Case C-287/12 P, Ryanair v Commission

Court confirming General Court’s judgment upholding Commission decisions holding Italian State’s loan to Alitalia to be unlawful, but permitting sale of its assets

>> In 2008, Italy granted a loan of €300 million to Alitalia. It also allowed it to count that amount as part of its own capital. Alitalia, which was then in a situation of insolvency, was placed under extraordinary administration. A bank was appointed as independent expert which task was to verify that its assets would be sold at a price in line with the market price. The bid tendered by the Compagnia Aerea Italiana (‘CAI’) for the purchase of certain Alitalia assets, in response to the call for declarations of interest published for that purpose, was sent by Italy to the Commission.

After initiating a formal investigation procedure in connection with the loan and the option of counting the amount thereof as part of Alitalia’s own capital, the Commission, by a first decision, declared the loan to be unlawful State aid incompatible with the common market, and ordered its recovery from Alitalia.

By a second decision, the Commission found that the sale of Alitalia assets did not involve State aid to the purchasers, subject to full compliance with the undertakings given by the Italian authorities that the sale would be made at market price. Moreover, the Commission confirmed that the extraordinary administration procedure did not amount to State aid in favour of the purchasers. The Commission concluded that the procedure implemented by Italy entailed no economic continuity between Alitalia and the buyers of its assets and that the sale did not have the effect of circumventing the obligation to recover aid. The General Court dismissed Ryanair’s action against these decisions.  The Court of Justice has now rejected all the arguments raised by Ryanair against this judgment of the General Court.

 Ryanair had put forward six grounds of appeal concerning its application for annulment of the second contested decision.

First ground of appeal
The first ground of appeal alleged that the General Court erred in law in the examination of the admissibility of the action. The Court however held that the General Court did not misconstrue its arguments aimed at challenging the substance of the second contested decision, nor artificially redefined the subject-matter of the action as an action aimed exclusively at the protection of its procedural rights.

The Court added that where an applicant sought the annulment of a decision not to raise objections, it essentially contested the fact that the Commission adopted the decision in relation to the aid at issue without initiating the formal investigation procedure, thereby infringing the applicant’s procedural rights.

In order that its action for annulment might succeed, the applicant may invoke any plea capable of showing that the assessment of the information and evidence which the Commission had at its disposal, during the phase of preliminary examination of the notified measure, should have raised doubts as to the compatibility of that measure with the common market.

The Court however held that the use of such arguments could not have the consequence of changing the subject-matter of the application or altering the conditions of its admissibility. On the contrary, according to the Court, the existence of doubts concerning that compatibility was precisely the evidence which must be adduced in order to show that the Commission was required to initiate the formal investigation procedure under Article 88(2) EC and Article 6(1) of Regulation No 659/1999 (C83/09 P Commission v Kronoply and Kronotex [2011]).

Second ground of appeal
By its second ground of appeal, Ryanair claimed that the General Court erred in its statement of reasons and erred in law by failing to declare that the Commission lacked competence to adopt a conditional decision.

The Court however held that it was clear that since the Commission found, by the second contested decision, that there was no aid, the General Court was correct to holdthat the second contested decision could not be classified as a conditional decision, within the meaning of Article 7(4) of Regulation No 659/1999, but, on the contrary, could be classified as a ‘decision taking account of undertakings as to the behaviour voluntarily entered into by the State during the phase of notification of the contested measure in order to clarify certain points’ and that, therefore, those commitments formed an integral part of the notified measure.

The Court added that  to determine whether an act of the Commission in matters of State aid constituted a decision within the meaning of Article 4 of Regulation No 659/1999, it was necessary to ascertain whether, taking account of the substance of that act and the Commission’s intention, that institution had, at the end of the preliminary examination stage, definitively established its position, by way of the act under consideration, on the measure under review (see Case C521/06 P Athina├»ki Techniki v Commission [2008], on which I wrote this post).

The General Court therefore was correct to state that Article 7(4) of Regulation No 659/1999 was not applicable in the present case and that it followed that the second contested decision could not be classified as either a conditional decision, within the meaning of that provision, imposing conditions or obligations on the Member State, or as a decision which required modifications to the project notified, as Ryanair claimed.

Furthermore, the General Court was fully entitled to hold that the Commission had the power lawfully to adopt, on the basis of Article 4(2) of Regulation No 659/1999, a decision, such as the second contested decision, whereby, while finding the absence of State aid, it took note of commitments entered into by the Member State.

Third ground of appeal
The third ground of appeal alleged that the General Court erred in law in that it failed to examine all the relevant characteristics of the notified measure.

The Court however pointed out that, while Ryanair sought to call into question the findings of fact and the assessment of the evidence, under Article 256(1) TFEU and the first paragraph of Article 58 of the Statute of the Court of Justice, an appeal lay on points of law only. The General Court therefore had sole jurisdiction to establish and assess the relevant facts and to assess the evidence, save where such facts and evidence had been distorted (Case C403/10 P Mediaset v Commission [2011]).

The Court added that it was clear that the arguments invoked by Ryanair in reality were aimed at persuading the Court to replace the General Court’s findings of fact with its own, while such arguments must be held to be inadmissible.

Fourth ground of appeal
The fourth ground of appeal alleged that the General Court erred in its statement of reasons and erred in law by failing to examine alternatives to the notified measure.

The Court however noted that complaints directed against grounds of a judgment of the General Court which were included merely for the sake of completeness must be rejected outright since such grounds could provide any basis for setting that judgment aside (see Case C405/11 P Commission v Buczek Automotive [2013).

The Court held that where the Commission found an absence of any advantage for the undertaking concerned, which lead it to find that there was no State aid, it could not be considered to be bound to examine alternative solutions to the choice made by the notifying Member State.

Fifth ground of appeal
The fifth ground of appeal related to an error of law in applying the market economy investor principle.

The Court however pointed out that Ryanair did not dispute the existence and role of national mechanisms ensuring that the bid be assessed in a way which guaranteed that the price not be lower than the market price and did not establish that the continuity of service requirement was a public service obligation, but confined itself to claiming that the General Court should have held that continuity of service was a major obligation and a selection criterion.

 In that regard, General Court held first, that the determinant criterion applied by the independent expert was that of price, in light of the fact that both Decree-Law No 134 and the call for declarations of interest provided that the sale price of the assets could not be lower than the market price, as determined by the independent expert, and, secondly, that the continuity of service criterion was a secondary criterion in relation to that of price, in the context of the assessment of offers by the extraordinary administrator. The General Court held that a continuity of service obligation did not necessarily imply the imposition of a public service obligation on the operator whose bid was accepted. Those findings had  not been called into question by Ryanair.

The Court found that the argument that, if a public service obligation had been imposed, the Commission would have had the duty to investigate the absence of aid and the General Court should have found fault with the absence of such an examination, must be held to be ineffective.

Sixth ground of appeal
The sixth ground of appeal alleged a distortion of the evidence and an error committed by the General Court by not holding CAI to be the economic successor of Alitalia.

The Court however pointed out that the Commission had found that the bid submitted by CAI concerned only the passenger air transport business. As followed from from the judgment of the General Court, the Commission had found that CAI would take over only certain assets relating thereto. Moreover, it was apparent from the second contested decision that CAI’s bid covered all the timetable slots corresponding to the assets purchased in the procedure. It did not therefore follow that CAI’s bid covered 100% use of Alitalia’s timetable slots for passenger transport. Secondly, it was apparent from that decision that that bid concerned approximately one half of the 180 Alitalia aircraft and that the new company would operate only part of the corresponding timetable slots. It followed from the foregoing that the General Court did not distort the evidence which was submitted to it.

Seventh ground of appeal
As regards the application for annulment of the first contested decision, Ryanair puts forward a seventh ground of appeal, alleging a failure to state adequate reasons.

The Court however pointed out that the reasoning set out by the General Court in paragraphs 193 to 199 of the judgment under appeal allowed both Ryanair to know why the General Court dismissed its application for partial annulment of the first contested decision and the Court to have sufficient material to exercise its power of review.