Introduction
On 23 January 2025, the Court of Justice delivered its judgment in case C‑490/23 P, Neos v Ryanair.[1] Neos, a private airline licensed in Italy, appealed against the judgment of the General Court in case T-268/21, Ryanair v Commission, by which it annulled Commission decision SA.59029 concerning an Italian compensation scheme for airlines with an Italian operating licence.[2] The compensation was granted on the basis of Article 107(2)(b) TFEU. The General Court concluded that the Commission had not examined thoroughly whether the scheme infringed other provisions of EU law. This judgment was reviewed here on 13 July 2023. It can be accessed at:
In the meantime, the Commission adopted a new decision in which it examined the Italian scheme more thoroughly and again found that it was compatible with the internal market because the aid itself and its intrinsic aspects did not infringe any other provisions of EU law. The revised Commission decision was reviewed here on 30 July 2024. It can be accessed at:
Neos claimed that the General Court erred in its assessment of the link between the aid scheme and other provisions of EU law and also that it did not explain sufficiently its own reasoning.
What did the Commission decide?
The Italian scheme in question laid down four eligibility conditions, one of which was that airlines had to pay above the minimum wage in Italy. In paragraph 93 of the original decision in 2023, the Commission stated that those four conditions were “indissolubly linked to the scheme”.
However, in paragraph 95 of the same decision, the Commission stated that “that condition is not inherent in the objective of the Measure, as it aims at ensuring that the beneficiaries grant a minimum salary protection to their employees based in Italy as required by Italian law”. It further justified this finding by explaining that “(96) the minimum remuneration requirement applies only to employees who have their “home base” in Italy”.
In other words, the Commission implicitly considered that compliance with payment above the minimum wage was anyway necessary because that was required by Italian law for any company based in Italy and employing staff whose home was in Italy.
Not surprisingly, the General Court criticised the apparent contradiction in the Commission’s reasoning by noting in paragraph 24 of its judgment that “the contested decision does not disclose in a clear and unequivocal manner the reasoning which led the Commission to state both that the minimum remuneration requirement was indissolubly linked to the measure at issue, in recital 93 of that decision, and that that requirement was not inherent in the objective of that measure, in recital 95 of that decision.”
The choice of the words “indissolubly linked” and “not inherent” by the Commission was unfortunate. Yet, it is not difficult to understand the Commission’s meaning. In fact, the Commission, in paragraphs 96-98 of its decision, examined Article 8 of the Rome I Regulation [Regulation 593/2008] on conflict-of-law rules relating to individual contracts of employment and found that all airlines with employees based in Italy had to comply with the minimum wage defined by Italian law, irrespective of the nationality of the carrier. Therefore, it appears that the Commission meant that even though the fourth condition was inseparable from the scheme, it was not necessary for the achievement of the objective of the scheme because other law required airlines to respect the minimum wage in Italy. Hence, it concluded that the aid scheme did not breach any other provisions of EU law.
However, the General Court was not satisfied with the Commission limiting its assessment only to the Rome I Regulation. It held that the Commission should have also examined possible infringement of Article 56 TFEU on the freedom to provide services.
The judgment of the General Court raised a fundamental question. How wide should the scope of the Commission’s investigation be? If the Commission is obliged to examine the vast body of EU law, it will grind to a hold. In this respect, the General Court mentioned the “context” of the case or complaint.
In compliance with the judgment of the General Court, the Commission re-adopted its decision in 2024. In the revised decision, it, first, noted that “(100) the Italian authorities established four eligibility requirements (see recital (28)). Those requirements are indissolubly linked to the object of the scheme, because they were specifically set out in order to select the undertakings that will be eligible for compensation under the scheme itself, and thus regulate the identification of the potential beneficiaries thereof. In other words, the eligibility requirements listed in recital (28) determine the scope of the measure, which is an aspect that must necessarily be taken into account in the assessment of the selectivity of the measure and hence of its qualification as State aid within the meaning of Article 107(1) TFEU (see recitals (44), (45) and (48)). The scope of an aid scheme is also an element to take into account in the assessment of its compatibility with the internal market, as it must be defined in coherence with the public interest objective allegedly pursued by the aid scheme itself.”
“(101) The Commission further notes that one of the four eligibility requirements, namely the minimum remuneration requirement, is not inherent in the objective of the measure, however. While the objective of the scheme is to make good the damage suffered by its beneficiaries due to the COVID-19 pandemic (see recital (8)), the minimum remuneration requirement aims at ensuring that the beneficiaries of the scheme apply certain salary standards to their employees that have their ‘home base’ in Italy.”
“(103) Given that context, the Commission concludes that, while the condition concerning the minimum remuneration requirement shall not be decoupled from the aid measure assessed in the present procedure and must be examined in the present decision, there is particular cause to examine whether that minimum remuneration requirement could breach relevant provisions of Union law other than Article 107 and 108 TFEU.”
It is strange that the Commission again relied on convoluted reasoning [“indissolubly linked to the object of the scheme” but “not inherent in the objective of the measure”] to conclude that it had to assess the fourth eligibility condition. Now it also introduced a new term – “not decoupled” to explain why it had examine the legality of the fourth condition.
The Commission found again that the fourth condition concerning minimum wage was compatible both with the Rome I Regulation and with the case law on Article 58 TFEU which applies specifically to transport, rather than the more general rule on freedom to provide services under Article 56 TFEU. However, the present judgment of the CJEU concerns the 2023 decision.
Adequate explanation?
After the CJEU reviewed the analysis of the Commission with respect to the conformity of the scheme with Article 107(2)(b) TFEU, it addressed the plea concerning the allegedly insufficient statement of reasons in relation to the Commission’s assessment of other provisions of EU law.
First, the CJEU reiterated that “(41) State aid which, as such or by reason of some modalities thereof, contravenes provisions or general principles of EU law cannot be declared compatible with the internal market”.
“(42) Second, […], the Commission referred in recital 92 of that decision to the case-law to the effect that when the aspects of aid are so indissolubly linked to the object of the aid that it is impossible to evaluate them separately, their effect on the compatibility or incompatibility of the aid as a whole with the internal market must of necessity be determined by means of the procedure prescribed in Article 108 TFEU”.
“(43) The General Court then stated […] that the Commission had found, […], that the four conditions to be eligible for the measure at issue were ‘indissolubly linked’ to that measure, for the purposes of that case-law.”
“(44) The General Court also found, […], that the Commission had noted […] that there was a particular reason for examining the fourth of those eligibility conditions, on the minimum remuneration requirement, and that the Commission had taken the view that that requirement was ‘not inherent in the objective of the measure at issue’, given, in essence, that its aim was to ensure that the undertakings benefiting from that measure guarantee a minimum salary protection to their employees whose home base was in Italy, as required by Italian law; the Commission had then found that the compatibility of that requirement had therefore also to be assessed in the light of ‘other relevant provisions of Union law’.”
“(45) Lastly, […], the Commission, after assessing, […], the compatibility of the minimum remuneration requirement in the light of Article 8(1) of the Rome I Regulation, found, […], that that requirement prima facie complied with the protection granted to employees by that regulation and did not constitute a breach of other provisions of EU law.”
The CJEU then held, in paragraph 48, that, contrary to the findings of the General Court, the Commission did give reasons why the scheme was compatible with Article 107(2) TFEU and did not appear to conflict with other provisions of EU law.
Next the CJEU pointed out that “(50) the reasoning for the decision at issue shows why the Commission found that it was necessary to assess the minimum remuneration requirement in the light of EU legal provisions other than those concerning State aid, namely that that requirement was not inherent in the objective of the measure at issue.”
I find this statement of the CJEU rather confusing. In order for the Commission to assess solely on State aid rules an aid measure that touches on other provisions of EU law, it must, first, determine whether the measure infringes a different provision of EU law and, second, whether the infringement is caused by an aspect or modality of the aid measure that is indissoluble from it or inherent to it. If something is not indissolubly linked to the aid measure or inherent to it, the Commission does not have to look outside State aid rules. Therefore, if the minimum remuneration requirement was not inherent in the objective of the measure, the Commission did not have to form an opinion as that whether it complied with other EU law.
The CJEU went on to state that “(52) it follows implicitly but necessarily from the relationship between recitals 93 and 95 of the decision at issue that the Commission considered that it was required to carry out a further analysis of the minimum remuneration requirement in the light of provisions of EU law other than those concerning State aid. The Commission’s reasoning is thus apparent in a sufficiently clear and unequivocal manner.”
The CJEU explained that “(53) the question of whether the reasoning for an act is well founded is a separate matter from whether that reasoning is sufficient. Accordingly, even if it were assumed that the conjunction of the findings made in recitals 93 and 95 of the decision at issue reveals an error in law, that error cannot be penalised on the basis of the obligation to state reasons set out in the second paragraph of Article 296 TFEU.” The CJEU concluded that “(54) the General Court erred in law by finding, […], that the decision at issue, and in particular recitals 93 and 95 thereof, did not comply with the obligation to state reasons under the second paragraph of Article 296 TFEU.”
In principle, of course, the CJEU is right in distinguishing between well-founded reasoning and sufficient reasoning. But I wonder whether the reasoning of the Commission was sufficient given its contrasting statements concerning the fourth eligibility condition being indissolubly linked to the objective of the aid and at the same time not being inherent to it.
How far outside State aid rules should the Commission look?
Neos argued that the General Court was wrong to censure the Commission for limiting the scope of its assessment only to Article 8 of the Rome I Regulation and for excluding, in particular, Article 56 TFEU.
The CJEU held that “(57) in the present case, it must be found, first, that while the decision at issue, […], includes a detailed examination of the compatibility of the minimum remuneration requirement solely in the light of Article 8 of the Rome I Regulation, that nevertheless does not show, as Neos has correctly observed, that that is the only provision of EU law which the Commission considered as relevant for that examination. Indeed, in recital 99 of the decision at issue, the Commission concluded that the minimum remuneration requirement was prima facie compliant with the Rome I Regulation and that it did not ‘constitute a breach of other provisions of Union law’.”
Then the CJEU made a number of statements that blur rather than clarify the scope of the assessment by the Commission of other provisions of EU law.
“(58) Second, contrary to what the General Court found […], the Commission’s obligation to state reasons does not in any event mean that it must in every case justify the absence of an explicit examination of the compatibility of an aid measure in the light of certain provisions or certain principles of EU law other than the State aid rules and, therefore, give its view on their relevance for the purpose of such an examination.”
“(59) Indeed, given the extremely large number of provisions and principles of EU law that may be infringed by the grant of aid, the Commission cannot be required, without undermining the effectiveness of the procedure under Article 108 TFEU, or even the possibility to take a decision in favour of aid after the preliminary examination phase referred to in Article 108(3) TFEU, and thus without initiation of the formal investigation procedure, to provide specific reasoning concerning each one of them, and, in the present case, as far as concerns Article 56 TFEU.”
“(60) In that respect, it should be held, having regard to the necessity to take account of the context for the purpose of assessing the obligation to state reasons, […], that a decision declaring an aid measure to be compatible with the internal market in the framework of a procedure under Article 108 TFEU means, in particular if it is apparent, as in the present case, from the Commission’s statement of reasons that it has assessed the aid measure concerned in the light of those provisions or principles, that the latter institution has taken the view that those provisions and principles were either not relevant with respect to that measure or, in any event, had not been infringed.”
On the basis of the above considerations, The CJEU annulled the judgment of the General Court and decided that the case had to be returned to the General Court to hear again the arguments of Ryanair claiming infringement of the principles of non-discrimination, the freedom to provide services and the freedom of establishment, as well as infringement of Article 107(2)(b) TFEU and a manifest error of assessment of the proportionality of the aid. Given the recent judgments of the General Court and the CJEU on cases brought by Ryanair making the same claims, it is rather certain that Ryanair’s appeal will be dismissed by the General Court in its entirety.
However, on the issue of whether the Commission had assessed sufficiently the link between the minimum wage requirement and possible infringement of other provisions of EU law, the CJEU concluded that there was no need for the General Court to examine it again because the CJEU could determine itself that the Commission’s assessment was correct.
Has the Court of Justice missed a rare opportunity to provide guidance?
The statements of the CJEU in paragraphs 58 to 60 did not cite any case law. Indeed it seems that it was the first time that the CJEU dealt with the extent of the examination by the Commission of other provisions of EU law. The CJEU missed an opportunity to provide more detailed guidance on what the Commission ought to examine, given the absoluteness of the principle that State aid may not be declared compatible with the internal market if it infringes other provisions of EU law.
It would be unreasonable to expect the Commission to scan the whole of EU law whenever it assesses the compatibility of State aid. But that is certainly not necessary. In this sense, the CJEU performed a logical trick by setting up an irrelevant benchmark to justify why the Commission was not obliged to carry out an exhaustive examination of EU law. The CJEU could have laid down general criteria or could have identified the aspects and modalities that may be considered to be indissoluble from an aid measure, without laying down airtight rules.
