COVID-19 Key EU Developments, Policy & Regulatory Update No. 92

COMPETITION & STATE AID

State Aid

EU General Court fully dismisses Ryanair challenge to Croatia Airlines COVID-19 aid (see here)

On 9 November 2022, the General Court (GC) fully dismissed Ryanair's challenge, launched on 19 February 2021, of a Commission Decision approving a Croatian State aid measure to compensate Croatia Airlines in the context of alleged damages suffered following the COVID-19 outbreak (T111/21 Ryanair v. Commission).

The contested Decision (SA.55373 (2020/N) of 30 November 2020) had approved Croatia's EUR 11.7 million direct grant to state-owned Croatia Airlines as compatible with State aid rules.

The GC, in particular, dismissed Ryanair's claims that the Commission breached its procedural rights:

• Ryanair alleged that the Commission carried out an insufficient examination during the preliminary examination stage and should have initiated a formal investigation. Ryanair contended that the Commission had failed to do so and therefore deprived it of the opportunity to submit its comments on Croatia's notified measure and to provide the Commission with, in particular, factual information.
  
  In dismissing this claim, the GC ruled in particular that Ryanair had not demonstrated the existence of serious difficulties in appraising the alleged damage suffered by Croatia Airlines that would have triggered a formal investigation (e.g., the GC held that Ryanair erroneously deemed that domestic flights in Croatia were not affected by the restrictions imposed by the Croatian authorities, and thus claimed that the Commission had overestimated the damage. The GC, however, found that the contested Decision had set out that the Croatia's restrictive measures had affected both Croatia Airlines' international and domestic flights).
• Ryanair further contended that the Commission failed to fulfil its obligation to state reasons, e.g. by failing to justify the fact that Croatia Airlines was distinguished from other airlines as the only one to receive aid in the form of compensation, whereas other airlines, including Ryanair, also suffered damage from the COVID-19 pandemic.
  
  In dismissing this claim, the GC ruled in particular that by definition, individual aid benefits only one company, to the exclusion of all other companies, including those in a comparable situation. Consequently, the nature of such individual aid results in difference in treatment, or even discrimination, which is nevertheless inherent in the individual character of that measure. It also noted that Member States are not required to grant aid to all victims of damage caused by an exceptional occurrence referred to in State aid rules under Article 107(2)(b) TFEU. Thus, the contested Decision was not required to explain why it considered it lawful to grant the aid at issue solely to Croatia Airlines.

The GC thus rejected Ryanair's grounds alleging procedural errors and dismissed the action in its entirety.

European Commission approves further schemes under Ukraine Temporary Crisis Framework (see here)

The Commission continues to approve additional measures under the State aid Temporary Crisis Framework for State Aid measures in the context of Russia's invasion of Ukraine.

To recall, in adopting this Crisis Framework, the Commission noted that the conflict had significantly impacted the energy market, and steep rises in energy prices had affected various economic sectors, including some of those particularly affected by the COVID-19 pandemic, such as transport and tourism. The conflict has also disrupted supply chains for both EU imports from Ukraine (in particular, cereals and vegetable oils) and EU exports to Ukraine.

The Commission recently prolonged (until 31 December 2023 (instead of 31 December 2022)) and expanded the Crisis Framework (see Jones Day COVID-19 Update No. 90 of 28 October 2022).

Among the latest schemes under the Crisis Framework (until 18 November 2022):

• €500 million Romanian scheme to support companies in the context of Russia's war against Ukraine.
• €1.23 billion Czech scheme to support the economy in the context of Russia's war against Ukraine.
• €2.1 million Latvian scheme to support some producers active in the agriculture sector in the context of the Russia's war against Ukraine.
• €30 million scheme to support companies in the context of Russia's war against Ukraine.
• €60 million Irish scheme to support the agricultural sector, in particular producers of fodder, in the context of the Russia's war against Ukraine.
• Approved modification of Luxembourg scheme, including a budget increase of €150 million, aimed at supporting companies in the context of the war led by Russia against Ukraine.

Notably, the Crisis Framework complements the various possibilities for Member States to design measures in line with existing EU State aid rules. For instance, State aid measures under the Crisis Framework may be cumulated with aid granted under the COVID-19 Temporary Framework, provided that their respective cumulation rules are respected.

The Crisis Framework, applicable since 1 February 2022, will be in place until 31 December 2023. During its period of application, the Commission will keep the Framework under review in light of developments regarding the energy markets, other input markets, and the general economic situation. Prior to the Crisis Framework's end date, and in view of maintaining legal certainty, the Commission will assess whether it should be prolonged.