OPINION OF ADVOCATE GENERAL

PITRUZZELLA

delivered on 7 April 2022 ( 1 )

Case C‑211/20 P

European Commission

v

Valencia Club de Fútbol, SAD

(Appeal – State aid – Aid granted to certain professional football clubs – Article 107(1) TFEU – Concept of ‘advantage’ – State guarantees – Guarantee Notice – Market-oriented guarantee price – Burden of proof – Commission’s due diligence obligation)

1. This case concerns an appeal brought by the European Commission, by which the Commission asks the Court of Justice to set aside the judgment of 12 March 2020, Valencia Club de Fútbol v Commission (T‑732/16, EU:T:2020:98; ‘the judgment under appeal’), by which the General Court of the European Union annulled, following an appeal by Valencia Club de Fútbol, SAD (‘Valencia CF’), Commission Decision (EU) 2017/365 of 4 July 2016 on the State aid SA.36387 (2013/C) (ex 2013/NN) (ex 2013/CP) implemented by Spain for Valencia Club de Fútbol, SAD, Hércules Club de Fútbol, SAD and Elche Club de Fútbol, SAD ( 2 ) (‘the decision at issue’).

2. This appeal will require the Court to examine the methodology laid down in the Commission Notice on the application of Articles [107] and [108 TFEU] to State aid in the form of guarantees ( 3 ) (‘the Guarantee Notice’), to assess whether aid exists in the case of an individual public guarantee – a methodology that the General Court asserts, in the judgment under appeal, was disregarded by the Commission. The Court will also have an opportunity to further clarify the scope of its case-law in relation to the burden of proof and the Commission’s due diligence obligation in determining the existence of an advantage, specifically where an individual State guarantee has been granted.

I. Legal context

3. In addition to Article 107 TFEU, points 2.1, 2.2, 3.1, 3.2, 4.1 and 4.2 of the Guarantee Notice are deemed to be relevant to this case.

II. Background to the dispute and decision at issue

4. The background to the dispute is set out in paragraphs 1 to 10 of the judgment under appeal, to which reference should be made for further details. For the purposes of the present proceedings, I merely note the following.

5. Valencia CF is a professional football club whose head office is situated in Valencia, Spain. Fundación Valencia is a non-profit foundation whose primary aim is to preserve, disseminate and promote the sporting, cultural and social aspects of Valencia CF and its relationship with its fans.

6. On 5 November 2009, the Instituto Valenciano de Finanzas (‘the IVF’), the financial establishment of the Generalitat Valenciana (Regional Government of Valencia, Spain), provided the Fundación Valencia with a guarantee for a bank loan of EUR 75 million from Bancaja (now Bankia), through which it acquired, in the context of a capital increase, 70.6% of the shares in Valencia CF (‘Measure 1’). ( 4 )

7. The guarantee covered 100% of the principal of the loan, plus interest and the costs of the guaranteed transaction. In return, an annual guarantee premium of 0.5% had to be paid by the Fundación Valencia to the IVF. The IVF received, as a counter-guarantee, a second-rank pledge on the shares in Valencia CF acquired by the Fundación Valencia. The duration of the underlying loan was six years. To begin with, the interest rate of the underlying loan was 6% for the first year, and subsequently the Euro Interbank Offered Rate (Euribor) 1-year + 3.5% margin with a 6% minimum rate. In addition, there was a 1% commitment fee. The schedule provided for repayment of the interest starting in August 2010 and repayment of the principal in two tranches of EUR 37.5 million on 26 August 2014 and 26 August 2015, respectively. It was envisaged that repayment of the guaranteed loan (principal and interest) would be financed by the sale of the shares in Valencia CF acquired by the Fundación Valencia.

8. On 10 November 2010, the IVF increased its guarantee to Fundación Valencia by EUR 6 million (‘Measure 4’). ( 5 )

9. Having been informed of those guarantees, the Commission initiated, by decision of 4 July 2006 (‘the decision to initiate the investigation procedure’), ( 6 ) an investigation to verify whether those guarantees were compatible with the EU legal provisions on State aid. In the course of the investigation, the Commission received information and observations from parties including the Kingdom of Spain, the IVF, Valencia CF and Fundación Valencia.

10. By means of the decision at issue, the Commission concluded, among other things, that Measure 1 and Measure 4 constituted unlawful State aid.

11. In that decision, the Commission first concluded that, at the time when Measures 1 and 4 were granted, Valencia CF was in a situation of difficulty. ( 7 ) However, the club was not in an extreme difficult situation within the meaning of point 2.2 and point 4.1 letter (a) of the Guarantee Notice. ( 8 ) Nevertheless, the Commission considered that, in view of the financial difficulties experienced by the club before the measures were implemented, the club’s rating could be considered to be CCC according to Standard & Poor’s rating scale. ( 9 )

12. Subsequently, in recitals 85 to 87 of the decision at issue, included in Section 7.1.2 entitled ‘Selective advantage’, the Commission stated as follows: ‘(85) As regards the aid element in the measures, all of which involve State guarantees, the Commission takes account of the … Guarantee Notice, Sections 2.2 and 3.2. [That] Guarantee Notice stipulates that the fulfilment of certain conditions could be sufficient for the Commission to rule out the presence of State aid, such as that the borrower is not in financial difficulty and that the guarantee does not cover more than 80% of the outstanding loan or other financial obligation. However, when the borrower does not pay a risk-carrying price for the guarantee, it obtains an advantage. Moreover, where the borrower is a firm in financial difficulty, it would not find a financial institution prepared to lend on any terms, without a State guarantee. (86) In this respect, the Commission disagrees with the argument of Spain that the conditions of the … Guarantee Notice are fulfilled. Applying these criteria to the case at hand, the Commission finds that: (a) Valencia CF, … [was] in financial difficulty (see recitals 70-82 above) at the time of granting of Measures 1, … and 4. (b) As demonstrated in recitals 7‑9 above, the guarantees covered more than 100% of the underlying loans. (c) The annual guarantee premiums of 0.5%‑1% charged for the guarantees in question cannot be considered as reflecting the risk of default for the guaranteed loans, given the difficulties of Valencia CF … and in particular their high debt-to-equity ratio or the fact that they had negative equity at the time of the measures in question. (87) On the basis of the above, the Commission concludes that Measures 1, … and 4 do not respect the conditions set out in the … Guarantee Notice and therefore comes to the view that the beneficiaries would not have obtained the measures under the same terms on the market and hence that these measures conferred an undue advantage to the beneficiaries.’

13. Recital 93 of the decision at issue, included in Section 7.2, entitled ‘Quantification of the aid’, states as follows: ‘(93) According to Section 4.2 of the … Guarantee Notice, the Commission considers that, for every guarantee, the aid amount is equal to the guarantee’s subsidy element, i.e. the amount stemming from the difference between, on the one hand, the interest rate of the loan actually applied thanks to the State guarantee plus the guarantee fee and, on the other hand, the interest rate that would have been applied to a loan without the State guarantee. The Commission notes that due to the limited number of observations of similar transactions on the market, such a benchmark will not provide a meaningful comparison. Therefore the Commission will use the relevant reference rate, which is 1000 basis points in view of the three football clubs’ difficulties and the very low value of the loans’ securities, plus 124‑149 basis points as the base rates of Spain at the time of the aid measures. Indeed, each loan was securitised with a pledge on the acquired shares in the clubs. However, the latter were in difficulty, i.e. they were conducting operations resulting in losses, and there was no credible viability plan in place to demonstrate that those operations would turn to producing profits for their shareholders. Therefore those clubs’ losses were encompassed in the value of the same clubs’ shares, thus the value of those shares as loan security was close to zero. On the basis of the Commission’s calculations, the aid amount in the measures under assessment would be … in the case of Valencia CF (EUR 19.193 million under Measure 1 …’.

III. Procedure before the General Court and the judgment under appeal

14. By application lodged at the General Court Registry on 20 October 2016, Valencia CF brought an action for annulment of the decision at issue, raising eight pleas in law in support of its action.

15. In the judgment under appeal, in paragraphs 116 to 138, the subject of this appeal, the General Court upheld – solely with reference to Measure 1 – ( 10 ) the third part of the first plea, in which Valencia CF alleged a manifest error on the part of the Commission in so far as it found that Measure 1 had not been granted at a market price.

16. The General Court held, first of all, that it follows from the Guarantee Notice that a market price, if any, must first be identified, either for the guarantee or for the relevant loan, against which the terms of the transaction at issue can be compared in order to determine whether the financial burden borne by the borrower is less than the burden it would bear if it were to procure the same loan and guarantee at market price. For that purpose, according to the General Court, on the basis of point 3.2 letter (d) and point 4.2 of the Guarantee Notice, the Commission must, first, verify whether the price paid for the guarantee is at least as high as the corresponding guarantee premium benchmark that can be found on the financial markets. Second, if no corresponding guarantee premium benchmark can be found on the financial markets, the total financial cost of the guaranteed loan, including the interest rate of the loan and the guarantee premium, has to be compared to the market price of a similar non-guaranteed loan. Third and finally, if there is no market price of a similar non-guaranteed loan, the reference rate should be used. ( 11 )

17. On that basis, the General Court held, referring to recitals 85 and 86(c) of the decision at issue, that the Commission had not indicated, in the arguments relating to the characterisation of an advantage, what market price it used to evaluate the premium at issue and had not examined the pledge made to the IVF as a counter-guarantee. The General Court considered that the Commission had merely carried out an evaluation of the applicant’s financial situation to conclude that, in view of the amount of the guarantee premium paid to the IVF, that premium was not in line with market conditions. The General Court then noted that, in its reply to the measures of organisation of procedure, the Commission had confirmed that, bearing in mind the financial situation of the applicant, which was a firm in difficulty, it considered that there was no market price which could serve as a benchmark for the guarantee premium. The General Court therefore concluded that, in order to establish whether the premium paid to the IVF concealed an advantage, the Commission, first, failed to take into consideration all of the relevant characteristics of the guarantee and the underlying loan, in particular the existence of securities provided by the borrower, and second, omitted to look for a market price with which to compare the premium at issue because it considered that, for a firm in difficulty, such a price did not exist. ( 12 )

18. In paragraphs 130 to 133 of the judgment under appeal, the General Court went on to state that it is true that the Commission did carry out a more detailed analysis in recital 93 of the decision at issue when quantifying the aid at issue. However, referring to the Commission’s reply to the measures of organisation of procedure and to a reply to a question asked during the hearing in which the Commission referred to the content of the decision to initiate the investigation procedure, the General Court considered, first, that the Commission had not inquired whether there was a ‘corresponding guarantee premium benchmark that can be found on the financial markets’. According to the General Court, the Commission had instead presumed that no financial establishment would act as a guarantor for a firm in difficulty, whereas the Guarantee Notice does not make provision for a general presumption that, when dealing with a firm in difficulty, there is no market price. Second, the General Court held that the Commission considered that it had fulfilled its investigative obligations relating to the existence of a market price for a similar non-guaranteed loan, merely expressing doubts to that effect in the decision to initiate the investigation procedure.

19. The General Court therefore criticised the Commission, first, for having disregarded the Guarantee Notice and presuming that no financial establishment would act as a guarantor for a firm in difficulty and that, as a result, no corresponding guarantee premium benchmark could be found on the market. Second, the General Court considered that the Commission had failed to fulfil its obligation to carry out an overall assessment, taking into account all relevant evidence in the case. ( 13 )

20. Third, in paragraphs 135 to 137 of the judgment under appeal, the General Court also criticised the Commission for failing to substantiate to the requisite legal standard the finding excluding the existence of a market price for a similar non-guaranteed loan. On that point, the General Court held that the Commission had merely expressed its doubts, in the decision to initiate the investigation procedure, regarding the existence of similar transactions without asking the Member State concerned or other sources, as it was entitled to do, for information relating to the existence of loans similar to the loan underlying the transaction at issue. Furthermore, according to the General Court, the Commission did not adduce any other information obtained during the administrative procedure which would have supported its findings relating to the lack of comparable transactions. ( 14 )

21. On the basis of those considerations, the General Court upheld the first plea in law raised by Valencia CF and set aside the decision at issue in so far as it related to Measure 1.

IV. Forms of order sought by the parties

22. In its appeal, the Commission is asking the Court of Justice to set aside the judgment under appeal in so far as, in that judgment, the Court annulled the decision at issue in respect of Measure 1, to refer the case back to the General Court, and to reserve the decision on costs.

23. Valencia CF is asking the Court of Justice, primarily, to find the Commission’s appeal inadmissible and, in the alternative, to dismiss that appeal in full and order the Commission to pay the costs.

24. The Kingdom of Spain contends that the Court of Justice should dismiss the Commission’s appeal and order it to pay the costs.

V. Analysis of the appeal

A. Brief summary of the arguments of the parties

25. The Commission bases its appeal on a single ground of appeal, alleging that, in paragraphs 124 to 138 of the judgment under appeal, the General Court infringed EU law by incorrectly interpreting Article 107(1) TFEU, specifically with regard to demonstrating the existence of an advantage. The Commission’s single ground of appeal is divided into three parts.

26. In the first part, the Commission asserts that the General Court misinterpreted the decision at issue and the Guarantee Notice. The Commission notes that, given the specific nature of the guaranteed transaction, it did not identify transactions on the market similar to the guarantee in question or non-guaranteed loans similar to the loan covered by that guarantee. However, contrary to the finding of the General Court, the Commission never considered that there was no market price for a corresponding guarantee premium and that, therefore, no market participant would have taken on the guarantee for Valencia CF. On the contrary, it can be seen from recital 93, letter (a) of the decision at issue that the Commission calculated the market interest rate applicable to the guarantee at issue. On this point, it is clear from the Guarantee Notice that, in certain exceptional circumstances, the Commission is able to consider that there is no market price for a given guarantee, but this would not have been the case in the decision at issue. ( 15 )

27. According to the Commission, the assessments set out in paragraphs 124 to 130 of the judgment under appeal are therefore based on an incorrect interpretation of the decision at issue. Specifically, in paragraph 124 of the judgment under appeal, the General Court made a partial and selective reading of the decision at issue. It took into consideration the final sentence of recital 85 in isolation, which, although inaccurate, does not form the basis of the decision at issue. Conversely, that decision was based on the insufficient level of the price paid for the guarantee, not on the fact that it was impossible to obtain a guarantee or a loan on the market. The Commission does not question the fact that there might be a market price, even where the guarantee is granted to a firm in difficulty. Paragraphs 127 to 129 of the judgment under appeal are therefore irrelevant.

28. Furthermore, the Commission argues that the judgment under appeal is based on a misinterpretation of the Guarantee Notice, which was merely summarised by the General Court in a few brief fragments, without the full logic being followed and applied. First, the General Court wrongly considered that the use of reference rates was comparable to a presumption, when, in fact, the use of such rates was an integral part of an empirical exercise aimed at establishing an indicator of the market price of the guarantee. Second, the General Court misinterpreted the Guarantee Notice as if it provided a strict hierarchy for market methods and reference methods in determining whether aid exists and the corresponding quantity of that aid. However, all the methods detailed in that notice are intended to determine the market price of the guarantee and are based on market data. Third, the use of the reference rate did not presuppose failure to fulfil the obligation to carry out an overall assessment which takes into account all relevant evidence in the case.

29. In the second part of its single ground of appeal, the Commission alleges that the General Court erred in law as regards the standard of the burden of proof concerning the existence of an advantage arising from an individual guarantee and as regards the Commission’s due diligence obligation. Specifically, the General Court placed an unreasonable burden of proof on the Commission to demonstrate that a public guarantee had not been granted at market conditions.

30. The Commission points out that, in the present case, first, it expressed doubts in the decision to initiate the investigation as to the existence of similar guarantees on the financial market and indicated that it appeared that market participants were not prepared to assume the risk that the beneficiaries might become insolvent. Second, the Commission also invited the Member State and the interested parties to submit comments in that regard, asking the Kingdom of Spain to provide all the information relevant to the assessment of the aid. Third, according to the Commission, in its observations relating to the decision to initiate the investigation procedure, Fundación Valencia had expressed doubts as to the existence of similar guarantees in the market.

31. According to the Commission, it discharges its burden of proof requiring it to demonstrate the existence of an advantage within the meaning of the case-law when, as in the present case, it sets out in the decision to initiate the investigation procedure reasons based on the difficulties experienced by the undertaking granted the guarantee and on the characteristics of that guarantee, from which it deduces the rating of the undertaking, and when, after inviting the Member State and the interested parties to submit comments on the case and requesting that they provide all the information relevant to the assessment of the aid, nothing in the file suggests that there are similar transactions on the market (and the interested parties also confirm this). In such circumstances, the due diligence obligation does not require the Commission to search for elements that are unlikely to exist or are merely hypothetical. In such circumstances, there would be no logical reason for the Commission to be obliged to make use of its powers vis-à-vis the Member State, third parties or even other sources. The invitation made in the decision to initiate the investigation procedure would be sufficient for the Member State and/or the interested parties to notify the Commission of similar transactions, if they existed. In principle, it is the Member State claiming to have acted as a rational private operator in a market economy that should have examined whether similar transactions exist on the market. The public authorities and the beneficiary of the measure would be in a better position than the Commission to ascertain the existence of similar transactions. Moreover, the Commission could not be asked to prove a negative. The case-law of both the Court of Justice and the General Court confirms this approach.

32. More generally, in terms of the demonstration of the existence of the aid, the Commission considers that it is obliged to use its specific powers of investigation only when it does not have sufficient evidence to prove the existence of aid, when it is aware of the existence of an important element that is not in its possession and that could affect its assessment of the existence of aid, or when it is reasonable to suppose that the information in its possession is incomplete. None of those situations exists in the present case.

33. In the third part of its single ground of appeal, the Commission alleges that the General Court distorted the facts when, in paragraph 137 of the judgment under appeal, it stated that ‘the Commission does not adduce any other information obtained during the administrative procedure which would have supported its findings relating to the lack of comparable transactions’. In fact, at the hearing before the General Court, the Court referred to the doubts expressed by Fundación Valencia as to the existence of similar guarantees in the market, mentioned in point 30, an element on which it also based its decision.

34. Valencia CF has raised – as a preliminary matter – a plea of inadmissibility in which it submits that the appeal should be declared inadmissible. On the merits, Valencia CF and the Kingdom of Spain dispute the Commission’s arguments.

B. Legal analysis

1. Regarding the admissibility of the appeal

35. As a preliminary point, it is appropriate to analyse the plea of inadmissibility raised by Valencia CF against the appeal.

36. Valencia CF submits, first, that the Commission has not identified with the requisite precision the points in the grounds of the judgment under appeal that it is challenging. Second, Valencia CF asserts that, since the Guarantee Notice is not an instrument of substantive EU law, any breach of that notice cannot be characterised as a point of law that the Court may examine in the context of an appeal. Third, according to Valencia CF, the Commission has merely repeated pleas and arguments already put forward before the General Court and is seeking a new assessment of the facts, which is not admissible in an appeal.

37. I believe that the plea of inadmissibility raised by Valencia CF should be rejected.

38. First of all, the Commission states clearly in its appeal the paragraphs and sections of the judgment under appeal that are the subject of its claims. Furthermore, as we can infer from points 25 to 33 above, the errors in law alleged by the Commission to have been committed by the General Court are clearly apparent from the arguments put forward by the Commission.

39. Indeed, the Commission is challenging, first, the General Court’s interpretation of the decision at issue. On that point, the Court of Justice has already held that any grounds directed against an interpretation by the General Court of a Commission decision are admissible in an appeal. ( 16 ) The Commission is then challenging the General Court’s interpretation of the Guarantee Notice. In this regard, we should note that, according to settled case-law, in the specific area of State aid, the Commission is bound by the guidelines and notices that it issues, to the extent that they do not depart from the rules in the Treaty. ( 17 ) It follows that, since the General Court criticised the Commission for disregarding the Guarantee Notice, a plea challenging the interpretation of that notice must be regarded as admissible. Similarly, an alleged failure to have regard to the rules of evidence is a question of law, which is admissible in an appeal. ( 18 )

40. It is apparent from the above that, contrary to what Valencia CF has asserted, the Commission’s appeal is not intended either to repeat pleas and arguments already put forward at first instance or to call into question the assessment of the facts and evidence made by the General Court.

2. On the merits: the single ground of appeal

41. In terms of the merits of the case, in order to be able to respond to the arguments put forward by the Commission in its appeal, I consider it necessary, as a preliminary point, to make a few comments on the Guarantee Notice (section (a)) and to review the principles developed in the case-law concerning the Commission’s burden of proof and its due diligence obligation in the context of assessing the existence of an advantage under Article 107(1) TFEU (section (b)). On the basis of those comments and that review, I will then analyse the Commission’s single ground of appeal (section (c)).

(a) The Guarantee Notice

42. According to point 1.1 of the Guarantee Notice, that notice provides information about the principles and methodology used by the Commission to apply the provisions of the Treaty on State aid to State guarantees. In accordance with the case-law noted in point 39 above, this is binding on the Commission but cannot bind the Court. ( 19 )

43. As can be inferred from point 2.1 and point 2.2 of the Guarantee Notice, the benefit of a State guarantee is that the risk associated with default on the loan guaranteed is carried by the State. Such risk-carrying by the State should normally be remunerated by an appropriate fee, namely the premium. There is an advantage within the meaning of Article 107(1) TFEU in the case of a total or partial waiver of the premium, which involves a loss of resources for the State and at the same time an advantage for the undertaking concerned.

44. In accordance with the case-law of the Court of Justice, ( 20 ) it is apparent from the Guarantee Notice ( 21 ) that the assessment to determine whether an advantage is being granted and, therefore, to determine that aid exists is based on the ‘market economy investor principle’. That assessment is intended to verify whether the guarantee has been granted on conditions which would be acceptable for a private operator under the normal conditions of a market economy.

45. For this purpose, the Guarantee Notice provides for an analysis intended to determine, first of all, whether a prudent private investor would have granted a similar guarantee to the beneficiary under the same conditions and at the same price as the guarantee at issue. If that is not the case, there is an advantage and therefore aid. As a second step, that aid must be quantified by determining at what price, in the specific circumstances of the case, the prudent private investor would potentially have granted a similar guarantee. The amount of aid will, in general, be equal to the difference between the price actually paid for the guarantee and the price a prudent private investor would charge for granting such a guarantee.

46. The structure of the Guarantee Notice follows this two-stage process. First of all, Section 3 of the notice lays down a number of cumulative conditions that, if met, rule out the presence of State aid. With specific regard to individual guarantees, such as the one at issue in this case, point 3.2 of the Guarantee Notice states that the fulfilment of certain conditions described in that point is sufficient to rule out the presence of State aid. Those conditions are: the borrower is not in financial difficulty (letter (a)); the extent of the guarantee can be properly measured when it is granted (letter (b)); the guarantee does not cover more than 80% of the loan (letter (c)); and a market-oriented price is paid for the guarantee (letter (d)).

47. The Guarantee Notice does not specify expressly the consequences of failure to fulfil those conditions. However, it should be noted that if one or more of these conditions are not met, this does not imply automatically and necessarily that there is State aid. Failure to meet one or more of those conditions indicates that there is an indicator of aid, which means that a more detailed analysis is necessary. In this context, the condition set out in point 3.2 letter (d) – that a market-oriented price must be paid for the guarantee – is particularly important. If that condition is not met, that is, if the State guarantee in question is granted at a price below the market price, there can be no doubt that the measure in question is likely to confer an advantage on the beneficiary and therefore constitutes State aid.

48. Point 3.2 letter (d) of the Guarantee Notice provides a detailed description of the criteria to be used to determine whether the guarantee in question is granted at a market-oriented price.

49. That point states, in the first and second paragraphs, that for that purpose it must first be verified that there is a ‘corresponding guarantee premium benchmark on the financial markets’. If no corresponding guarantee premium benchmark can be found, ‘the total financial cost of the guaranteed loan, including the interest rate of the loan and the guarantee premium, has to be compared to the market price of a similar non-guaranteed loan’.

50. That point then specifies, in the third paragraph, that, in both cases, in order to determine the corresponding market price, the essential characteristics of the guarantee and of the underlying loan should be analysed. That analysis should, in particular, allow the borrower to be classified by means of a risk rating.

51. If, in the light of the analysis carried out with regard to the above parameters, the Commission concludes that the guarantee granted confers an advantage on the beneficiary within the meaning of Article 107(1) TFEU, the amount of aid must be quantified, as a second step. Section 4 of the Guarantee Notice provides information about the criteria to be used for that quantification.

52. As already mentioned, the notice states that, in general, the amount of the aid will be equal to the difference between the price actually paid for the guarantee and the price a prudent private investor would charge for granting such a guarantee.

53. In some cases, however, it is possible that, if the undertaking is in extreme difficulty and therefore the probability that the borrower will not repay the loan is particularly high, no prudent private investor would grant the guarantee. In such a case, which is described in point 2.2 and point 4.1 letter (a) of the Guarantee Notice, the market price for the guarantee does not exist, because no investor would be available to grant it. In such a case, which, under point 4.1 letter (a) of the Guarantee Notice, occurs only in ‘exceptional circumstances’, the amount of aid will then be equal to the amount of the guarantee itself. This is explained by the fact that, on the one hand, since there is no market price for granting such a guarantee, the amount of aid cannot be determined as the difference between the price actually paid and a factor that does not exist. On the other hand, since the risk of default is particularly high, the State will most likely be obliged to pay out the entire sum guaranteed. ( 22 )

54. Outside this specific hypothesis, in order to quantify the aid, it will be necessary to identify a market price at which the guarantee is granted that can be compared with the price actually paid for the guarantee in question.

55. On that point, point 4.2 of the Guarantee Notice states that where the market does not provide guarantees for the type of transaction concerned, no market price for the guarantee is available. This should not be understood in the sense that the situation is as indicated in point 53 above, but rather in the sense that a market price is not ‘empirically’ available, although it can be constructed. In such a case, the aid is quantified by calculating ‘the difference between the specific market interest rate this company would have borne without the guarantee and the interest rate obtained by means of the State guarantee after any premiums paid have been taken into account’. According to the same point of the notice, ‘if there is no market interest rate and if the Member State wishes to use the reference rate as a proxy, … the conditions laid down in the communication on reference rates … are valid to calculate the aid intensity of an individual guarantee’.

(b) Case-law principles on the Commission’s burden of proof and its due diligence obligation in proving the existence of an advantage

56. According to the settled case-law of the Court, it is for the Commission to prove the existence of State aid within the meaning of Article 107(1) TFEU and thus also to prove that an advantage has been granted to the beneficiaries. ( 23 )

57. It is also apparent from settled case-law that, where the private investor principle is applicable, the Commission has the burden of proving, taking into account, specifically, the information provided by the Member State concerned, that the conditions for the application of that principle have been satisfied. ( 24 )

58. It is therefore for the Commission to carry out an overall assessment, taking into account all relevant evidence in the case enabling it to determine whether the recipient undertaking would manifestly not have been able to obtain similar facilities from such a private investor. ( 25 ) According to case-law, for the purposes of applying the private investor test, the only relevant evidence is the information which was available, and the developments which were foreseeable, at the time when the decision to adopt the measure was taken. ( 26 )

59. On that point, the Commission is required, in the interests of correct application of the fundamental rules of the FEU Treaty relating to State aid, to conduct a diligent and impartial examination of the contested measures, so that it has at its disposal, when adopting the final decision, the most complete and reliable information possible for that purpose. ( 27 )

60. In particular, where it appears that the private operator test might be applicable, it is for the Commission to ask the Member State concerned to provide it with all the relevant information enabling it to determine whether the conditions for applying that test are satisfied. ( 28 )

61. Indeed, as the Commission does not necessarily have direct knowledge of the circumstances in which a decision to adopt a measure was taken, it must rely, for the purposes of applying that test, to a large extent, on the objective and verifiable evidence produced by the Member State at issue for the purposes of establishing that the conditions for application of the private investor test are satisfied. ( 29 )

62. However, even where that institution is faced with a Member State which does not fulfil its duty to cooperate and has not provided the Commission with the information requested, it must base its decisions on reliable and coherent evidence which provides a sufficient basis for concluding that an undertaking has benefited from an advantage amounting to State aid and which, therefore, support the conclusions which it arrives at. ( 30 )

63. Indeed, given that the purpose of the recovery of the aid at issue from the beneficiary is to eliminate the distortion of competition brought about by a certain competitive advantage and, thus, to re-establish the status quo before the aid was granted, the Commission cannot assume that an undertaking has benefited from an advantage constituting State aid solely on the basis of a negative presumption, based on a lack of information enabling the contrary to be found, if there is no other evidence capable of positively establishing the actual existence of such an advantage. ( 31 )

(c) The single ground of appeal

64. It is on the basis of the considerations detailed above that we need to analyse the Commission’s single ground of appeal against the judgment under appeal.

65. To verify that the General Court’s analysis is correct given the Commission’s claims, it is necessary, in my view, to begin by examining the decision at issue in the light of the judgment under appeal.

66. On that basis, in the decision at issue, the Commission first determined, in Section 7.1.2, that a selective advantage exists and then, in Section 7.2, quantified that aid.

67. In Section 7.1.2, the Commission first established, in recitals 73 to 77, that Valencia CF was in difficulty, but ruled out, in recital 80, the possibility that it might be in an extreme difficult situation. On that point, in paragraphs 51 to 106 of the judgment under appeal, the General Court rejected the arguments raised by Valencia CF aimed at calling into question the Commission’s analysis of that company’s situation of difficulty. That part of the judgment under appeal is not being challenged and is therefore outside the scope of the present appeal.

68. Subsequently, in recitals 81 to 83 of the decision at issue, the Commission inferred from this situation of difficulty that it was possible to consider that the rating applied to Valencia CF fell within the CCC category, according to the standard methodology used by the rating agencies (Standard & Poor’s in particular). Although Valencia CF challenged that analysis both in the third part of the first plea in law of its action at first instance – upheld by the General Court – and in its reply in the present appeal, it should be noted that, in the judgment under appeal, the General Court did not call into question that analysis and resulting conclusion. Consequently, they do not come within the scope of this appeal.

69. In recital 85 of the decision at issue – reproduced in point 12 above – the Commission refers to the Guarantee Notice, indicating that its analysis is based on that notice and recalling some of its principles. The General Court mentions that recital, the final sentence specifically, in paragraph 124 of the judgment under appeal. As the Commission itself admits, that last sentence is clearly inaccurate. ( 32 )

70. The actual analysis of the case can, however, be found in recitals 86 and 87 of the decision at issue.

71. More specifically, in recital 86, the Commission notes that the conditions indicated in point 3.2 of the Guarantee Notice are not met. More specifically, the Commission notes: (a) that Valencia CF is a failing firm (see point 3.2 letter (a) of the Guarantee Notice); (b) that the guarantee covers more than 100% of the loan (see point 3.2 letter (c) of that notice); and that (c) a guarantee premium of 0.5% does not reflect the default risk for the guaranteed loan and that therefore the price of the guarantee cannot be regarded as a market-oriented price (see point 3.2 letter (d) of that notice).

72. On the basis of that analysis, the Commission concludes in recital 87 that the measures in question do not respect the conditions set out in the Guarantee Notice and therefore ‘the beneficiaries would not have obtained the measures under the same terms on the market’.

73. It follows from the above analysis that the General Court was correct in establishing, in paragraph 125 of the judgment under appeal, that in the findings relating to the characterisation of an advantage – namely those stated in Section 7.1.2 of the decision at issue – the Commission did not indicate the market price against which it had assessed the premium in question.

74. It is only in recital 93 of the decision at issue – namely Section 7.2 on the amount of the aid – that the Commission observes that ‘the interest rate that would have been applied to a loan without the State guarantee … will not provide a meaningful comparison’ and that is ‘due to the limited number of observations of similar transactions on the market’.

75. On that point, it should be noted that, as has been established in points 48 to 50 above, within the meaning of the Guarantee Notice, in order to determine whether, in application of the ‘market economy investor principle’, a market-oriented price has been paid for the guarantee, it must first be verified whether ‘the price paid for the guarantee is at least as high as the corresponding guarantee premium benchmark that can be found on the financial markets’ and, if no corresponding guarantee premium benchmark can be found, ‘the total financial cost of the guaranteed loan, including the interest rate of the loan and the guarantee premium, has to be compared to the market price of a similar non-guaranteed loan’.

76. In the system created by the Guarantee Notice, the determination of those reference prices (namely the ‘guarantee premium benchmark on the financial markets’ and, in the absence of that benchmark, ‘the market price of a similar non-guaranteed loan’), where it is possible to identify those elements, appears crucial in determining whether the guarantee in question can be classified as State aid.

77. On that point, it is clear from the case file and from paragraphs 125 and 131 of the judgment under appeal that, in the context of measures of organisation of procedure, the General Court expressly questioned the Commission in order to ascertain the basis for the abovementioned conclusion, stated in recital 93 of the decision at issue, from which it was inferred, in essence, that there were no ‘similar non-guaranteed loans’ that could be used as a benchmark for determining whether the price paid for the guarantee at issue was market-oriented.

78. In response to that question, the Commission stated that, in view of the financial situation of Valencia CF, which was a company in difficulty, it considered that there was no market price that could serve as a reference for the premium in question. In its reply, the Commission went on to state that ‘in other words, it had not been able to find similar transactions with premiums paid by financial establishments, since those establishments did not support transactions as high-risk as those involving the assumption of guarantees in favour of companies with a CCC rating’. The Commission also referred to point 3.3 of the Guarantee Notice, from which it infers that there is no market reference rate for loans granted to undertakings that have been awarded a CCC rating. It also added that nothing in the administrative file indicated the contrary.

79. It follows from that reply to the question asked by the General Court that the Commission essentially inferred from the fact that, as a result of its own analysis, it ‘can be considered’ ( 33 ) that Valencia CF’s rating fell within the CCC category, that no financial establishment would have supported such a high-risk transaction as taking out a guarantee in favour of Valencia CF, and that, therefore, for that reason and in the absence of any indication to the contrary in the file, the existence of ‘similar non-guaranteed loans’ that could be used as a benchmark for comparison with the guarantee in question had to be ruled out.

80. In this respect, I note that, apart from the fact that this argument underlying the conclusion stated in recital 93 of the decision at issue is entirely absent from the text of the decision at issue, it seems to be based on an argument that could be described as ‘logically plausible’, but is not in fact based on actual evidence.

81. It is indeed plausible, as asserted by the Commission, to consider that financial establishments generally do not enter into guarantee transactions with companies having a CCC rating, although, to be fair, the Commission provided only a reference to point 3.3 of the Guarantee Notice in support of that assertion. However, in the present case, the finding that there were no ‘similar non-guaranteed loans’ that could be used as a benchmark to determine whether the price paid for the guarantee in question was market-oriented is, to some extent, based on a twofold inference, namely: on the one hand, the inference that, because of the financial difficulty faced by Valencia CF, it ‘can be considered’ that the rating awarded to that undertaking fell within the CCC category. That rating was therefore attributed to Valencia CF by the Commission itself. ( 34 ) On the other hand, there is the inference, as a consequence of the attribution of that rating, that no financial establishment would have concluded a similar transaction with Valencia CF.

82. I doubt whether a conclusion based solely on such logically plausible reasoning can be regarded as complying with the requirements concerning the burden of proving the existence of an advantage and the Commission’s due diligence obligation arising from the case-law referred to in points 56 to 63 above.

83. Indeed, as noted above in point 57, the burden of proving that the conditions for application of the private operator principle are not met falls to the Commission. That burden, as interpreted by the case-law, requires that the Commission rely on evidence that is able to positively demonstrate the existence of an advantage and cannot permit it to rely simply on mere inferences, however plausible they may be, or to rely on negative presumptions without the Commission being able to show that it has, at the very least, sought to verify in concreto the validity of those inferences by means of evidence with a certain degree of reliability and coherence that provides a sufficient basis for the conclusions it reaches, and that is therefore capable of supporting those conclusions. Indeed, it follows from the settled case-law mentioned in point 59 above that the Commission must conduct a diligent and impartial examination, so that it has at its disposal, when adopting the final decision, the most complete and reliable information possible for that purpose. The Commission’s due diligence obligation means that it cannot base its conclusions merely on ‘logically plausible’ reasoning without in any way seeking to obtain specific information on which to base its conclusion.

84. In that respect, I do not share the Commission’s view, stated in point 31 above, whereby, in a situation such as that in the present case, it should be regarded as having discharged its burden of proof and complied with its due diligence obligation within the meaning of the case-law. In my opinion, in a case such as this one, the Commission cannot in fact conclude, on the basis of deductive reasoning, that there are no ‘similar non-guaranteed loans’ that could be used as a benchmark for determining whether the price paid for the guarantee in question is market-oriented, merely asking the Member State and the interested parties to submit comments on the decision to initiate the investigation procedure and on the conclusions contained in that decision, and noting that nothing in the file suggests that there are similar transactions on the market.

85. Indeed, as is clear from the case-law mentioned in points 57 and 61 above, when dealing with State aid, the Commission bases its conclusions to a large extent on the information provided by the Member State. However, first, it is also apparent from the case-law cited in point 60 that it is for the Commission to ask the Member State concerned to provide it with all the relevant information enabling it to determine whether the conditions for applying the private investor principle are satisfied. A mere request to submit comments on the decision to initiate the investigation procedure does not seem to me to be equivalent to such a request for information. Second, it also follows from the case-law cited in point 62 that, even where the Member State in question does not cooperate, the Commission must still base its decisions on reliable and coherent evidence that provides a sufficient basis for its conclusions. It cannot therefore rely simply on deductive, logically plausible reasoning.

86. This does not mean that the Commission should look for elements that are merely hypothetical or that it should use its specific powers of investigation in cases where this is not necessary. It simply means that the Commission’s due diligence obligation does not allow it, in a case such as this one, to rely solely on logically plausible reasoning without in any way – at least attempting to – substantiate its conclusion, using specific information that could underpin the conclusion that it had to rule out the possible existence of ‘similar non-guaranteed loans’ which could be used as a benchmark for comparison of the guarantee at issue.

87. It follows from all the above analysis that it cannot be held, as the Commission claims, that the General Court erred in law and placed an undue burden of proof on that institution when it found, in paragraph 135 of the judgment under appeal, that the Commission had erred in ruling out, in recital 93 of the decision at issue, the existence of a market price for a similar non-guaranteed loan ‘due to the limited number of observations of similar transactions on the market’, since that finding was not sufficiently substantiated. It follows that the second part of the single ground of appeal raised by the Commission must be dismissed.

88. That error by the Commission in respect of an element that, as noted in points 75 and 76, with reference to points 48 to 50, is crucial in the analysis required by the Guarantee Notice for the classification of a State guarantee such as that at issue as State aid is, in my view, also sufficient to justify the General Court’s conclusion in paragraph 134 of the judgment under appeal that the Commission disregarded that notice in the present case. Indeed, an analysis in accordance with that Guarantee Notice would have required a diligent verification of the possible existence of a market price for a similar non-guaranteed loan. It follows that the first part of the Commission’s single ground of appeal must, in any event, in my view, also be rejected.

89. As regards the third part of the Commission’s sole ground of appeal, relating to an alleged distortion of the facts by the General Court and summarised in point 33 above, it should be noted that according to the Court of Justice’s settled case-law, a distortion must be obvious from the documents in the Court’s file, without any need to carry out a new assessment of the facts and the evidence. ( 35 )

90. The Commission submits that by holding – in paragraph 137 of the judgment under appeal – that the Commission had not provided any other evidence obtained during the administrative procedure that supported its findings relating to the absence of similar transactions, the General Court distorted the facts, since it also relied on the doubts expressed by Fundación Valencia as to the existence of similar guarantees in the market in its observations relating to the decision to initiate the investigation procedure.

91. In that regard, I note, first, that there is no reference to any doubts expressed by Fundación Valencia either in the decision at issue or in the Commission’s reply, referred to above, to the measures of organisation of procedure ordered by the General Court. Second, and in any case, a simple reading of the section in Fundación Valencia’s observations referred to by the Commission shows that the latter merely stated that it was ‘unaware’ of whether there were comparable similar guarantees on the market and not, as the Commission claims, expressing doubts as to their existence. Under those circumstances, the General Court cannot, in my view, be accused of distorting the facts and, consequently, the third part of the Commission’s sole ground of appeal cannot be upheld.

92. In conclusion, it follows from the above that, in my view, the Commission’s sole ground of appeal is unfounded. Consequently, I believe the appeal should be dismissed.

VI. Costs

93. Under Article 184(2) of the Rules of Procedure of the Court of Justice, where the appeal is dismissed, the Court is to make a decision as to the costs. Under Article 138(1) of the Rules of Procedure, which is applicable to the procedure on appeal by virtue of Article 184(1) thereof, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings.

94. Article 140(1) of the Rules of Procedure, which is also applicable to the procedure on appeal by virtue of Article 184(1) thereof, provides that the Member States intervening in the proceedings are to bear their own costs.

95. In the present case, since the Commission has been unsuccessful, it must be ordered to pay the costs in accordance with the claims made by Valencia CF. The Kingdom of Spain, which acted as an intervener at first instance, is to bear its own costs.

VII. Conclusion

96. In the light of the foregoing considerations, I propose that the Court should: – dismiss the appeal; – order the European Commission to bear its own costs and to pay those incurred by Valencia Club de Fútbol, SAD; – order the Kingdom of Spain to bear its own costs.

( 1 ) Original language: Italian.

( 2 ) OJ 2017 L 55, p. 12.

( 3 ) OJ 2008 C 155, p. 10.

( 4 ) See recitals 6 to 8 of the decision at issue and paragraph 9 of the judgment under appeal.

( 5 ) See the details in recitals 12 and 13 of the decision at issue and paragraphs 5 and 9 of the judgment under appeal.

( 6 ) OJ 2014 C 69, p. 99.

( 7 ) Within the meaning of the Community guidelines on State aid for rescuing and restructuring firms in difficulty (OJ 2004 C 244, p. 2), see recitals 73 to 77 of the decision at issue.

( 8 ) See recital 80 of the decision at issue.

( 9 ) Recitals 81 to 83 and footnote 25 of the decision at issue.

( 10 ) As can be seen from paragraphs 50 and 140 of the judgment under appeal, the General Court in fact held that the first plea in law was inadmissible in so far as it related to Measure 4.

( 11 ) Defined in accordance with the Communication from the Commission on the revision of the method for setting the reference and discount rates (OJ 2008 C 14, p. 6). See paragraphs 121 to 123 and 133 of the judgment under appeal.

( 12 ) Judgment under appeal, paragraphs 124 and 125.

( 13 ) See paragraph 134 of the judgment under appeal.

( 14 ) See paragraphs 135 to 138 of the judgment under appeal.

( 15 ) The Commission refers to point 4.1(a) of the Guarantee Notice and cites, as an example, the decision that was the subject of the recent judgment of 26 March 2020, Larko v Commission (C‑244/18 P, EU:C:2020:238, paragraphs 92 to 119).

( 16 ) See, on that point, judgment of 26 March 2020, Larko v Commission (C‑244/18 P, EU:C:2020:238, paragraph 102 and the case-law cited).

( 17 ) See, inter alia, judgment of 2 December 2010, Holland Malt v Commission (C‑464/09 P, EU:C:2010:733, paragraph 47 and the case-law cited).

( 18 ) See, inter alia, judgment of 10 July 2008, Bertelsmann and Sony Corporation of America v Impala (C‑413/06 P, EU:C:2008:392, paragraph 44 and the case-law cited).

( 19 ) See, on this point, inter alia, judgment of 7 March 2002, Italy v Commission (C‑310/99, EU:C:2002:143, paragraph 52 and the case-law cited).

( 20 ) On this point, see, inter alia, judgment of 3 April 2014, France v Commission (C‑559/12 P, EU:C:2014:217, paragraph 96).

( 21 ) See, specifically, point 3.1 of the Guarantee Notice.

( 22 ) Such a situation occurred in the case that resulted in the judgment of 26 March 2020, Larko v Commission (C‑244/18 P, EU:C:2020:238, see paragraphs 92 to 119). On this point, see also the corresponding judgment of 1 February 2018, Larko v Commission (T‑423/14, EU:T:2018:57, paragraphs 180 to 194).

( 23 ) See, inter alia, judgment of 4 March 2021, Commission v Fútbol Club Barcelona (C‑362/19 P, EU:C:2021:169, paragraph 62 and the case-law cited).

( 24 ) See judgment of 10 December 2020, Comune di Milano v Commission (C‑160/19 P, EU:C:2020:1012, paragraph 110), and, to that effect, judgment of 26 March 2020, Larko v Commission (C‑244/18 P, EU:C:2020:238, paragraph 65 and the case-law cited).

( 25 ) Judgment of 26 March 2020, Larko v Commission (C‑244/18 P, EU:C:2020:238, paragraph 66).

( 26 ) See, to that effect, judgments of 5 June 2012, Commission v EDF (C‑124/10 P, EU:C:2012:318, paragraph 105), and of 10 December 2020, Comune di Milano v Commission (C‑160/19 P, EU:C:2020:1012, paragraph 112).

( 27 ) See, inter alia, judgments of 2 September 2010, Commission v Scott (C‑290/07 P, EU:C:2010:480, paragraph 90), and of 26 March 2020, Larko v Commission (C‑244/18 P, EU:C:2020:238, paragraph 67).

( 28 ) See, inter alia, judgments of 20 September 2017, Commission v Frucona Košice (C‑300/16 P, EU:C:2017:706, paragraph 24); of 26 March 2020, Larko v Commission (C‑244/18 P, EU:C:2020:238, paragraph 68); and of 10 December 2020, Comune di Milano v Commission (C‑160/19 P, EU:C:2020:1012, paragraph 104). See also, to that effect, judgments of 5 June 2012, Commission v EDF (C‑124/10 P, EU:C:2012:318, paragraph 104), and of 6 March 2018, Commission v FIH Holding and FIH Erhvervsbank (C‑579/16 P, EU:C:2018:159, paragraph 47).

( 29 ) See, to that effect, judgment of 10 December 2020, Comune di Milano v Commission (C‑160/19 P, EU:C:2020:1012, paragraph 112).

( 30 ) See judgments of 17 September 2009, Commission v MTU Friedrichshafen (C‑520/07 P, EU:C:2009:557, paragraphs 54 to 56), and of 26 March 2020, Larko v Commission (C‑244/18 P, EU:C:2020:238, paragraph 69).

( 31 ) Judgments of 17 September 2009, Commission v MTU Friedrichshafen (C‑520/07 P, EU:C:2009:557, paragraphs 57 and 58); of 26 March 2020, Larko v Commission (C‑244/18 P, EU:C:2020:238, paragraph 70); and of 10 December 2020, Comune di Milano v Commission (C‑160/19 P, EU:C:2020:1012, paragraph 111).

( 32 ) In my view, that sentence is an inaccurate paraphrase of the sentence contained in point 2.2 of the Guarantee Notice, which refers to situations in which the undertaking is in a state of extreme difficulty, such as those indicated in point 55 above. As the Commission itself found in recital 80 of the decision at issue, that is not the case here.

( 33 ) See recital 83 of the decision at issue.

( 34 ) In that regard, I note that Valencia CF and the Kingdom of Spain claim that Bancaja, the bank that provided the loan, had given it a BB rating.

( 35 ) See, inter alia, judgment of 11 November 2021, Autostrada Wielkopolska v Commission and Poland (C‑933/19 P, EU:C:2021:905, paragraph 94 and the case-law cited).