Cross-border: COVID-19 State aid under review for the first time

In May 2020, Ryanair brought two separate actions against the EC approval of a Swedish [1] and a French [2] State aid scheme supporting airlines holding national licences under Article 107(3)(b) TFEU and Article 107(2)(b) TFEU respectively. On 17 February 2021, the General Court dismissed Ryanair’s actions in Cases T-238/20 [3] and T-259/20 [4] and confirmed the EC assessment of the Swedish and French aid schemes. These judgments are of a significant importance as they give an indication of how COVID-19 State aid approved under the Temporary Framework [5] will be treated going forward.

Ryanair’s actions for annulment were based on very similar claims, notably: (i) an infringement of the principles of non-discrimination on grounds of nationality and the free provision of services; (ii) a violation of Ryanair’s procedural rights under Article 108(2) TFEU; and (iii) a violation of the EC’s obligation to provide reasons. 

Additionally, Ryanair raised two claims specific to the legal basis under which the EC approved the national schemes. As regards the Swedish loan guarantee scheme (approved under Article 107(3)(b) TFEU), Ryanair claimed that the EC erred by not weighting the beneficial effects of the aid against its adverse effects on competition and trading conditions; As regards the French deferral of aviation taxes, (approved under Article 107(2)(b) TFEU) Ryanair claimed that the EC wrongly assessed the proportionality of the aid scheme in the light of the actual damage caused by the COVID-19 crisis. 

When a difference in treatment becomes “reasonable”

The Court dismissed Ryanair’s allegations on the principle of non-discrimination by claiming that the requirement to benefit from the aid (i.e., to hold a national aviation licence) ensured: a stable link between the airlines and the Member States, an ‘administrative and financial stability’ of the presence of those airlines in the given country and greater control by the respective authorities on how the aid was used.

No need to carry out a balancing test under the Temporary Framework

The General Court confirmed in the Swedish case that the aid measures adopted to remedy a serious disturbance such as the COVID-19 pandemic “are, first, necessary for that purpose and, secondly, appropriate and proportionate”. Furthermore, measures adopted under Article 107(3)(b) TFEU “are presumed to be in the interests of the European Union” [6]

It is also the first time that the General Court has confirmed that Article 107(3)(b) TFEU does not require the Commission to weigh the beneficial effects of the aid against its adverse effects on trading conditions and the maintenance of undistorted competition. Without being that categorical, the General Court also noted that the Temporary Framework neither requires the Commission to carry out this balancing test [7]

Member States hold the pen in the design of State aid measures

Most of Ryanair’s allegations concerning the lack of proportionality in the French scheme were dismissed by the Court on the basis of the Member States’ broad margin of discretion in the design of State aid measures. The Court recalled in the French case that Member States are not required to prove “that no other conceivable measure could better achieve the intended objective” It added, that “it is not for the Commission to make a decision in the abstract on every alternative measure conceivable” [8]

Conclusion: The Union Courts are confronted with the difficult task of finding the right balance between the letter of the law on State aid and the need to be pragmatic and flexible as required by the unprecedented situation caused by the COVID-19 pandemic in Europe. Many more COVID-19 State aid cases will make their way through the EU Courts in Luxembourg over the coming months and years. It will be interesting to monitor them closely. 

[1] European Commission’s decision (EU) of 11 April 2020 on State aid SA.56812 Sweden - Loan guarantee scheme to airlines under the temporary framework for State aid measures to support the economy in the current COVID-19 outbreak 

[2] European Commission’s decision (EU) of 31 March 2020 on State aid SA.56765 (2020/N) – France COVID-19 – Moratoire sur le paiement de taxes aéronautiques en faveur des entreprises de transport public aérien 

[3] Judgment of 17 February 2021 in Case T-238/20, Ryanair v Commission, EU:T:2021:91

[4] Judgment of 17 February 2021 in Case T-259/20, Ryanair v Commission, EU:T:2021:92

[5] In less than a year, the Temporary Framework has been amended five times and prolonged twice. The latest amendment of the Temporary Framework took place on 28 January 2021. See Commission prolongs and further expands Temporary Framework to support economy in context of coronavirus outbreak

[6] Judgment of 17 February 2021 in Case T-238/20, Ryanair v Commission, EU:T:2021:91, para 68

[7] Ibid., Paras. 69-71

[8] Judgment of 17 February 2021 in Case T-259/20, Ryanair v Commission, EU:T:2021:92, para. 46

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