Introduction
According to Article 4 of Regulation 2015/1589 [the Procedural Regulation], when the Commission, after a preliminary examination of a State aid measure, has doubts as to the absence of State aid or the compatibility of the aid with the internal market, it must open the formal examination procedure.
The case law says that doubts arise when the Commission encounters “serious difficulties” in concluding that State aid does not exist in the meaning of Article 107(1) TFEU or that the aid is compatible. While the Commission enjoys wide discretion in assessing the compatibility of aid, its discretion is limited when it determines the existence of aid. This is because the concept of aid is “objective”. The concept of “serious difficulties” is also objective, which entails that it must be based on refutable or rebuttable criteria.
Those criteria have been explored and analysed extensively in the case law. On 13 September 2023, the General Court added to that burgeoning case law with its judgment in case T-525/20, ITD and others v European Commission.1 But, as we will see below in the review of the judgment, the General Court examined those criteria in a manner that appears to weaken their objective nature.
ITD, a trade association, and the other applicants which are active in road haulage and logistics, sought the annulment of Commission decision on measures SA.52489 and SA.52658 concerning alleged State aid to PostNord Logistics. PostNord wholly owns PostNor Logistics. In turn, PostNord is owned by Denmark [40%] and Sweden [60%]. PostNord also owns Post Danmark.
PostNord Logistics suffered extensive losses and by 2017 it had lost its entire share capital. In 2018, PostNord injected EUR 9.4 million in PostNord Logistics.
Following a complaint submitted by ITD, the Commission decided in May 2020 that the capital injection was not imputable to Denmark or Sweden and, therefore, did not constitute State aid. It also rejected ITD’s claim that Post Danmark had cross-subsidised PostNord Logistics.
Obligations of the Commission
First, the General Court made an extensive review of the case law and explained that when the Commission receives a complaint alleging the presence of State aid, it has to open the formal investigation procedure if it has serious doubts or encounters serious difficulties in establishing the absence of aid or the compatibility of the aid with the internal market.
How to determine whether a measure is attributed to the state
The applicants argued that the Commission was wrong to find that the capital injection was not imputable to Denmark and Sweden.
The General Court began its analysis by recalling established case law that “(45) the imputability to the State of a measure, within the meaning of Article 107(1) TFEU, may not be inferred from the mere fact that that measure was taken by a public undertaking. Even if the State is in a position to control a public undertaking and to exercise a dominant influence over its operations, actual exercise of that control in a particular case cannot be automatically presumed. It is also necessary to examine whether the public authorities must be regarded as having been involved, in one way or another, in the adoption of the measure in question”.
“(46) Thus, the imputability to the State of an aid measure taken by a public undertaking may be inferred from a set of indicators arising from the circumstances of the case and the context in which that measure was taken. In that regard it cannot be demanded that it be demonstrated, on the basis of a precise instruction, that the public authorities specifically incited the public undertaking to take the measure in question”.
“(47) Specifically, any indication, in the particular case, either, on the one hand, of the involvement by the public authorities in the adoption of a measure or the unlikelihood of their not being involved, having regard also to the compass of the measure, its content or the conditions which it contains, or, on the other hand, the absence of those authorities’ involvement in the adoption of that measure is relevant”.
Here the General Court cited repeatedly the judgment in case C-425/19 P, Commission v Italy, concerning the rescue of Banca Tercas by a private banking association. The Commission had considered that that the rescue was attributed to the state, but both the General Court and the Court of Justice disagreed.
The General Court went on to add that “(48) evidence supporting the conclusion that the measure is imputable to the State includes, in addition, the fact that the public undertaking in question could not have taken the decision at issue without taking account of the requirements of the public authorities or the directives emanating from the public authorities, the integration of the public undertaking into the structures of the public administration, the nature of its activities and the exercise of those activities on the market in normal conditions
of competition with private operators, the legal status of the undertaking as well as the intensity of the supervision exercised by the public authorities”.
Then the General Court examined how the Commission applied the above principles to the case at hand.
The organic links between PostNord and Denmark and Sweden
The General Court explained that “(52) the appointment of the members of the board of directors is a prerogative of the owners of a company and does not, in principle, in itself give rise to a presumption that a measure taken by a public undertaking can be imputed to the State which controls it”.
“(53) However, when assessing the imputability to the State of a measure taken by the board of directors of a public undertaking, the appointment of the members of that body must be duly taken into consideration, in so far as it attests to the existence of special links between the public undertaking in question and the State which controls it […] Those special links may constitute an indicator of the unlikelihood of the State’s not being involved in the adoption of the measure at issue”.
“(54) In particular, in certain cases, the circumstances surrounding the appointment of the members of the management bodies of a public undertaking are capable of establishing that that undertaking has a limited margin of independence from the State which controls it, with the result that such an appointment constitutes a significant indicator of imputability to the State”.
According to the information provided in the judgment, PostNord’s board of directors consisted of 11 members, 4 of whom were appointed by Denmark, 4 by Sweden and 3 by the employees of Post Danmark and Posten [subsidiaries of PostNord]. Two of the state-appointed members were also senior civil servants.
“(60) In that regard, the appointment, within PostNord’s board of directors, of members simultaneously performing senior management duties in government ministries in Denmark and in Sweden, in areas of activity with a direct link to public undertakings – including PostNord – permits the inference that those civil servants enjoyed the confidence of those States, and that they were therefore likely to maintain informal contacts with agents of the ministries to which they belonged and, thus, to relay the influence of the said States in the decision-making process within PostNord.”
“(61) Moreover, […], the Commission stated that ‘it [wa]s highly likely that Denmark and Sweden were aware of the intended capital injection (notably since two board members [we]re also active as civil servants in Denmark and Sweden respectively)’.”
“(62) In those circumstances, the indicators of an organic nature put forward by the applicants tend to establish that, at the time of the capital injection, PostNord had a limited degree of independence from the Danish and Swedish States, given that its board of directors was
composed of 8 members out of 11 the appointment of whom fell to the ministers of those States, and 2 of whom were, moreover, senior civil servants”.
But the conclusions in paragraph 62 do not follow from the principles outlined in paragraphs 52 & 53. First, the fact that the state, as owner, appoints board members is not in itself decisive. Second, “special links” with the state existed only for two of the 8 members appointed by the state.
Nonetheless, the General Court went on to conclude that “(64) the organic factors had to be duly taken into consideration and were capable of constituting a non-negligible indicator that the capital injection was imputable to the Danish and Swedish States.”
“(65) However, the Commission confined itself, […], to considering, in essence, that the organic links between PostNord and the Danish and Swedish States were not sufficient to render the capital injection imputable to those States, without giving any particular weight to those factors over the other indicators of imputability examined.”
Here, the General Court faults the Commission for not weighing the various factors, but it appears to commit the same mistake. The General Court infers that the presence of two civil servants was significant, while the Commission inferred that it was not. The General Court does not really explain how the two civil servants could sway the other six independent members.
“(70) It follows from the foregoing that the Commission’s assessment of the organic links between, on the one hand, the Danish and Swedish States and, on the other, PostNord, demonstrates the incomplete and insufficient nature of its examination of the imputability, to those States, of the capital injection, and therefore constitutes an indication of the existence of serious difficulties.”
Then the General Court added an important qualification. “(71) Given that the organic links between a public undertaking and the State which owns it cannot, in principle, suffice to establish the imputability to the State of a measure taken by that undertaking […], it should still be examined whether other elements at the Commission’s disposal are capable of constituting indicators of the existence of serious difficulties.”
The existence of a dialogue between the members of PostNord’s board of directors and the Danish and Swedish authorities
The applicants argued that statements in annual reports revealed that there was a “dialogue with the owners on financing”.
The General Court, first, observed that “(84) the Commission did not examine whether such a dialogue on the restructuring of PostNord’s business in Denmark had taken place, even though that matter had been put forward by ITD in its complaint, as an indication of the role of supervision and control exercised by the Danish and Swedish States over the capital injection, approved by PostNord.”
“(85) In those circumstances, the Commission’s failure to take into account the links between PostNord Logistics and the restructuring of PostNord’s business in Denmark demonstrates the incomplete and insufficient nature of its examination of the imputability, to those States, of the capital injection and therefore constitutes an indication of the existence of serious difficulties.”
The nature of PostNord’s activities
The applicants claimed that PostNord’s activities were connected to the universal postal service in Denmark and Sweden. That fact established a link between the measures taken by PostNord and Denmark and Sweden.
The General Court recalled that “(87) the nature of the activities of a public undertaking granting aid constitutes a relevant indicator for assessing the imputability of that aid to the State […] More specifically, the pursuit of public policy objectives by such an undertaking has already been deemed by the EU judicature to be an indication of imputability, to the State that controls it, of the measures it adopts […], just like the exercise, by a public undertaking, of activities falling within the competence of that State”.
“(88) In the present case, in the first place, […], the Commission found that the nature of PostNord’s activities did not constitute an indicator of imputability, in so far as such activities were purely commercial, with the exception of the universal postal service in Denmark, for which Post Danmark received public compensation.”
“(89) It is apparent from Article 3 of PostNord’s articles of association, however, that the company’s corporate purpose is, primarily, to operate, either directly or through subsidiaries, nationwide postal services in Denmark and Sweden and to operate activities in accordance with those services. It is moreover common ground that the only operators entrusted with the universal postal service for the territories of Denmark and Sweden are Post Danmark and Posten respectively, subsidiaries of PostNord, which are also the incumbent operators in those States.”
“(90) In that regard, the universal postal service constitutes a service of general economic interest which Member States are obliged to ensure”.
“(91) It follows that PostNord, a company whose board of directors had to approve the capital injection, pursues public policy objectives falling within the competence of the Danish and Swedish States. Thus, as the applicants essentially argue, that fact tends to prove that those States, in principle, pay special attention to the decisions taken by that company.”
“(96) In those circumstances, the Commission’s failure to take into account the corporate purpose of PostNord, which was required to approve the capital injection, is such as to demonstrate the incomplete and insufficient nature of its assessment of the imputability of that measure to the Danish and Swedish States, and therefore constitutes an indication of the existence of serious difficulties.”
But, it is not clear how PostNord’s universal service obligation influenced its decision to inject capital in PostNord Logistics. The General Court did not to consider whether the operations of PostNord Logistics were necessary for the universal service provision or whether as a universal service provider it was also required to support PostNord Logistics.
The compass of the capital injection
The applicants claimed that the capital injection was imputable to the state because it was a ‘significant’ financial decision.
The General Court accepted that “(102) the compass of a measure may constitute a relevant factor in the assessment of the imputability of that measure to the State”.
Then it added that “(104) it is not apparent from the contested decision that the Commission took into account the amount of the capital injection in absolute terms, which, at more than EUR 15 million, cannot be regarded as negligible. […] That sum appears to be all the more important for the beneficiary of the capital injection, PostNord Logistics, whose economic viability was depending on it.”
In addition, “(105) at the stage of the examination of the amount of the capital injection, the Commission also failed to take account of the fact that such an amount exceeded the threshold above which capital injections within the group had to obtain approval from PostNord, the parent company of that group, whose board of directors had close links with the Danish and Swedish States”.
The last sentence of paragraph 105 is not correct. Only two members had close links. The judgment did not include any evidence on the links between the state and the other six members who were appointed by the state.
“(106) In those circumstances, the Commission’s assessment that the amount of the capital injection did not raise suspicions as to the involvement of the Danish and Swedish States in the adoption of that measure demonstrates the incomplete and insufficient nature of its examination of the imputability, to those States, of the said measure, and therefore constitutes an indication of the existence of serious difficulties.”
Conclusion
On the basis of the above findings, the General Court proceeded to annul the part of the Commission decision concerning the capital injection.
However, as pointed out, at several points in the judgment the General Court faulted the Commission for not examining certain aspects of the case without explaining how they could reveal involvement of the state in the injection of capital in PostNord Logistics.
