Introduction
This article reviews two judgments: On a public health system and on regional development through capital injections.
I. Public health system
On 27 April 2023, the Court of Justice rendered its judgment in case C-492/21 P, Casa Regina Apostolorum della Pia Società delle Figlie di San Paolo v European Commission.[1]
Casa Regina Apostolorum della Pia Società delle Figlie di San Paolo [CRA] sought the annulment of the judgment of the General Court in case T-223/18 CRA v European Commission. The General Court had dismissed its appeal against Commission decision SA.39913 which had found that no State aid had been granted by Italy to public hospitals in the Lazio region. The Commission’s assessment was prompted by a complaint by CRA which operated private hospitals.
The Commission reached that conclusion on the grounds that the health services provided by public hospitals were not economic in nature, despite the fact that there was a certain degree of competition between hospitals, and that their funding depended on a system of social solidarity. Patients could choose the public hospital from which they could receive treatment. Health services at public hospitals were provided for free or at a nominal price. In its complaint, CRA claimed that the public health system competed with private providers of health services.
Insufficient analysis of the application of Articles 107(1) and 106(2) TFEU
CRA argued that the General Court erred in not examining whether the Commission had properly analysed the applicability of Articles 107(1) and 106(2) TFEU.
The Court of Justice rejected that argument on the grounds that the General Court correctly concluded that the Commission did not have to examine all of the criteria of Articles 107(1) and 106(2) TFEU, given that it had found that the health services at issue were not economic in nature. [paragraph 70 of the judgment]
Insufficient analysis of the applicability of the landmark case C-262/18 P, Dovera
In that judgment, which concerned health insurance in Slovakia, the Court of Justice had held that some elements of competition which were intended to increase operational efficiency without undermining the principle of solidarity were not sufficient to turn an otherwise non-economic activity into economic.
In the present case, the Court of Justice observed that as regards the applicability of the principles of the Dover judgment, the General Court noted that the Court of Justice had held that the introduction in a scheme which implements the principle of solidarity of a competitive element intended to encourage operators to carry out their activities in accordance with the principles of sound management did not alter the nature of that scheme. The applicant did not dispute that the Italian system was a scheme which met the characteristics of the principle of solidarity, namely, the compulsory nature of affiliation for insured persons, contributions fixed by law in proportion to the income of insured persons and the rule that the compulsory benefits laid down by law were identical for all insured persons, regardless of the amount of contributions paid by each of them. [para 104]
For these reasons, the Court of Justice dismissed in its entirety the appeal of CRA.
II. Regional development
On 22 June 2023, the Court of Justice delivered its judgment in case C-163/22 P, Gmina Miasto Gdynia v European Commission.[2]
Gmina Miasto Gdynia sought annulment of the judgment of the General Court in case T-263/15 RENV, v European Commission, which dismissed the action against Commission decision 2015/1586.
In September 2012, the Republic of Poland notified the European Commission of a measure financing the expansion and modernisation of the Gdynia airport. Soon afterwards, the Commission found out that in fact the aid had already been granted. After opening the formal investigation procedure, in February 2014, the Commission adopted decision 2014/883 by which it held that the aid was incompatible with the internal market and had to be recovered.
In February 2015, the Commission withdrew decision 2014/883 and replaced it with decision 2015/1586. The reason was that during the procedure before the General Court, it had become apparent that the aid measure supported certain investments/activities which were non-economic in nature as they fell within a public tasks of the state.
Gdynia challenged that decision before the General Court in case T-263/15. The General Court partly annulled the Commission decision. The Commission appealed successfully in case C-56/18 P, European Commission v Gdynia. The Court of Justice returned the case to the General Court which dismissed the action brought by Gdynia in case T-263/15 RENV, Gdynia v European Commission. Gdynia challenged the new judgment of the General Court, which is the subject of the ruling of the Court of Justice that is reviewed in this article.
Identification of economic advantage
Gdynia argued that the General Court erred in the identification of economic advantage by conflating the support for the airport operator who did not own the land or the infrastructure of the airport and the support for the operation of the airport.
The Court of Justice held in response that the fact that operator was not the owner of the land at the airport or of the airport infrastructure did not call into question the existence of an advantage in respect of that company. [paragraph 47 of the judgment]
An advantage exists where the financial situation of an undertaking is improved as a result of state intervention carried out on terms other than normal market conditions. [para 48]
The contributions to the operator’s capital were made on terms other than normal market conditions and that that company used those capital contributions for the exercise of its economic activity. It followed that that company’s financial situation was improved. [para 49]
Those capital contributions enabled the airport operator to finance, first, the investments necessary for the conversion of the airport and, second, to offset part of its operating costs. [para 50]
The existence of an advantage could not be called into question by the fact that the improvement in the operator’s financial situation took place differently from acquiring ownership of the airport land or of the airport infrastructure or by increasing the value of immovable property which belonged to that company. [para 51]
Then the Court of Justice clarified that that advantage was not transferred, in whole or partially, to other undertakings. Since the Polish authority that owned the airport was not an undertaking, any indirect benefit which the latter could derive, as the owner of the infrastructure, from the financing of that company did not constitute an advantage within the meaning of Article 107(1) TFEU. [para 52]
The Court of Justice then held that the General Court did not err in law in refusing to exclude from its analysis the component of that advantage linked to the improvement of the airport infrastructure or to treat that component differently from that linked to the operation of the airport. [para 54]
The construction of the infrastructure necessary for the conversion of the airport concerned was an economic activity inseparable from the operation of that airport. [para 55]
Since the aid measure consisted of a contribution to the operator’s capital, the advantage deriving from that contribution could not be allocated to either of the two economic activities for which that company was responsible [i.e. construction of infrastructure and operation of airport], irrespective of whether those activities were separable or inseparable. [para 58]
Quantification of advantage and of the aid to be recovered
Gdynia claimed that the Commission failed to quantify the advantage conferred by State aid and therefore it was not possible to recover it.
First, the Court of Justice recalled that the object of the recovery obligation was not the commercial benefit, but the aid itself. Recovery of the aid is intended to make the beneficiary lose the advantage which it enjoyed on the market over its competitors. [para 61]
The Court of Justice also observed that the private investor test was not satisfied when the contributions to airport operator’s capital were granted. Gdynia did not claim that a private investor would have contributed, under similar conditions, an amount equal to that provided by the public investor. [para 62]
Therefore, the General Court did not err in law in holding that the advantage granted to the airport operator derived from those capital contributions, and not from the right to operate the airport. [para 64]
The Court of Justice also agreed with the General Court that the advantage for the operator did not derive from the right to operate the airport infrastructure at a price below the market price. [para 65]
Therefore, the aid to be recovered consisted of the amounts contributed to the operator’s capital, after deduction of investments falling within the public tasks. Furthermore, the Court of Justice rejected the claim that the airport operator was deprived of the right to operate the airport. [paras 66-68]
Since none of Gdynia’s pleas were successful, the Court of Justice dismissed the appeal in its entirety.
Since the General Court rejected all pleas, it dismissed the action in its entirety.
News:
Aviation Guidelines
On Tuesday, 11 July 2023, the European Commission announced an amendment of the aviation guidelines. The purpose of the amendment is to extend the period in which operating aid may be granted to airports with fewer than 700,000 passengers per year. This period will now last until 3 April 2027.
The amendment was published in OJ C 244, 11 July 2023:
Foreign subsidies
On Wednesday, 12 July 2023, the European Commission published detailed rules on the application of Regulation 2022/2560 on countering foreign subsidies that distort the internal market. The rules are in Implementing Regulation 2023/1441 in OJ L 177, 12 July 2023:
https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32023R1441
[1] The full text of the judgment in languages other than English can be accessed at:
[2] The full text of the judgment in languages other than English can be accessed at:
