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June 2011: Newsletter 5 FLO – Aviation

Flieger A., lawyer Flieger Law Office bvba with the participation of Stijn Brusseleers, lawyer Flieger Law Office bvba

 

Decision General Court of Justice May 19th, 2011: Ryanair Ltd t/ European Commission

 

The background of the dispute are: Going back to 2005 where Ryanair sent a letter to the Commission of the European Communities in which it complained that Lufthansa and its Star Alliance partners had exclusive use of Terminal 2 at Munich Airport, and that this exclusive use had been provided at a cost of 1,5 billion euro and had led to the airport incurring financial losses of over 100 million euro in the previous two years. In the view of Ryanair such was an abuse of a dominant position since Ryanair was refused access to the terminal 2. It also meant, in the view of Ryanair, that the German authorities had granted substantial State aid to Lufthansa. Ryanair referred as well to the community State aid rules where the Commission published Community guidelines on financing of airports and start-up aid to airlines departing from regional airports. Ryanair called on the Commission to investigate the serious distortion of competition resulting from the advantages granted to Lufthansa by Munich Airport and the Federal Republic of Germany. Ryanair also requested that the Commission’s DG Energy and Transport should force Lufthansa to pay back the substantial amounts of State aid which it had received. Ryanair called on the Commission: – First , to require the Federal Republic of Germany to suspend the State aid in question, at least until the Commission had adopted a decision under Article 11(1) of Regulation No 659/1999; Second, to adopt a formal decision in the context of the preliminary examination of the award of State aid contested in the applicant’s complaint, under Article 4(2), (3) or (4) of Regulation No 659/1999 and under article 13(1) thereof; Third, to keep the applicant informed of the decisions taken, in accordance with Article 20(2) of Regulation No 659/1999, and also – To order the suspension of the anti-competitive conduct contested in the applicant’s complaint as an interim measure pursuant to Article 8 of Regulation No 1/2003 regarding such anti-competitive conduct, or inform the applicant of its reasons for considering that on the basis of the information in its possession there are insufficient grounds for acting on the complaint pursuant to Article 7 of Regulation No 773/2004. On August 2nd, 2007 the Commission acknowledged receipt of the letter of formal notice and stated that the letter has been allocated to DG Energy and Transport. On November 15th, 2007 Ryanair brought the present case before the Court where it claimed that the Court should: – Declare, in accordance with Article 232 EC, that the Commission unlawfully failed to adopt a position with respect to the complaint lodged on November 3rd, 2005, despite having been formally called on to do so; – Order the Commission to pay all the costs, including those incurred by the applicant in the proceedings, even if, after the action is brought, the Commission adopts measures which, in the opinion of the Court, render the action devoid of purpose or if the Court dismisses the application as inadmissible; – Take any other measures that the Court considers appropriate. During the procedure the Commission sent to the Court on January 16th, 2009 a copy of the decision of July 23rd, 2008 where it confirmed the formal investigation procedure against Germany – Measures in favour of Munich Airport Terminal 2. It also suggested that Ryanair would inform the Court that it was discontinuing its action and, should Ryanair not discontinue its action, the Court would declare that there was no need to adjudicate on the action. Ryanair was clearly not in agreement with such since the Commission had failed to act on certain issues raised in the complaint, in particular regarding the Star Alliance partners, and since the decision to initiate a formal investigation procedure obviously did not constitute the definition of the Commission’s position on Ryanair’s complaint against abuse of a dominant position. The Court states that when the Commission is seized of a complaint, it is obliged, according to the provisions of Regulations Nos 1/2003 and 773/2004, to examine the factual and legal considerations brought to its notice by the complainant in order to decide, within a reasonable time, whether it must initiate the procedure for establishing the infringement, reject the complaint without initiating the procedure or decide not to pursue the matter. If the Commission decides that the investigation of a complaint under Article 82 EC is unwarranted or unnecessary, it must inform the applicant of its decision, stating its reasons in order to allow judicial review of the legality of the decision. The Court considers that the requirements contained in those regulations have not been complied with by Ryanair in this case. The Court notes that a complaint must comply with Article 5 of Regulation No 773/2004 concerning the admissibility of complaints, which expressly provides, that natural or legal persons must show a legitimate interest in order to be entitled to lodge a complaint for the purposes of Article 7 of Regulation No 1/2003 and, secondly, that complaints must contain the information required by Form C annexed to Regulation No 773/2004. Now in the case that was brought before the General Court it occurs that Ryanair merely stated in its complaint, as regards the alleged abuse of a dominant position, that the exclusive use by Lufthansa and its Star Alliance partners of terminal 2 at Munich Airport constituted abuse of a dominant position, and that it was copying its complaint to the Commission’s DG Competition, with a request that they investigate Munich Airport’s abuse of a dominant position by its refusal to allow Ryanair to operate from terminal at that airport. In view of the law Ryanair did not meet the requirements of the above mentioned regulation 773/2004. The complaint did therefore not contain sufficient information to be classified as a complaint. It occurs that Ryanair did also not filled out the form C annexed to regulation n° 773/2004. In view of the Court the complaint did not contain any statement of facts capable of explaining in what way Munich Airport occupied a dominant position, or why the fact of reserving terminal 2 for Lufthansa and its Star Alliance partners constituted abuse of dominant position by Munich Airport. Indeed Terminal 1 at Munich Airport is used by a large number of airlines (Aer Lingus, AirBerlin, Air France, Alitalia, British Airways, EasyJet, Germanwings, Iberia and KLM). Ryanair failed to explain why it is precluded from entering the Munich Market by being offered the use of the same terminal as that used by those other airlines. Ryanair did also not make clear why Munich Airport would be abusing a dominant position by treating it in the very same way as f.i. Germanwings. The General Court also states that the complaint was drafted in an unclear way in that it could be interpreted as meaning that it was Lufthansa which is in a dominant position. The Court has also some other formal arguments to dismiss the case as such. The interesting issue of the case is that the Court can decide that, where a case does not proceed to judgement, the costs are in the discretion of the Court. In the underlined case the main part of the action concerning the alleged State aid to Lufthansa on which there is no longer any need for the Court to give a decision following the adoption of the decision of 23 July, 2008 by the Commission Ryanair cannot be criticised for having brought that action in order to protect its rights without waiting for the Commission to adopt its decision, which was in fact adopted after the expiry of the time-limit for bringing an action for failure to act. For the second part of the action concerning the alleged State aid to Star Alliance partners and the alleged abuse of a dominant position, Ryanair has to bear its own costs. The European Commission has therefore been condemned to pay its own costs and half of those incurred by Ryanair. Such implies that even the Commission needs to respect it owns delays even in aviation matters.

 

For further information and comment, please contact Arthur Flieger at Flieger@fliegerlaw.com, Website: www.fliegerlaw.com, telephone: +32 3 238 77 66 – Fax: +32 3 216 18 44

 

Copyright A. Flieger

 

This is not a legal opinion