aforementioned companies, giving a new opportunity to the European Commission to justify the support received by KLM and TAP.

In the case of Spain, it notified the EC in July 2020 of the aid scheme by which the aforementioned Fund was created. The Government adopted different recapitalization measures in favor of non-financial companies that are domiciled and have their main work centers in Spain and that are considered systemic or strategic for the Spanish economy. The financial support offered by the fund has been Air Europa, Plus Ultra, Duro Felguera or Avoris, and others have requested it, such as Abengoa, Air Nostrum or Grupo Villar Mir.

Brussels examined the mechanism when constituting state aid, but within the time frame in which its hand has been raised so that governments could support their economies against the impact of the pandemic. It was on July 31 of last year when the EC declared the Spanish fund compatible with the internal market pursuant to Article 107 (3) point b TFEU. Under that provision, aid intended to remedy a serious disturbance in the economy of a Member State may, under certain conditions, be considered compatible with the internal market.

The queen of low cost, Ryanair, filed an appeal requesting the annulment of the EC decision, which has been rejected by the expanded Tenth Chamber of the General Court. The same Chamber examines the compatibility with the internal market of the State aid scheme adopted in response to the consequences of the Covid-19 pandemic. And the General Court clarifies how the rules on State aid are combined with the principle of non-discrimination on grounds of nationality (Article 18 TFEU).

The court based in Luxembourg has controlled whether the Spanish fund complies with the principle of non-discrimination by being accessible to companies with registered offices in Spain and which have their main work centers in this country. And the answer is that the objective of remedying the “serious disturbance caused in the Spanish economy by the Covid-19 pandemic” is imposed. The General Court adds that the criterion of the strategic and systemic importance of the aid recipients clearly reflects the objective of the aid in question.

The eligibility criteria for the beneficiaries of the aid, consisting of the temporary entry of the Spanish State into the capital of the affected companies, and the ex post restrictions established by said regime against the beneficiaries of the aid, “reflect the will of Spain to support companies that are truly and permanently established in the Spanish economy ”. This solution, says the ruling, is consistent with the objective of the regime, aimed at remedying the serious disturbance of the Spanish economy from a medium and long-term economic development perspective.

As regards the proportionate nature of the aid scheme, the General Court concludes that, by establishing modalities of access to aid of a general and multisectoral nature, without distinction of the economic sector in question, Spain could legitimately rely on eligibility criteria aimed at identifying companies that have a systemic or strategic importance for its economy and at the same time a lasting and stable link with the latter. In effect, a different eligibility criterion, which will include companies operating in Spanish territory such as mere service providers, “Could not have guaranteed the need for a stable and lasting establishment of the aid beneficiaries in the Spanish economy, underlying the controversial aid scheme”.

Ryanair, for its part, has not demonstrated in its appeal “how the exclusion of access to the recapitalization measures established by the controversial regime could dissuade it from establishing itself in Spain or from providing services from Spain and destined for this country ”.

The General Court also rejects the plea according to which the Commission failed to fulfill its obligation to balance the positive effects of the aid with its negative effects on the conditions of trade and on the maintenance of undistorted competition. In this regard, the General Court notes that such weighting is not required by Article 107 (3) (b) TFEU, unlike what is required by Article 107 (3) (c) TFEU, and that, in the circumstances of the present case, “that weighting would have no reason to be, since it is presumed that its result is positive”.

Financial support to TAP and KLM must go through the EC filter again

Air France-KLM group plane at the Airbus delivery center in Colomiers (France). AFP

Ryanair’s complaints against the support of different countries to which its flag airlines were have put into question the oxygen balloons that Portugal put in the hands of the state TAP Air or the one that the Netherlands activated for KLM. The General Court has annulled, due to insufficient reasons, the decision of the European Commission that declared the aforementioned public financing compatible with the internal market. The effects of the cancellations, which entail the recovery of financial support, are suspended pending a new examination by the EC.

TAP agreed to a maximum loan of 1.2 billion to remain active between July and December 2020. The EC saw it as State aid compatible with the internal market. And the General Court has upheld the appeal filed by Ryanair, in which it requested the annulment of the Brussels decision by a breach of the obligation to state reasons. The Irish airline understood that the reasons for considering that the notified measure was compatible with the domestic market had not been given.

The EC, says the General Court, had to examine whether TAP was in crisis because of the pandemic or because of its own structural problems. In fact, the ruling maintains, the Commission limited itself to providing explanations about the financial situation of the beneficiary and about the difficulties generated by the Covid-19 pandemic.

KLM, for its part, had access in June last year to 3.4 billion between a direct loan from the Netherlands and a state guarantee to raise a loan that was to be granted by a banking consortium. A month earlier, the EC had declared the 7 billion French aid to Air France, KLM’s sister company in the Air France-KLM holding company, compatible with the internal market.

Both State aid were accepted within the framework of the measures to support the economy in times of pandemic, but the General Court also accepts Ryanair’s appeal. In this case, the effects of the annulment are again suspended until the EC adopts a new decision.

The loopholes found in the KLM case refer to the fact that it is “an aid granted to a subsidiary of a holding company [Air France -KLM], despite the fact that another subsidiary of the same holding company has been the beneficiary of a similar aid ”.

When there is a well-founded fear regarding the effects on competition of an accumulation of State aid within the same group, the Luxembourg court points out, “it is incumbent on the Commission examine with special rigor the links between the companies that belong to that group, in order to verify whether the latter can be considered to form a single economic unit and, therefore, a single beneficiary, for the purposes of applying the rules on State aid ”.

The General Court emphasizes that the contested EC decision “does not contain any data on the composition of the shareholders of Air France or KLM, nor any information on the functional, economic and organic links between the holding company Air France-KLM and its subsidiaries , although it shows that the holding company is involved in the granting and administration of the aid provided for both KLM and Air France “.

The decision challenged by Ryanair also does not disclose the possible existence of any mechanism that prevents KLM from enjoying the aid that was granted to Air France through the holding company Air France-KLM.

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