Background
The Netherlands notified the Commission on 26 June 2020 of EUR 3.4 billion in proposed support for KLM: a State guarantee for a bank-consortium loan and a State loan. The Commission initially approved the measure on 13 July 2020 under Article 107(3)(b) TFEU and its COVID-19 Temporary Framework, treating KLM as the sole beneficiary. The General Court annulled that approval on 19 May 2021 for inadequate reasoning concerning the beneficiary, while suspending the annulment’s effects pending a new Commission decision.
The Commission adopted a replacement decision on 16 July 2021, again finding the aid compatible with the internal market and identifying KLM and its subsidiaries as the sole beneficiaries. Ryanair challenged that decision. In Ryanair v Commission (KLM II; COVID-19), T‑146/22, EU:T:2024:68, the General Court found Ryanair’s action admissible and upheld its first plea. It held that the Commission had manifestly erred by excluding the Air France-KLM holding and its other subsidiaries, including Air France and its subsidiaries, from the beneficiary group. It annulled the decision without examining Ryanair’s four remaining pleas.
The Commission, KLM, and Air France together with the Air France-KLM holding brought separate appeals, which were joined. They advanced two common grounds: that the General Court used an incorrect legal criterion to identify aid beneficiaries within a corporate group, and that it exceeded the limits of judicial review by substituting its assessment for the Commission’s. KLM and the Air France appellants also raised a third ground concerning indirect advantages and secondary economic effects. The Third Chamber comprised President C. Lycourgos and Judges N. Fenger, S. Rodin (Rapporteur), O. Spineanu-Matei and N. Piçarra. A. Biondi was Advocate General and M. Longar was Registrar, Administrator.
The Court’s Holding
The Court rejected the first ground of appeal in each case as unfounded. It held that the General Court had not applied an incorrect legal criterion or framework by using the economic-unit concept alongside other evidence. Identifying the actual beneficiary requires attention to the aid’s effects, the capital, functional, economic and organic links within the group, the agreements governing the measure, and the type and context of the aid. Contractual mechanisms may, depending on their actual content and the circumstances, establish that only one group company benefits. The General Court had recognized that possibility and assessed the particular agreements; it had not treated the existence of an economic unit as automatically resolving beneficiary status.
The Court nevertheless upheld the second common ground. Although the Commission has wide discretion when assessing aid compatibility, including beneficiary identity, review must determine whether evidence makes its factual assessment implausible. The General Court identified various assessment errors without demonstrating that any was manifest. Its findings about integration, coordination and economic interdependence broadly corresponded to matters the Commission had already acknowledged, while its reweighting of largely the same material did not show that the Commission’s conclusion was implausible. Additional evidence concerning coordinating bodies, Transavia, bond issues and a joint aircraft order likewise did not meet that standard. Nor did the General Court adequately explain how the separate Air France-KLM and Air France recapitalisation decision altered the analysis. The Court therefore concluded that the General Court had substituted its own assessment for the Commission’s and erred in law. It did not need to examine the third ground.
Giving final judgment on Ryanair’s first plea, the Court rejected as unfounded the contention that the Commission had committed the alleged manifest assessment error. It set aside the General Court’s judgment, but did not finally resolve Ryanair’s entire challenge. It remanded the second through fifth pleas—concerning Treaty provisions and general principles, Article 107(3)(b) TFEU, procedural rights, and the duty to state reasons—because they required factual assessments for which the Court lacked all necessary information. Costs were reserved.
Key Takeaways
- The economic-unit concept was not an impermissible legal criterion, but the Court did not thereby endorse every aspect of the General Court’s application of it.
- The dispositive error was the General Court’s failure to demonstrate that the Commission’s beneficiary assessment was implausible, rather than its own differently weighted assessment.
- The Court rejected Ryanair’s first plea and remanded only its second through fifth pleas; it did not finally adjudicate the entire annulment action.
Why It Matters
The judgment distinguishes the legal framework for identifying aid beneficiaries from the intensity of review applied to the Commission’s complex economic assessments. Group links and contractual arrangements remain relevant, but disagreement over their weight does not itself establish a manifest error.
For the KLM proceedings, the immediate consequence is the removal of the General Court’s annulment judgment and continued litigation over Ryanair’s unexamined pleas. The remand leaves those distinct challenges for the General Court, with costs still to be determined.