# 62012TJ0473

JUDGMENT OF THE GENERAL COURT (Ninth Chamber)

5 February 2015 (
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  )

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‛State aid — Irish tax on air passengers — Lower rate for destinations no more than 300 km from Dublin — Decision declaring the aid incompatible with the internal market and ordering its recovery — Advantage — Selective nature — Identification of the beneficiaries of the aid — Article 14 of Regulation (EC) No 659/1999 — Obligation to state reasons’

In Case T‐473/12,

Aer Lingus Ltd, established in Dublin (Ireland), represented by K. Bacon, D. Scannell, D. Bailey, Barristers, and A. Burnside, Solicitor,

Aer Lingus Ltd

applicant,

v

European Commission, represented by L. Flynn, D. Grespan and T. Maxian Rusche, acting as Agents,

European Commission

defendant,

supported by

Ireland, represented by E. Creedon, A. Joyce and J. Quaney, acting as Agents, assisted by E. Regan SC, and B. Doherty, Barrister,

Ireland

intervener,

APPLICATION for annulment of Commission Decision 2013/199/EU of 25 July 2012 on State aid Case SA.29064 (11/C, ex 11/NN) — Differentiated air travel tax rates implemented by Ireland (OJ 2013 L 119, p. 30),

THE GENERAL COURT (Ninth Chamber),

composed of G. Berardis (Rapporteur), President, O. Czúcz and A. Popescu, Judges,

Registrar: J. Plingers, Administrator,

having regard to the written procedure and further to the hearing on 4 June 2014,

gives the following

Judgment (
  1
  )

Judgment

1

Background to the dispute

Background to the dispute

| 1 | The applicant, Aer Lingus Ltd, is an airline established in Ireland, with bases in Ireland (Dublin, Cork and Shannon airports) and in the United Kingdom (London Gatwick, London Heathrow and Belfast airports). It operates domestic flights within Ireland and international flights from Ireland and the United Kingdom to 70 destinations in Ireland, the United Kingdom, Continental Europe and the United States. |
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1

The applicant, Aer Lingus Ltd, is an airline established in Ireland, with bases in Ireland (Dublin, Cork and Shannon airports) and in the United Kingdom (London Gatwick, London Heathrow and Belfast airports). It operates domestic flights within Ireland and international flights from Ireland and the United Kingdom to 70 destinations in Ireland, the United Kingdom, Continental Europe and the United States.

| 2 | Section 55 of the Finance Act (No 2) 2008 (‘the Finance Act’) introduced an excise duty, known as the air travel tax (‘ATT’), payable as from 30 March 2009, the date on which the Finance Act came into force. |
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2

Section 55 of the Finance Act (No 2) 2008 (‘the Finance Act’) introduced an excise duty, known as the air travel tax (‘ATT’), payable as from 30 March 2009, the date on which the Finance Act came into force.

| 3 | The Finance Act provides that the ATT is to be charged directly to airline operators in respect of every departure of a passenger on an aircraft from an airport situated in Ireland (with the exception of airports carrying fewer than 10000 passengers a year, and subsequently, as from 3 June 2009, 50000 passengers a year) and becomes due when a passenger departs from an airport on an aircraft capable of carrying more than 20 passengers and not used for State or military purposes. While the tax is intended ultimately to be passed on to passengers through the ticket price, it is the airline operators that are accountable for it and liable to pay it. |
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3

The Finance Act provides that the ATT is to be charged directly to airline operators in respect of every departure of a passenger on an aircraft from an airport situated in Ireland (with the exception of airports carrying fewer than 10000 passengers a year, and subsequently, as from 3 June 2009, 50000 passengers a year) and becomes due when a passenger departs from an airport on an aircraft capable of carrying more than 20 passengers and not used for State or military purposes. While the tax is intended ultimately to be passed on to passengers through the ticket price, it is the airline operators that are accountable for it and liable to pay it.

| 4 | When it was introduced, the ATT was levied on the basis of the distance between the airport of departure and the airport of arrival, at the rate of EUR 2 in the case of a flight from an airport to a destination no more than 300 km from Dublin airport and EUR 10 in all other cases. |
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4

When it was introduced, the ATT was levied on the basis of the distance between the airport of departure and the airport of arrival, at the rate of EUR 2 in the case of a flight from an airport to a destination no more than 300 km from Dublin airport and EUR 10 in all other cases.

| 5 | On 21 July 2009, the European Commission registered two separate complaints, lodged by a competitor of the applicant, one pursuant to Article 20(2) of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article [108 TFEU] (OJ 1999 L 83, p. 1), the other pursuant to Article 56 TFEU and Regulation (EC) No 1008/2008 of the European Parliament and of the Council of 24 September 2008 on common rules for the operation of air services in the Community (Recast) (OJ 2008 L 293, p. 3), concerning several aspects of the ATT implemented by Ireland. |
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5

On 21 July 2009, the European Commission registered two separate complaints, lodged by a competitor of the applicant, one pursuant to Article 20(2) of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article [108 TFEU] (OJ 1999 L 83, p. 1), the other pursuant to Article 56 TFEU and Regulation (EC) No 1008/2008 of the European Parliament and of the Council of 24 September 2008 on common rules for the operation of air services in the Community (Recast) (OJ 2008 L 293, p. 3), concerning several aspects of the ATT implemented by Ireland.

| 6 | In response to the second complaint, the Commission first initiated an investigation regarding possible infringement of Article 56 TFEU on freedom to provide services, and of Regulation No 1008/2008. A letter of formal notice was issued by the Commission to the Irish authorities on that basis on 18 March 2010 (‘the letter of formal notice’). Following that letter of formal notice, the tax rates were changed, so that, from 1 March 2011, a single tax rate of EUR 3 was applied to all departures regardless of the distance travelled. The Commission’s investigation relating to Article 56 TFEU and to Regulation No 1008/2008 was therefore concluded. |
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6

In response to the second complaint, the Commission first initiated an investigation regarding possible infringement of Article 56 TFEU on freedom to provide services, and of Regulation No 1008/2008. A letter of formal notice was issued by the Commission to the Irish authorities on that basis on 18 March 2010 (‘the letter of formal notice’). Following that letter of formal notice, the tax rates were changed, so that, from 1 March 2011, a single tax rate of EUR 3 was applied to all departures regardless of the distance travelled. The Commission’s investigation relating to Article 56 TFEU and to Regulation No 1008/2008 was therefore concluded.

| 7 | The first complaint, concerning the application of the State aid rules, objected to, inter alia, the fact that the lower rate (EUR 2 instead of EUR 10) mainly benefited domestic airlines such as Aer Arann, which operated the majority of their flights to destinations no more than 300 km from Dublin airport. That complaint also stated that the flat-rate amount of the tax was discriminatory since it represented a significantly higher proportion of the ticket price for low-fare airlines than for traditional airlines. Lastly, it was alleged that the non-application of the ATT to transit and transfer passengers constituted unlawful State aid to the advantage of the airlines Aer Lingus and Aer Arann, because those companies had a relatively high proportion of passengers and flights in those categories. |
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7

The first complaint, concerning the application of the State aid rules, objected to, inter alia, the fact that the lower rate (EUR 2 instead of EUR 10) mainly benefited domestic airlines such as Aer Arann, which operated the majority of their flights to destinations no more than 300 km from Dublin airport. That complaint also stated that the flat-rate amount of the tax was discriminatory since it represented a significantly higher proportion of the ticket price for low-fare airlines than for traditional airlines. Lastly, it was alleged that the non-application of the ATT to transit and transfer passengers constituted unlawful State aid to the advantage of the airlines Aer Lingus and Aer Arann, because those companies had a relatively high proportion of passengers and flights in those categories.

| 8 | By letter of 13 July 2011, the Commission notified Ireland of its decision to open the formal investigation procedure laid down in Article 108(2) TFEU in respect of the lower national rate of ATT for the period between 30 March 2009 and 1 March 2011. The Commission asked the Irish authorities to forward a copy of the decision to the beneficiaries. |
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8

By letter of 13 July 2011, the Commission notified Ireland of its decision to open the formal investigation procedure laid down in Article 108(2) TFEU in respect of the lower national rate of ATT for the period between 30 March 2009 and 1 March 2011. The Commission asked the Irish authorities to forward a copy of the decision to the beneficiaries.

| 9 | By a decision of 13 July 2011, a summary of which was published in the Official Journal of the European Union (OJ 2011 C 306, p.10), adopted at the end of the preliminary examination, the Commission found, inter alia, that non-application of the ATT to transfer and transit passengers and the use of a flat‐rate tax did not constitute State aid within the meaning of Article 107(1) TFEU. However, it considered that the application of a lower national rate between 30 March 2009 and 1 March 2011 appeared to constitute State aid, raising questions as to compatibility with the internal market, inasmuch as it unlawfully benefited domestic flights as opposed to cross-border flights. It therefore opened the formal investigation procedure in respect of this latter measure, inviting the parties concerned to submit their observations on the measure at issue. |
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9

By a decision of 13 July 2011, a summary of which was published in the Official Journal of the European Union (OJ 2011 C 306, p.10), adopted at the end of the preliminary examination, the Commission found, inter alia, that non-application of the ATT to transfer and transit passengers and the use of a flat‐rate tax did not constitute State aid within the meaning of Article 107(1) TFEU. However, it considered that the application of a lower national rate between 30 March 2009 and 1 March 2011 appeared to constitute State aid, raising questions as to compatibility with the internal market, inasmuch as it unlawfully benefited domestic flights as opposed to cross-border flights. It therefore opened the formal investigation procedure in respect of this latter measure, inviting the parties concerned to submit their observations on the measure at issue.

Official Journal of the European Union

| 10 | The Irish authorities submitted their observations on 15 September 2011. The applicant did not submit observations at that stage of the procedure. |
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10

The Irish authorities submitted their observations on 15 September 2011. The applicant did not submit observations at that stage of the procedure.

| 11 | On 25 July 2012, the Commission adopted Decision 2013/199/EU concerning State aid case SA.29064 (11/C, ex 11/NN) — Differentiated air travel tax rates implemented by Ireland (OJ 2013 L 119, p. 30) (‘the contested decision’). That decision was also notified to the applicant by letter of 23 August 2012 from the Irish Department of Finance, received by the applicant on 6 September 2012. |
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11

On 25 July 2012, the Commission adopted Decision 2013/199/EU concerning State aid case SA.29064 (11/C, ex 11/NN) — Differentiated air travel tax rates implemented by Ireland (OJ 2013 L 119, p. 30) (‘the contested decision’). That decision was also notified to the applicant by letter of 23 August 2012 from the Irish Department of Finance, received by the applicant on 6 September 2012.

| 12 | The Commission concluded, in Article 1 of that decision, that the State aid which, in accordance with the Finance Act, took in the present case the form of a lower air travel tax rate applicable to all flights operated by an aircraft capable of carrying more than 20 passengers and not used for State or military purposes, departing from an airport with more than 10000 passengers per year to a destination no more than 300 km from Dublin airport, unlawfully put into effect by Ireland between 30 March 2009 and 1 March 2011 (‘the period concerned’), in breach of Article 108(3) TFEU, was incompatible with the internal market. |
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12

The Commission concluded, in Article 1 of that decision, that the State aid which, in accordance with the Finance Act, took in the present case the form of a lower air travel tax rate applicable to all flights operated by an aircraft capable of carrying more than 20 passengers and not used for State or military purposes, departing from an airport with more than 10000 passengers per year to a destination no more than 300 km from Dublin airport, unlawfully put into effect by Ireland between 30 March 2009 and 1 March 2011 (‘the period concerned’), in breach of Article 108(3) TFEU, was incompatible with the internal market.

| 13 | Article 4 of that decision provides that Ireland is to recover the incompatible aid granted under the scheme referred to in Article 1 from the beneficiaries. Those beneficiaries are identified in recital 70 of the contested decision as being Ryanair, the applicant, Aer Arann and other air carriers to be identified by Ireland. Recital 70 also states that the amount of the State aid amounts to the difference between the lower rate of the air travel tax and the standard rate of EUR 10 — that is to say, EUR 8 — levied on each passenger. |
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13

Article 4 of that decision provides that Ireland is to recover the incompatible aid granted under the scheme referred to in Article 1 from the beneficiaries. Those beneficiaries are identified in recital 70 of the contested decision as being Ryanair, the applicant, Aer Arann and other air carriers to be identified by Ireland. Recital 70 also states that the amount of the State aid amounts to the difference between the lower rate of the air travel tax and the standard rate of EUR 10 — that is to say, EUR 8 — levied on each passenger.

Procedure and forms of order sought by the parties

Procedure and forms of order sought by the parties

| 14 | By application lodged at the Court Registry on 1 November 2012, the applicant brought the present action. |
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14

By application lodged at the Court Registry on 1 November 2012, the applicant brought the present action.

| 15 | By document lodged at the Court Registry on 6 March 2013, Ireland sought leave to intervene in support of the Commission. By order of 17 April 2013, the President of the Sixth Chamber of the General Court granted Ireland leave to intervene. |
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15

By document lodged at the Court Registry on 6 March 2013, Ireland sought leave to intervene in support of the Commission. By order of 17 April 2013, the President of the Sixth Chamber of the General Court granted Ireland leave to intervene.

| 16 | Ireland submitted its statement in intervention on 4 June 2013. By letter of 17 June 2013, the Commission notified the Registry that it had no observations to make. The applicant filed its observations on that statement on 24 July 2013. |
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16

Ireland submitted its statement in intervention on 4 June 2013. By letter of 17 June 2013, the Commission notified the Registry that it had no observations to make. The applicant filed its observations on that statement on 24 July 2013.

| 17 | The composition of the chambers of the Court having been altered, the Judge-Rapporteur was assigned to the Ninth Chamber, to which this case was, consequently, assigned. |
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17

The composition of the chambers of the Court having been altered, the Judge-Rapporteur was assigned to the Ninth Chamber, to which this case was, consequently, assigned.

| 18 | The applicant claims that the Court should:





  — | annul or, in the alternative, annul in part the contested decision; |
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18

The applicant claims that the Court should:

—

annul or, in the alternative, annul in part the contested decision;

| — | order the Commission to pay the costs. |
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—

order the Commission to pay the costs.

| 19 | The Commission, supported by Ireland, contends that the Court should:





  — | dismiss the action; |
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19

The Commission, supported by Ireland, contends that the Court should:

—

dismiss the action;

| — | order the applicant to pay the costs. |
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—

order the applicant to pay the costs.

Law

Law

[omissis]

[omissis]

The third and fourth pleas in law, alleging an error of law and a manifest error of assessment in the classification and quantification of the aid, resulting from the failure to take into account the passing on of the ATT to passengers, and infringement of Article 14 of Regulation No 659/1999 and the principles of proportionality and equal treatment by the order for recovery of the aid

The third and fourth pleas in law, alleging an error of law and a manifest error of assessment in the classification and quantification of the aid, resulting from the failure to take into account the passing on of the ATT to passengers, and infringement of Article 14 of Regulation No 659/1999 and the principles of proportionality and equal treatment by the order for recovery of the aid

| 78 | By its third plea, the applicant claims that the Commission erred in law and committed a manifest error of assessment by identifying the air carriers subject to the lower rate tax as the beneficiaries of the alleged aid in the amount of EUR 8 per passenger, and ordering recovery of the aid on that basis, when the Commission acknowledged that the burden of the tax could have been passed on to the passengers, who were therefore the primary beneficiaries of the lower rate. |
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78

By its third plea, the applicant claims that the Commission erred in law and committed a manifest error of assessment by identifying the air carriers subject to the lower rate tax as the beneficiaries of the alleged aid in the amount of EUR 8 per passenger, and ordering recovery of the aid on that basis, when the Commission acknowledged that the burden of the tax could have been passed on to the passengers, who were therefore the primary beneficiaries of the lower rate.

| 79 | According to the applicant, the Commission ought to have taken that point into consideration in defining and quantifying the aid, and have assessed the advantage actually retained by the airlines which paid the ATT at the lower rate of EUR 2 and, to a large extent, passed it on to their passengers. Insofar as any part of the EUR 8 saving represented by the lower tax was passed on to passengers and not retained by the airlines, the Commission’s decision requiring recovery of EUR 8 per passenger has the effect of requiring the airlines subject to the lower rate tax to repay more than they have actually received, and is therefore unlawful. |
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79

According to the applicant, the Commission ought to have taken that point into consideration in defining and quantifying the aid, and have assessed the advantage actually retained by the airlines which paid the ATT at the lower rate of EUR 2 and, to a large extent, passed it on to their passengers. Insofar as any part of the EUR 8 saving represented by the lower tax was passed on to passengers and not retained by the airlines, the Commission’s decision requiring recovery of EUR 8 per passenger has the effect of requiring the airlines subject to the lower rate tax to repay more than they have actually received, and is therefore unlawful.

| 80 | By its fourth plea, the applicant also maintains that, it being impossible to recoup the EUR 8 per passenger retrospectively from the passengers who benefited from the lower rate tax, the recovery order operates as an additional tax on the relevant airlines, and consequently amounts to unlawfully penalising those airlines rather than restoring the situation as it was before the grant of the alleged aid. That is disproportionate and constitutes infringement of the principle of equal treatment, and therefore an infringement of Article 14 of Regulation No 659/1999. |
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80

By its fourth plea, the applicant also maintains that, it being impossible to recoup the EUR 8 per passenger retrospectively from the passengers who benefited from the lower rate tax, the recovery order operates as an additional tax on the relevant airlines, and consequently amounts to unlawfully penalising those airlines rather than restoring the situation as it was before the grant of the alleged aid. That is disproportionate and constitutes infringement of the principle of equal treatment, and therefore an infringement of Article 14 of Regulation No 659/1999.

| 81 | As regards the third plea in law, the Commission contests the applicant’s arguments. It submits, in the first place, that there was, under the relevant legislation, no obligation to pass the tax on to passengers. On the contrary, it was left open to each airline to decide whether the cost of the tax should be fully or partly passed on to the passengers. In the second place, the Commission maintains that even if the tax savings had been passed on in full, that would also have resulted in an advantage for the airlines concerned, in that they could have offered more attractive prices to their customers than if they had been taxed at the normal rate of EUR 10. It is therefore irrelevant whether the beneficiary has chosen to pass on the advantage to its customers and thus obtain higher sales volumes, or has chosen to absorb the advantage directly by charging a higher price. The logical consequence was therefore to recover the amount of the aid in full, that is to say, EUR 8 per passenger, for the flights subject to the lower rate of EUR 2. |
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81

As regards the third plea in law, the Commission contests the applicant’s arguments. It submits, in the first place, that there was, under the relevant legislation, no obligation to pass the tax on to passengers. On the contrary, it was left open to each airline to decide whether the cost of the tax should be fully or partly passed on to the passengers. In the second place, the Commission maintains that even if the tax savings had been passed on in full, that would also have resulted in an advantage for the airlines concerned, in that they could have offered more attractive prices to their customers than if they had been taxed at the normal rate of EUR 10. It is therefore irrelevant whether the beneficiary has chosen to pass on the advantage to its customers and thus obtain higher sales volumes, or has chosen to absorb the advantage directly by charging a higher price. The logical consequence was therefore to recover the amount of the aid in full, that is to say, EUR 8 per passenger, for the flights subject to the lower rate of EUR 2.

| 82 | As regards the fourth plea in law, the Commission contends that, because recovery of aid is intended to restore the previous situation, it cannot, in principle, be regarded as a disproportionate measure. Moreover, since repayment of the aid is designed only to restore the previous situation, it cannot in principle be regarded as a penalty. There is, therefore, no breach of the principle of equal treatment, inasmuch as all the beneficiaries of the aid are required to repay the illegal, incompatible aid. |
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82

As regards the fourth plea in law, the Commission contends that, because recovery of aid is intended to restore the previous situation, it cannot, in principle, be regarded as a disproportionate measure. Moreover, since repayment of the aid is designed only to restore the previous situation, it cannot in principle be regarded as a penalty. There is, therefore, no breach of the principle of equal treatment, inasmuch as all the beneficiaries of the aid are required to repay the illegal, incompatible aid.

| 83 | As a preliminary point, it must be recalled that the objective of the obligation on a State to abolish aid found by the Commission to be incompatible with the internal market is to restore the previous situation. That objective is accomplished when the recipients have repaid the sum paid by way of unlawful aid, thereby forfeiting the advantage which they had enjoyed over their competitors on the market, and when the situation prior to payment of the aid is restored (see judgments of 17 June 1999 in Belgium v Commission, C‐75/97, ECR, EU:C:1999:311, paragraphs 64 and 65 and the case-law cited, and 13 February 2012 in Budapesti Erőmű v Commission, T‐80/06 and T‐182/09, EU:T:2012:65, paragraph 107). |
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83

As a preliminary point, it must be recalled that the objective of the obligation on a State to abolish aid found by the Commission to be incompatible with the internal market is to restore the previous situation. That objective is accomplished when the recipients have repaid the sum paid by way of unlawful aid, thereby forfeiting the advantage which they had enjoyed over their competitors on the market, and when the situation prior to payment of the aid is restored (see judgments of 17 June 1999 in Belgium v Commission, C‐75/97, ECR, EU:C:1999:311, paragraphs 64 and 65 and the case-law cited, and 13 February 2012 in Budapesti Erőmű v Commission, T‐80/06 and T‐182/09, EU:T:2012:65, paragraph 107).

Belgium

Commission

Budapesti Erőmű

Commission

| 84 | It must also be recalled that no provision of EU law requires the Commission, when ordering the recovery of aid declared incompatible with the internal market, to fix the exact amount of the aid to be recovered. It is sufficient for the Commission’s decision to include information enabling the recipient itself to work out that amount without overmuch difficulty (judgments of 12 October 2000 in Spain v Commission, C‐480/98, ECR, EU:C:2000:559, paragraph 25, and 12 May 2005 in Commission v Greece, C‐415/03, ECR, EU:C:2005:287, paragraph 39). Moreover, the operative part of an act is indissociably linked to the statement of reasons for it, so that, when it has to be interpreted, account must be taken of the reasons which led to its adoption (judgments of 15 May 1997 in TWD v Commission, C‐355/95 P, ECR, EU:C:1997:241, paragraph 21, and 29 April 2004 in Italy v Commission, C‐298/00 P, ECR, EU:C:2004:240, paragraph 97). |
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84

It must also be recalled that no provision of EU law requires the Commission, when ordering the recovery of aid declared incompatible with the internal market, to fix the exact amount of the aid to be recovered. It is sufficient for the Commission’s decision to include information enabling the recipient itself to work out that amount without overmuch difficulty (judgments of 12 October 2000 in Spain v Commission, C‐480/98, ECR, EU:C:2000:559, paragraph 25, and 12 May 2005 in Commission v Greece, C‐415/03, ECR, EU:C:2005:287, paragraph 39). Moreover, the operative part of an act is indissociably linked to the statement of reasons for it, so that, when it has to be interpreted, account must be taken of the reasons which led to its adoption (judgments of 15 May 1997 in TWD v Commission, C‐355/95 P, ECR, EU:C:1997:241, paragraph 21, and 29 April 2004 in Italy v Commission, C‐298/00 P, ECR, EU:C:2004:240, paragraph 97).

Spain

Commission

Commission

Greece

TWD

Commission

Italy

Commission

| 85 | However, if the Commission decides to order the recovery of a specific amount, it must — pursuant to its obligation to conduct a diligent and impartial examination of the case under Article 108 TFEU — assess, as accurately as the circumstances of the case will allow, the actual value of the benefit received from the aid by the beneficiary (see judgment of 29 March 2007 in Scott v Commission, T‐366/00, ECR, EU:T:2007:99, paragraph 95 and the case-law cited). |
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85

However, if the Commission decides to order the recovery of a specific amount, it must — pursuant to its obligation to conduct a diligent and impartial examination of the case under Article 108 TFEU — assess, as accurately as the circumstances of the case will allow, the actual value of the benefit received from the aid by the beneficiary (see judgment of 29 March 2007 in Scott v Commission, T‐366/00, ECR, EU:T:2007:99, paragraph 95 and the case-law cited).

Scott

Commission

| 86 | In restoring the situation existing prior to the payment of the aid, the Commission is, on the one hand, obliged to ensure that the real advantage resulting from the aid is eliminated and thus to order recovery of the aid in full. The Commission may not, out of sympathy with the beneficiary, order recovery of an amount which is less than the value of the aid received by the latter. On the other hand, the Commission is not entitled to mark its disapproval of the serious character of the illegality by ordering recovery of an amount in excess of the value of the aid received by the beneficiary (judgment in Scott v Commission, paragraph 85 above, EU:T:2007:99, paragraph 95). |
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86

In restoring the situation existing prior to the payment of the aid, the Commission is, on the one hand, obliged to ensure that the real advantage resulting from the aid is eliminated and thus to order recovery of the aid in full. The Commission may not, out of sympathy with the beneficiary, order recovery of an amount which is less than the value of the aid received by the latter. On the other hand, the Commission is not entitled to mark its disapproval of the serious character of the illegality by ordering recovery of an amount in excess of the value of the aid received by the beneficiary (judgment in Scott v Commission, paragraph 85 above, EU:T:2007:99, paragraph 95).

Scott

Commission

| 87 | The applicant does not dispute that, even had the ATT been entirely passed on to the passengers, the application of a tax at a reduced rate could confer an advantage on the undertaking required to pay that tax. Nevertheless, it contests the extent of that advantage, which was evaluated at EUR 8 per passenger in the contested decision. |
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87

The applicant does not dispute that, even had the ATT been entirely passed on to the passengers, the application of a tax at a reduced rate could confer an advantage on the undertaking required to pay that tax. Nevertheless, it contests the extent of that advantage, which was evaluated at EUR 8 per passenger in the contested decision.

| 88 | In that regard, first of all, it must be noted that Section 55 of the Finance Act refers to the ATT as an excise duty to be charged, levied and paid in respect of every departure of a passenger on an aircraft from an airport located in Ireland, which Ireland also confirmed at the hearing. |
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88

In that regard, first of all, it must be noted that Section 55 of the Finance Act refers to the ATT as an excise duty to be charged, levied and paid in respect of every departure of a passenger on an aircraft from an airport located in Ireland, which Ireland also confirmed at the hearing.

| 89 | An excise duty is, by definition, an indirect tax levied on the consumption of a particular good or service, by contrast with direct taxes such as taxes on income or on profits, which are paid directly by the undertakings. |
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89

An excise duty is, by definition, an indirect tax levied on the consumption of a particular good or service, by contrast with direct taxes such as taxes on income or on profits, which are paid directly by the undertakings.

| 90 | In the present case, it is undisputed that the airlines were required, under the Finance Act, to apply the ATT at the rate of EUR 2 in respect of all flights subject to that rate. It is also common ground between the parties that pursuant to Article 23 of Regulation No 1008/2008, airlines were required to indicate the amount of ATT separately in the price of each ticket sold to their passengers. Thus, the ATT was formally intended to be passed on through the price of the flight ticket bought by the passenger, as indicated in recital 8 of the contested decision. |
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90

In the present case, it is undisputed that the airlines were required, under the Finance Act, to apply the ATT at the rate of EUR 2 in respect of all flights subject to that rate. It is also common ground between the parties that pursuant to Article 23 of Regulation No 1008/2008, airlines were required to indicate the amount of ATT separately in the price of each ticket sold to their passengers. Thus, the ATT was formally intended to be passed on through the price of the flight ticket bought by the passenger, as indicated in recital 8 of the contested decision.

| 91 | As the applicant notes, it is therefore necessary to make a distinction between the formal or legal passing on, concerning the manner in which the tax is lawfully levied and applied, and the economic passing on, which consists in determining to what extent the airline bore the economic cost of the ATT by possibly adjusting the ticket price exclusive of the ATT according to the rate of the ATT actually applicable, or, in the case of application of the ATT at the reduced rate of EUR 2, to what extent they actually retained the economic advantage arising from the application of that lower rate. |
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91

As the applicant notes, it is therefore necessary to make a distinction between the formal or legal passing on, concerning the manner in which the tax is lawfully levied and applied, and the economic passing on, which consists in determining to what extent the airline bore the economic cost of the ATT by possibly adjusting the ticket price exclusive of the ATT according to the rate of the ATT actually applicable, or, in the case of application of the ATT at the reduced rate of EUR 2, to what extent they actually retained the economic advantage arising from the application of that lower rate.

| 92 | The Commission explained, in recital 53 of the contested decision, that the airlines which paid the tax at the reduced rate of EUR 2 had a smaller cost to pass on to their customers or to bear themselves. It then stated that that smaller cost represented financial resources that the airlines were able to economise and therefore improve their financial situation vis-à-vis other airlines. |
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92

The Commission explained, in recital 53 of the contested decision, that the airlines which paid the tax at the reduced rate of EUR 2 had a smaller cost to pass on to their customers or to bear themselves. It then stated that that smaller cost represented financial resources that the airlines were able to economise and therefore improve their financial situation vis-à-vis other airlines.

| 93 | In recital 57 of the contested decision, the Commission responded to the arguments of the Irish authorities, according to which no advantage existed for the airlines, since the tax was essentially a tax on consumption intended to be passed on to the passengers. The Commission considered, relying on the judgment in Adria-Wien Pipeline and Wietersdorfer & Peggauer Zementwerke, paragraph 45 above (EU:C:2001:598), that, even in situations where there is a legal requirement to pass the tax in question on to the customers, a reduction from the normal rate of tax can confer a selective advantage on the airlines which must pay that tax at the reduced rate. |
| --- | --- |

93

In recital 57 of the contested decision, the Commission responded to the arguments of the Irish authorities, according to which no advantage existed for the airlines, since the tax was essentially a tax on consumption intended to be passed on to the passengers. The Commission considered, relying on the judgment in Adria-Wien Pipeline and Wietersdorfer & Peggauer Zementwerke, paragraph 45 above (EU:C:2001:598), that, even in situations where there is a legal requirement to pass the tax in question on to the customers, a reduction from the normal rate of tax can confer a selective advantage on the airlines which must pay that tax at the reduced rate.

Adria-Wien Pipeline and Wietersdorfer & Peggauer Zementwerke

| 94 | The Commission acknowledged, in the same recital of the contested decision, that, in the present case, the cost of the tax could be passed on to the customers, even though there was no mechanism which ensured that the tax was actually passed on, and that it was a choice left to each airline. |
| --- | --- |

94

The Commission acknowledged, in the same recital of the contested decision, that, in the present case, the cost of the tax could be passed on to the customers, even though there was no mechanism which ensured that the tax was actually passed on, and that it was a choice left to each airline.

| 95 | In a similar situation, the Court of Justice has itself held that since airport taxes directly and automatically influence the price of the journey, differences in the taxes to be paid by passengers will automatically be reflected in the transport cost (Stylianakis, paragraph 59 above, EU:C:2003:72, paragraph 28). |
| --- | --- |

95

In a similar situation, the Court of Justice has itself held that since airport taxes directly and automatically influence the price of the journey, differences in the taxes to be paid by passengers will automatically be reflected in the transport cost (Stylianakis, paragraph 59 above, EU:C:2003:72, paragraph 28).

Stylianakis

| 96 | The Commission nevertheless submits that, even if the ATT was passed on, the airlines also enjoyed an advantage, since they could offer more attractive prices to their customers, which would have resulted in a higher turnover. |
| --- | --- |

96

The Commission nevertheless submits that, even if the ATT was passed on, the airlines also enjoyed an advantage, since they could offer more attractive prices to their customers, which would have resulted in a higher turnover.

| 97 | It must therefore be held that, in a situation such as that in the present case, where the ATT was intended to be passed on to the passengers and where the economic advantage arising from the application of the reduced tax could also have been passed on to the passengers, the Commission cannot presume that the advantage actually obtained and retained by the airlines amounted, in all cases, to EUR 8 per passenger. |
| --- | --- |

97

It must therefore be held that, in a situation such as that in the present case, where the ATT was intended to be passed on to the passengers and where the economic advantage arising from the application of the reduced tax could also have been passed on to the passengers, the Commission cannot presume that the advantage actually obtained and retained by the airlines amounted, in all cases, to EUR 8 per passenger.

| 98 | In such a case, the advantage actually obtained by the airlines does not necessarily consist in the difference between the two rates, but rather in the possibility of offering more attractive prices to their customers and thereby increasing their turnover, as the Commission itself acknowledged in recital 57 of the contested decision. |
| --- | --- |

98

In such a case, the advantage actually obtained by the airlines does not necessarily consist in the difference between the two rates, but rather in the possibility of offering more attractive prices to their customers and thereby increasing their turnover, as the Commission itself acknowledged in recital 57 of the contested decision.

| 99 | Accordingly, for airlines such as the applicant which paid the ATT at the lower rate of EUR 2, the Commission should have determined the extent to which they had actually passed on to their passengers the economic benefit resulting from the application of the ATT at the lower rate, in order to be able to quantify precisely the advantage which the airlines actually enjoyed, unless it decided to confer that task to the national authorities and provided the necessary information in that respect. |
| --- | --- |

99

Accordingly, for airlines such as the applicant which paid the ATT at the lower rate of EUR 2, the Commission should have determined the extent to which they had actually passed on to their passengers the economic benefit resulting from the application of the ATT at the lower rate, in order to be able to quantify precisely the advantage which the airlines actually enjoyed, unless it decided to confer that task to the national authorities and provided the necessary information in that respect.

| 100 | Thus, it is only if the applicant had systematically increased the price of its tickets excluding tax by EUR 8 per ticket for flights subject to the ATT at the rate of EUR 2 that it would have been possible to consider that the economic advantage resulting from the application of the differentiated rates amounted to EUR 8 per passenger for the applicant, since that advantage could not have been passed on, even partially, to the passengers. |
| --- | --- |

100

Thus, it is only if the applicant had systematically increased the price of its tickets excluding tax by EUR 8 per ticket for flights subject to the ATT at the rate of EUR 2 that it would have been possible to consider that the economic advantage resulting from the application of the differentiated rates amounted to EUR 8 per passenger for the applicant, since that advantage could not have been passed on, even partially, to the passengers.

| 101 | It must be found however that the Commission did not, at any point in the contested decision or in the present proceedings, explain why that situation would be the normal one, rather than a situation in which the airlines passed on the advantage to their passengers in accordance with the stated objective of the ATT, and despite having acknowledged that such passing on of the advantage was possible (see paragraph 94 above). |
| --- | --- |

101

It must be found however that the Commission did not, at any point in the contested decision or in the present proceedings, explain why that situation would be the normal one, rather than a situation in which the airlines passed on the advantage to their passengers in accordance with the stated objective of the ATT, and despite having acknowledged that such passing on of the advantage was possible (see paragraph 94 above).

| 102 | In addition, the Commission did not take sufficient account of the particular situation of the market in the present case and of its competitive constraints, in so far as all the airlines operating flights of less than 300 km (calculated from Dublin airport) departing from an airport located in Ireland were subject to the ATT at the rate of EUR 2 per passenger. Thus, the Commission has not established how, in those circumstances, the airlines whose flights were subject to the ATT at the reduced rate of EUR 2 per passenger enjoyed an advantage corresponding to the difference between the two rates of ATT, namely EUR 8 per passenger. |
| --- | --- |

102

In addition, the Commission did not take sufficient account of the particular situation of the market in the present case and of its competitive constraints, in so far as all the airlines operating flights of less than 300 km (calculated from Dublin airport) departing from an airport located in Ireland were subject to the ATT at the rate of EUR 2 per passenger. Thus, the Commission has not established how, in those circumstances, the airlines whose flights were subject to the ATT at the reduced rate of EUR 2 per passenger enjoyed an advantage corresponding to the difference between the two rates of ATT, namely EUR 8 per passenger.

| 103 | In so doing, the Commission committed an error of assessment and an error of law. |
| --- | --- |

103

In so doing, the Commission committed an error of assessment and an error of law.

| 104 | As the applicant rightly points out, the recovery of aid must be limited to the financial advantages actually arising from the placing of the aid at the disposal of the beneficiary, and be proportionate to them (see, to that effect, judgment of 22 January 2013 in Salzgitter v Commission, T‐308/00 RENV, ECR, EU:T:2013:30, paragraph 138). |
| --- | --- |

104

As the applicant rightly points out, the recovery of aid must be limited to the financial advantages actually arising from the placing of the aid at the disposal of the beneficiary, and be proportionate to them (see, to that effect, judgment of 22 January 2013 in Salzgitter v Commission, T‐308/00 RENV, ECR, EU:T:2013:30, paragraph 138).

Salzgitter

Commission

| 105 | Accordingly, although the advantage resulting from the application of a lower rate could consist in the improvement of the competitive position of airlines, because they could offer more competitive prices, the Commission should have merely ordered the recovery of the amounts actually corresponding to that advantage or, if it proved impossible to determine those amounts accurately in the decision, to confer that task to the national authorities and provide the necessary information in that respect, in accordance with the case-law cited in paragraph 84 above. |
| --- | --- |

105

Accordingly, although the advantage resulting from the application of a lower rate could consist in the improvement of the competitive position of airlines, because they could offer more competitive prices, the Commission should have merely ordered the recovery of the amounts actually corresponding to that advantage or, if it proved impossible to determine those amounts accurately in the decision, to confer that task to the national authorities and provide the necessary information in that respect, in accordance with the case-law cited in paragraph 84 above.

| 106 | According to the Commission, if the applicant’s line of argument were accepted, it would lead to a situation in which the Commission or the national authorities would be required to evaluate, in each individual case, the effects of the aid on the beneficiaries on the basis of their individual choices, which would run counter to the case-law referred to in paragraph 43 above, and the judgment of 15 December 2005 in Unicredito Italiano (C‐148/04, ECR, EU:C:2005:774). |
| --- | --- |

106

According to the Commission, if the applicant’s line of argument were accepted, it would lead to a situation in which the Commission or the national authorities would be required to evaluate, in each individual case, the effects of the aid on the beneficiaries on the basis of their individual choices, which would run counter to the case-law referred to in paragraph 43 above, and the judgment of 15 December 2005 in Unicredito Italiano (C‐148/04, ECR, EU:C:2005:774).

Unicredito Italiano

| 107 | In the case that gave rise to that judgment, the Court of Justice recalled that the withdrawal of unlawful aid through its recovery is the logical consequence of the finding that it is unlawful. That recovery for the purpose of re-establishing the previously existing situation cannot, in principle, be regarded as disproportionate to the objectives of the Treaty provisions on State aid. By repaying the aid, the recipient forfeits the advantage which it had enjoyed over its competitors on the market, and the situation prior to payment of the aid is restored (see the judgment in Unicredito Italiano, paragraph 106 above, EU:C:2005:774, paragraph 113 and the case-law cited). |
| --- | --- |

107

In the case that gave rise to that judgment, the Court of Justice recalled that the withdrawal of unlawful aid through its recovery is the logical consequence of the finding that it is unlawful. That recovery for the purpose of re-establishing the previously existing situation cannot, in principle, be regarded as disproportionate to the objectives of the Treaty provisions on State aid. By repaying the aid, the recipient forfeits the advantage which it had enjoyed over its competitors on the market, and the situation prior to payment of the aid is restored (see the judgment in Unicredito Italiano, paragraph 106 above, EU:C:2005:774, paragraph 113 and the case-law cited).

Unicredito Italiano

| 108 | The Court of Justice held, therefore, that it would not be right to determine the amounts to be repaid in the light of various operations which could have been implemented by the undertakings if they had not opted for the type of operation which was coupled with the aid. That choice was made in the knowledge of the risk of recovery of aid granted contrary to the procedure laid down in Article 108(3) TFEU. Those undertakings could have avoided that risk by opting immediately for operations structured in other ways. In addition, re-establishing the status quo ante means returning, as far as possible, to the situation which would have prevailed if the operations at issue had been carried out without the tax reduction (see, to that effect, judgment in Unicredito Italiano, paragraph 106 above, EU:C:2005:774, paragraphs 114 to 117). |
| --- | --- |

108

The Court of Justice held, therefore, that it would not be right to determine the amounts to be repaid in the light of various operations which could have been implemented by the undertakings if they had not opted for the type of operation which was coupled with the aid. That choice was made in the knowledge of the risk of recovery of aid granted contrary to the procedure laid down in Article 108(3) TFEU. Those undertakings could have avoided that risk by opting immediately for operations structured in other ways. In addition, re-establishing the status quo ante means returning, as far as possible, to the situation which would have prevailed if the operations at issue had been carried out without the tax reduction (see, to that effect, judgment in Unicredito Italiano, paragraph 106 above, EU:C:2005:774, paragraphs 114 to 117).

status quo ante

Unicredito Italiano

| 109 | According to the Court of Justice, that does not imply reconstructing past events differently on the basis of hypothetical elements such as the choices, often numerous, which could have been made by the operators concerned, since the choices actually made with the aid might prove to be irreversible. Re-establishing the status quo ante merely enables account to be taken, at the stage of recovery of the aid by the national authorities, of tax treatment which may be more favourable than the ordinary treatment which, in the absence of unlawful aid and in accordance with domestic rules which are compatible with EU law, would have been granted on the basis of the operation actually carried out (judgment in Unicredito Italiano, paragraph 106 above, EU:C:2005:774, paragraphs 118 to 119). |
| --- | --- |

109

According to the Court of Justice, that does not imply reconstructing past events differently on the basis of hypothetical elements such as the choices, often numerous, which could have been made by the operators concerned, since the choices actually made with the aid might prove to be irreversible. Re-establishing the status quo ante merely enables account to be taken, at the stage of recovery of the aid by the national authorities, of tax treatment which may be more favourable than the ordinary treatment which, in the absence of unlawful aid and in accordance with domestic rules which are compatible with EU law, would have been granted on the basis of the operation actually carried out (judgment in Unicredito Italiano, paragraph 106 above, EU:C:2005:774, paragraphs 118 to 119).

status quo ante

Unicredito Italiano

| 110 | It must be pointed out however, that, in contrast to the case that gave rise to the judgment in Unicredito Italiano, paragraph 106 above (EU:C:2005:774), invoked by the Commission, the beneficiary undertakings in the present case could not have opted for an operation other than that which was coupled with the aid. They were required, under the national legislation applicable during the period concerned, to apply the ATT at the rate of EUR 2 per passenger for all flights of less than 300 km, calculated from Dublin airport, departing from an airport located in Ireland. For the same reasons, it was legally impossible to levy the ATT at the rate of EUR 10 from passengers on those flights. |
| --- | --- |

110

It must be pointed out however, that, in contrast to the case that gave rise to the judgment in Unicredito Italiano, paragraph 106 above (EU:C:2005:774), invoked by the Commission, the beneficiary undertakings in the present case could not have opted for an operation other than that which was coupled with the aid. They were required, under the national legislation applicable during the period concerned, to apply the ATT at the rate of EUR 2 per passenger for all flights of less than 300 km, calculated from Dublin airport, departing from an airport located in Ireland. For the same reasons, it was legally impossible to levy the ATT at the rate of EUR 10 from passengers on those flights.

Unicredito Italiano

| 111 | It was indeed possible for them to increase the ticket price excluding tax in order to absorb the advantage resulting from the application of the ATT at the rate of EUR 2. However, the Commission could not determine the advantage actually obtained by the airlines without taking into account the circumstances of the particular case. Having regard to the operation of the ATT and the competitive constraints faced by airlines as regards the flights to which the ATT at the rate of EUR 2 was applicable (see paragraph 102 above), the Commission could not presume that the economic advantage resulting from the application of the reduced rate of ATT had not been passed on to the passengers at all. |
| --- | --- |

111

It was indeed possible for them to increase the ticket price excluding tax in order to absorb the advantage resulting from the application of the ATT at the rate of EUR 2. However, the Commission could not determine the advantage actually obtained by the airlines without taking into account the circumstances of the particular case. Having regard to the operation of the ATT and the competitive constraints faced by airlines as regards the flights to which the ATT at the rate of EUR 2 was applicable (see paragraph 102 above), the Commission could not presume that the economic advantage resulting from the application of the reduced rate of ATT had not been passed on to the passengers at all.

| 112 | Accordingly, the requirement — arising from the case-law referred to in paragraph 85 above — to assess, as accurately as the circumstances of the case will allow, the advantage actually enjoyed by the airlines in the present case because of the application of the reduced rate of ATT is not the same as reconstructing past events on the basis of hypothetical elements such as the choices, often numerous, which could have been made by the operators concerned, as the Commission maintains; on the contrary, that requirement is intended to ensure that the beneficiary forfeits the advantage which it had over its competitors in the market, nothing more and nothing less, and to restore the situation prior to payment of the aid. |
| --- | --- |

112

Accordingly, the requirement — arising from the case-law referred to in paragraph 85 above — to assess, as accurately as the circumstances of the case will allow, the advantage actually enjoyed by the airlines in the present case because of the application of the reduced rate of ATT is not the same as reconstructing past events on the basis of hypothetical elements such as the choices, often numerous, which could have been made by the operators concerned, as the Commission maintains; on the contrary, that requirement is intended to ensure that the beneficiary forfeits the advantage which it had over its competitors in the market, nothing more and nothing less, and to restore the situation prior to payment of the aid.

| 113 | In addition, the aid in the case that gave rise to the judgment in Unicredito Italiano, paragraph 106 above (EU:C:2005:774), consisted in a tax advantage in the form of a reduction to 12.5% of the rate of income tax for banks which merged or engaged in similar restructuring, for five consecutive tax years, subject to certain conditions. It is not disputed that income tax constitutes a charge which is actually and exclusively borne by the undertakings subject to it, unlike the ATT in the present case which, as an excise duty, was levied and collected by the airlines alone but which, ultimately, was actually paid and — at least partially if not totally — borne by the passengers. |
| --- | --- |

113

In addition, the aid in the case that gave rise to the judgment in Unicredito Italiano, paragraph 106 above (EU:C:2005:774), consisted in a tax advantage in the form of a reduction to 12.5% of the rate of income tax for banks which merged or engaged in similar restructuring, for five consecutive tax years, subject to certain conditions. It is not disputed that income tax constitutes a charge which is actually and exclusively borne by the undertakings subject to it, unlike the ATT in the present case which, as an excise duty, was levied and collected by the airlines alone but which, ultimately, was actually paid and — at least partially if not totally — borne by the passengers.

Unicredito Italiano

| 114 | Lastly, the Commission has not established to the requisite legal standard, in its decision, that the recovery of EUR 8 per passenger was necessary in order to ensure the re-establishment of the status quo ante, that is to say the restoration, as far as possible, of the situation which would have prevailed if the operations in question had been carried out without the tax reduction or, in other words, if the flights subject to the rate of EUR 2 per passenger had been subject to the rate of EUR 10 per passenger. |
| --- | --- |

114

Lastly, the Commission has not established to the requisite legal standard, in its decision, that the recovery of EUR 8 per passenger was necessary in order to ensure the re-establishment of the status quo ante, that is to say the restoration, as far as possible, of the situation which would have prevailed if the operations in question had been carried out without the tax reduction or, in other words, if the flights subject to the rate of EUR 2 per passenger had been subject to the rate of EUR 10 per passenger.

status quo ante

| 115 | The recovery of an amount of EUR 8 per passenger from the airlines could not ensure the re-establishment of the situation which would have prevailed if the operations in question had been carried out without the grant of the aid concerned, since it is not possible, for the airlines, to recover retroactively from their customers the EUR 8 per passenger which should have been collected. The recovery of an amount of EUR 8 per passenger from the airlines is therefore not necessary in order to eliminate the distortion of competition caused by the competitive advantage which such aid affords (see, to that effect, judgment of 8 December 2011 in Residex Capital IV, C‐275/10, ECR, EU:C:2011:814, paragraph 34 and the case-law cited). On the contrary, the recovery of such an amount would be liable to create additional distortions of competition, as the applicant rightly notes, since it could lead to the recovery of more from the airlines than the advantage they actually enjoyed. |
| --- | --- |

115

The recovery of an amount of EUR 8 per passenger from the airlines could not ensure the re-establishment of the situation which would have prevailed if the operations in question had been carried out without the grant of the aid concerned, since it is not possible, for the airlines, to recover retroactively from their customers the EUR 8 per passenger which should have been collected. The recovery of an amount of EUR 8 per passenger from the airlines is therefore not necessary in order to eliminate the distortion of competition caused by the competitive advantage which such aid affords (see, to that effect, judgment of 8 December 2011 in Residex Capital IV, C‐275/10, ECR, EU:C:2011:814, paragraph 34 and the case-law cited). On the contrary, the recovery of such an amount would be liable to create additional distortions of competition, as the applicant rightly notes, since it could lead to the recovery of more from the airlines than the advantage they actually enjoyed.

Residex Capital IV

| 116 | The Commission should, therefore, have taken into account the particular features of the ATT as an excise duty intended to be passed on to passengers by the airlines as regards all flights subject to the rate of EUR 2 during the period concerned. Inasmuch as the economic advantage resulting from the application of that reduced rate could have been, even only partially, passed on to the passengers, the Commission was not entitled to consider that the advantage enjoyed by the airlines amounted automatically, in all cases, to EUR 8 per passenger. |
| --- | --- |

116

The Commission should, therefore, have taken into account the particular features of the ATT as an excise duty intended to be passed on to passengers by the airlines as regards all flights subject to the rate of EUR 2 during the period concerned. Inasmuch as the economic advantage resulting from the application of that reduced rate could have been, even only partially, passed on to the passengers, the Commission was not entitled to consider that the advantage enjoyed by the airlines amounted automatically, in all cases, to EUR 8 per passenger.

| 117 | In that regard, the Commission invokes its established practice in its decision in relation to tax aids involving excise duties, according to which exemptions from such charges grant an advantage to undertakings required to pay the tax, even if that advantage could have been passed on to consumers. |
| --- | --- |

117

In that regard, the Commission invokes its established practice in its decision in relation to tax aids involving excise duties, according to which exemptions from such charges grant an advantage to undertakings required to pay the tax, even if that advantage could have been passed on to consumers.

| 118 | It must be recalled, however, that the question whether a measure constitutes State aid must be assessed solely in the context of the relevant provisions of the Treaty and the measures taken to implement it, and not in the light of any earlier practice of the Commission in its decisions (judgments of 30 September 2003 in Freistaat Sachsen and Others v Commission, C‐57/00 P and C‐61/00 P, ECR, EU:C:2003:510, paragraphs 52 and 53, and 15 June 2005 in Regione autonoma della Sardegna v Commission, T‐171/02, ECR, EU:T:2005:219, paragraph 177). |
| --- | --- |

118

It must be recalled, however, that the question whether a measure constitutes State aid must be assessed solely in the context of the relevant provisions of the Treaty and the measures taken to implement it, and not in the light of any earlier practice of the Commission in its decisions (judgments of 30 September 2003 in Freistaat Sachsen and Others v Commission, C‐57/00 P and C‐61/00 P, ECR, EU:C:2003:510, paragraphs 52 and 53, and 15 June 2005 in Regione autonoma della Sardegna v Commission, T‐171/02, ECR, EU:T:2005:219, paragraph 177).

Freistaat Sachsen and Others

Commission

Regione autonoma della Sardegna

Commission

| 119 | In any event, the decisions invoked by the Commission, which are also referred to in a footnote to recital 57 of the contested decision, do not concern taxes borne by airlines, as indicated by the Commission, but rather energy taxes, providing for a reduced tax or exemptions for certain categories of undertakings. In all those cases, the taxes were not intended to be passed on by the beneficiary undertakings to their customers. The excise duties were imposed on inputs (energy) that they consumed themselves, and not on products or services intended to be sold to their customers, as in the present case. Lastly, it must be noted that the Commission did not order the recovery of the aid from the beneficiaries in any of those cases, but rather, on the contrary, it declared the aid in question compatible with the internal market on the basis of Article 107(3)(c) TFEU. |
| --- | --- |

119

In any event, the decisions invoked by the Commission, which are also referred to in a footnote to recital 57 of the contested decision, do not concern taxes borne by airlines, as indicated by the Commission, but rather energy taxes, providing for a reduced tax or exemptions for certain categories of undertakings. In all those cases, the taxes were not intended to be passed on by the beneficiary undertakings to their customers. The excise duties were imposed on inputs (energy) that they consumed themselves, and not on products or services intended to be sold to their customers, as in the present case. Lastly, it must be noted that the Commission did not order the recovery of the aid from the beneficiaries in any of those cases, but rather, on the contrary, it declared the aid in question compatible with the internal market on the basis of Article 107(3)(c) TFEU.

| 120 | It must be noted, furthermore, that although the judgment in Adria-Wien Pipeline and Wietersdorfer & Peggauer Zementwerke, paragraph 45 above (EU:C:2001:598), mentioned by the Commission in recital 57 of the contested decision, indeed supports the argument that the application of a reduced tax may grant a selective advantage to the undertakings subject to that tax, even if they are legally obliged to pass that tax on to their customers, it does not establish that, where there are multiple beneficiaries, all of the aid must be imputed to the undertakings which pass that tax on to their customers. |
| --- | --- |

120

It must be noted, furthermore, that although the judgment in Adria-Wien Pipeline and Wietersdorfer & Peggauer Zementwerke, paragraph 45 above (EU:C:2001:598), mentioned by the Commission in recital 57 of the contested decision, indeed supports the argument that the application of a reduced tax may grant a selective advantage to the undertakings subject to that tax, even if they are legally obliged to pass that tax on to their customers, it does not establish that, where there are multiple beneficiaries, all of the aid must be imputed to the undertakings which pass that tax on to their customers.

Adria-Wien Pipeline and Wietersdorfer & Peggauer Zementwerke

| 121 | Moreover, in the case that gave rise to that judgment, the Court of Justice did not find that the aid should be recovered from the energy providers, which were directly responsible for paying the tax and passing it on to their customers, like the airlines in the present case, but rather from the undertakings which were the customers of those providers, whose principal activity was the manufacture of goods and which were entitled to the rebate of energy taxes. |
| --- | --- |

121

Moreover, in the case that gave rise to that judgment, the Court of Justice did not find that the aid should be recovered from the energy providers, which were directly responsible for paying the tax and passing it on to their customers, like the airlines in the present case, but rather from the undertakings which were the customers of those providers, whose principal activity was the manufacture of goods and which were entitled to the rebate of energy taxes.

| 122 | The fact that in the present case the customers of the airlines subject to the ATT are not undertakings, within the meaning of EU law, with the result that no aid can be recovered from them, cannot call into question the Commission’s obligation to identify precisely who were the beneficiaries of an aid, that is to say the undertakings which actually benefited from it (judgment of 3 July 2003 in Belgium v Commission, C‐457/00, ECR, EU:C:2003:387, paragraph 55) and to limit the recovery of the aid to the financial advantages actually arising from the placing of the aid at the disposal of those undertakings (see, to that effect, Salzgitter v Commission, paragraph 104 above, EU:T:2013:30, paragraph 138). |
| --- | --- |

122

The fact that in the present case the customers of the airlines subject to the ATT are not undertakings, within the meaning of EU law, with the result that no aid can be recovered from them, cannot call into question the Commission’s obligation to identify precisely who were the beneficiaries of an aid, that is to say the undertakings which actually benefited from it (judgment of 3 July 2003 in Belgium v Commission, C‐457/00, ECR, EU:C:2003:387, paragraph 55) and to limit the recovery of the aid to the financial advantages actually arising from the placing of the aid at the disposal of those undertakings (see, to that effect, Salzgitter v Commission, paragraph 104 above, EU:T:2013:30, paragraph 138).

Belgium

Commission

Salzgitter

Commission

| 123 | It must be held, therefore, that the Commission committed an error of assessment and an error of law by setting the amount of the aid to be recovered from the airlines at EUR 8 per passenger, and infringed Article 14 of Regulation No 659/1999 by ordering the recovery of that amount from those airlines. |
| --- | --- |

123

It must be held, therefore, that the Commission committed an error of assessment and an error of law by setting the amount of the aid to be recovered from the airlines at EUR 8 per passenger, and infringed Article 14 of Regulation No 659/1999 by ordering the recovery of that amount from those airlines.

| 124 | Accordingly, without it being necessary to rule on any infringement of the principles of proportionality and of equal treatment invoked by the applicant, the applicant’s third and fourth pleas in law must be upheld and the contested decision must be annulled inasmuch as the aid to be recovered from the airlines is evaluated at EUR 8 per passenger, and the order for recovery of the aid is therefore also vitiated by illegality. |
| --- | --- |

124

Accordingly, without it being necessary to rule on any infringement of the principles of proportionality and of equal treatment invoked by the applicant, the applicant’s third and fourth pleas in law must be upheld and the contested decision must be annulled inasmuch as the aid to be recovered from the airlines is evaluated at EUR 8 per passenger, and the order for recovery of the aid is therefore also vitiated by illegality.

| 125 | In that respect, it must be noted that Article 4 of the contested decision provides for the recovery of the aid from the beneficiaries, which are identified in recital 70 of that decision, for an amount of EUR 8 per passenger, an amount which is also fixed in that recital. |
| --- | --- |

125

In that respect, it must be noted that Article 4 of the contested decision provides for the recovery of the aid from the beneficiaries, which are identified in recital 70 of that decision, for an amount of EUR 8 per passenger, an amount which is also fixed in that recital.

| 126 | According to settled case-law, the statement of reasons for a decision on State aid must be taken into account when interpreting the operative part of that decision (see judgment of 20 March 2014 in Rousse Industry v Commission, C‐271/13 P, EU:C:2014:175, paragraph 69 and the case-law cited). |
| --- | --- |

126

According to settled case-law, the statement of reasons for a decision on State aid must be taken into account when interpreting the operative part of that decision (see judgment of 20 March 2014 in Rousse Industry v Commission, C‐271/13 P, EU:C:2014:175, paragraph 69 and the case-law cited).

Rousse Industry

Commission

| 127 | It is therefore necessary to annul Article 4 of the contested decision, read in the light of recital 70 of that decision, in so far as it orders the recovery of the aid, evaluated at EUR 8 per passenger, from the airlines which operated flights subject to the ATT at the lower rate of EUR 2 during the period concerned, and the action must be dismissed as to the remainder.

  [omissis] |
| --- | --- |

127

It is therefore necessary to annul Article 4 of the contested decision, read in the light of recital 70 of that decision, in so far as it orders the recovery of the aid, evaluated at EUR 8 per passenger, from the airlines which operated flights subject to the ATT at the lower rate of EUR 2 during the period concerned, and the action must be dismissed as to the remainder.

[omissis]

[omissis]

| | On those grounds,
  THE GENERAL COURT (Ninth Chamber)
  hereby: |
| --- | --- |

On those grounds,

THE GENERAL COURT (Ninth Chamber)

hereby:

| | 1. | Annuls Article 4 of Commission Decision 2013/199/EU of 25 July 2012 on State aid Case SA.29064 (11/C, ex 11/NN) — Differentiated air travel tax rates implemented by Ireland, in so far as it orders the recovery of the aid from the beneficiaries for an amount which is set at EUR 8 per passenger in recital 70 of that decision; |
| --- | --- | --- |

1.

1.

Annuls Article 4 of Commission Decision 2013/199/EU of 25 July 2012 on State aid Case SA.29064 (11/C, ex 11/NN) — Differentiated air travel tax rates implemented by Ireland, in so far as it orders the recovery of the aid from the beneficiaries for an amount which is set at EUR 8 per passenger in recital 70 of that decision;

Annuls Article 4 of Commission Decision 2013/199/EU of 25 July 2012 on State aid Case SA.29064 (11/C, ex 11/NN) — Differentiated air travel tax rates implemented by Ireland, in so far as it orders the recovery of the aid from the beneficiaries for an amount which is set at EUR 8 per passenger in recital 70 of that decision;

| | 2. | Dismisses the action as to the remainder; |
| --- | --- | --- |

2.

2.

Dismisses the action as to the remainder;

Dismisses the action as to the remainder;

| | 3. | Orders the European Commission to pay its own costs, as well as half of the costs incurred by Aer Lingus Ltd; |
| --- | --- | --- |

3.

3.

Orders the European Commission to pay its own costs, as well as half of the costs incurred by Aer Lingus Ltd;

Orders the European Commission to pay its own costs, as well as half of the costs incurred by Aer Lingus Ltd;

| | 4. | Orders Aer Lingus to pay half of its own costs; |
| --- | --- | --- |

4.

4.

Orders Aer Lingus to pay half of its own costs;

Orders Aer Lingus to pay half of its own costs;

| | 5. | Orders Ireland to pay its own costs. |
| --- | --- | --- |

5.

5.

Orders Ireland to pay its own costs.

Orders Ireland to pay its own costs.

| | Berardis


  Czúcz


  Popescu


  Delivered in open court in Luxembourg on 5 February 2015.
  [Signatures] |
| --- | --- |

Berardis

Czúcz

Popescu

Delivered in open court in Luxembourg on 5 February 2015.

[Signatures]

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(
  *1
  )	Language of the case: English.

*1

(
  1
  )	Only the paragraphs of the present judgment which the Court considers it appropriate to publish are reproduced here.

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