Case T‑732/16

Valencia Club de Fútbol, SAD

v

European Commission

Judgment of the General Court (Fourth Chamber) of 12 March 2020

(State aid – Aid granted by Spain to certain professional football clubs – Guarantee – Decision declaring the aid to be incompatible with the internal market – Advantage – Firm in difficulty – Private investor test – Guidelines on State aid for rescuing and restructuring firms in difficulty – Amount of the aid – Recipient of the aid – Principle of non-discrimination – Duty to state reasons)

1. Judicial proceedings – Application initiating proceedings – Formal requirements – Identification of the subject matter of the dispute – Brief summary of the pleas relied on – Documents annexed to the application – Admissibility – Conditions

   (Statute of the Court of Justice, Article 21; Rules of Procedure of the General Court, Article 76(d))

   (see paragraphs 28, 29)

2. Judicial proceedings – Application initiating proceedings – Formal requirements – Clear and precise statement of the pleas relied on – Plea alleging lack or inadequacy of the statement of reasons – Separate plea from the one concerning substantive legality – Lack of clarity and precision – Inadmissibility

   (Articles 263 and 296 TFEU; Statute of the Court of Justice, Article 21; Rules of Procedure of the General Court, Article 76(d))

   (see paragraphs 35-39)

3. State aid – Examination by the Commission – Guidelines adopted by the Commission – Binding effect – Limits – Guidelines on State aid for rescuing and restructuring firms in difficulty – Firm in difficulty – Definition – Complex economic assessment – Discretion of the Commission – Judicial review – Limits

   (Arts 107 and 108 TFEU; Communication from the Commission 2004/C 244/02)

   (see paragraphs 58-62)

4. State aid – Prohibition – Exceptions – Aid capable of being regarded as compatible with the internal market – Aid for rescuing a firm in difficulty – Guidelines on State aid for rescuing and restructuring firms in difficulty – Firm in difficulty – Definition – Limited liability company – Paragraph 10(a) of the Guidelines – Disappearance of more than half of the registered capital – Assessment criteria – Taking into consideration of the reduction of equity in the absence of a reduction in registered capital – Whether permissible

   (Article 107(3)(c) TFEU; Communication from the Commission 2004/C 244/02, paragraph 10(a))

   (see paragraphs 62, 63, 66-71, 73-104)

5. State aid – Definition – Grant of an advantage to the beneficiaries – Public guarantee granted to a non-profit organisation for a bank loan taken out for the sole purpose of recapitalising a firm in difficulty – Payment of consideration in the form of a guarantee premium – Assessment according to the private investor test – Assessment in the light of all the factors relevant to the transaction at issue and to its context – Presumption that the guarantee premium does not fulfil market conditions – Not permissible – Infringement of the Guarantee Notice – Manifest error of assessment

   (Article 107(1), TFEU; Commission Notice 2008/C 155/02, paragraphs 3.2(d) and 4.1)

   (see paragraphs 122, 123, 126-134)

6. State aid – Definition – Grant of an advantage to the beneficiaries – Public guarantee granted to a non-profit organisation for a bank loan taken out for the sole purpose of recapitalising a firm in difficulty – Assessment according to the private investor test – Burden of proof on the Commission – Scope – Failure to comply with the obligation to gather information relating to the existence of similar transactions carried out under market conditions – Manifest error of assessment

   (Article 107(1) TFEU)

   (see paragraphs 135-137)

7. State aid – Examination by the Commission – Determination of the aid beneficiary – Actual benefit – Public guarantee granted to a non-profit organisation for a bank loan taken out for the sole purpose of recapitalising a firm in difficulty – Classification of the firm as recipient of the aid measure – Whether permissible – Existence of co-beneficiaries – Irrelevant

   (Article 107(1) TFEU)

   (see paragraphs 150-153, 155)

8. State aid – Prohibition – Exceptions – Aid capable of being regarded as compatible with the internal market – Aid for restructuring a firm in difficulty – Conditions – Lack of a coherent restructuring plan at the time the aid is granted – Consequences – Consecutive State interventions inseparably linked to each other – Assessment criteria

   (Article 107(3)(c), TFEU)

   (see paragraphs 164-171)

9. State aid – Prohibition – Exceptions – Aid capable of being regarded as compatible with the internal market – Assessment in the light of Article 107(3)(c) TFEU – Taking into account previous practice – Precluded – No infringement of the principle of equal treatment

   (Article 107(3)(c) TFEU)

   (see paragraphs 179, 181, 182)

10. State aid – Recovery of unlawful aid – Calculation of the amount to be recovered – Aid to a firm in difficulty – Extension of the public guarantee granted to a non-profit organisation for a bank loan taken out for the sole purpose of recapitalising a firm in difficulty – Assessment of the value of the counter-guarantee constituted by the collateral of shares of the firm in difficulty – Complex economic assessment – Discretion of the Commission – Judicial review – Limits – Impact of the increase in capital on the financial situation of the firm in difficulty and the value of its shares – Information needed for an assessment

    (Article 108(2), first subparagraph, TFEU; Communication from the Commission 2004/C 244/02, paragraphs 10(a) and 11

    (see paragraphs 193-203)

Résumé

By the judgment in Valencia Club de Fútbol v European Commission (T‑732/16), delivered on 12 March 2020, the General Court annulled, in relation to the applicant, Decision 2017/365, ( 1 ) finding, inter alia, that the guarantees granted to the Fundación Valencia with a view to taking out a bank loan for the purpose of acquiring shares in Valencia Club de Fútbol constituted unlawful State aid incompatible with the internal market.

The applicant, Valencia Club de Fútbol, is a Spanish professional football club. The Fundación Valencia is a non-profit organisation linked to the activities of that football club. On 5 November 2009, the Fundación Valencia obtained from the Instituto Valenciano de finanzas (‘the IVF'), a financial institution in the Generalitat Valenciana (Regional Government of Valencia, Spain), a guarantee for a bank loan of EUR 75 million taken out for the purpose of subscribing to 70.6% of the applicant’s shares in the context of the capital increase decided by the applicant (‘the original guarantee'). In return, the IVF was to receive a 0.5% guarantee premium and, as a counter-guarantee, a pledge on the applicant's shares. A schedule provided for repayment of the interest from August 2010 and for repayment of the principal in two instalments of EUR 37.5 million, to be paid on 26 August 2014 and 26 August 2015, financed by the sale of the applicants shares. On 10 November 2010, the IVF increased its guarantee in favour of the Fundación Valencia by EUR 6 million so as to obtain an increase by the same amount in the sum already loaned in order to cover payment of the overdue principal, interest and costs arising from the non-payment of interest on the guaranteed loan (‘the second guarantee').

In the contested decision, the Commission considered that the guarantee granted by the IVF to the Fundación Valencia and its increase involved State resources and were imputable to the Kingdom of Spain, that the beneficiary of that aid was the applicant, the Fundación Valencia acting only as a financial vehicle, and that the applicant's financial situation at the time the measures at issue were adopted was that of a firm in difficulty, within the meaning of the Community Guidelines on State aid for rescuing and restructuring firms in difficulty. ( 2 ) It concluded, in the light of the criteria set out in the Commission Notice on the application of Articles [107] and [108 TFEU] to State aid in the form of guarantees, ( 3 ) that there was aid which was incompatible with the internal market.

In its judgment, the General Court first of all confirmed that the applicant was a firm in difficulty, within the meaning of the Rescue and Restructuring Guidelines. According to paragraph 10(a) of the Guidelines, a limited liability company is considered to be in difficulty where more than half of its registered capital has disappeared and more than one quarter of that capital has been lost over the preceding 12 months. In the present case, although the applicant’s share capital had not decreased by the date of the grant of the original guarantee, the General Court held that the Commission had rightly considered it to be a firm in difficulty, since its net assets, that is to say its equity, were less than half of its registered capital. The General Court stated, in that regard, that neither the specific features of the professional football sector, nor the market value of its players, nor the soundness and credibility of the viability plan adopted in 2009, were such as to call that assessment into question.

However, the General Court held that the Commission had infringed the Guarantee Notice by presuming that no financial establishment would act as a guarantor for a firm in difficulty and that, accordingly, it was not necessary to ascertain whether the guarantee premium payable by the Fundación Valencia for the original guarantee, set at 0.5% of the amount covered, complied with market conditions. It was for the Commission to carry out an overall assessment taking into account all relevant evidence making it possible to determine whether the applicant would manifestly not have obtained comparable facilities from a private operator. The General Court also held that the Commission failed to substantiate to the requisite legal standard its finding that it was not possible to establish the market price for a similar non-guaranteed loan due to the limited number of similar transactions on the market. The burden of proving that the conditions for applying the private operator test have been fulfilled lies with the Commission, which must therefore exercise its powers during the administrative procedure to ask for and obtain all the necessary relevant information.

The General Court went on to confirm that the applicant was the beneficiary of the second guarantee, the sole purpose of which was to enable the Fundación Valencia to continue to meet its obligations under the loan originally taken out. The fact that the bank which granted the loan may be the indirect co-beneficiary of that guarantee is, in that regard, held to be irrelevant.

However, in its examination of the calculation of the amount of aid provided by the second guarantee, it held that the Commission’s assessments that the applicant carried out loss-making operations and that the value of its shares given as collateral for the loan was close to zero, were vitiated by material inaccuracy and manifest errors of assessment. First, on the date on which the second guarantee was granted, the increase in capital had been decided and the new shares issued had been subscribed, so that the applicant’s registered capital, like its equity and profits, had increased and its operations were profitable. Second, at the end of the financial year 2009/2010, the applicant’s equity, of approximately EUR 57.3 million, was considerable and its net assets were positive.

( 1 ) 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 (OJ 2017 L 55, p. 12) (‘the contested decision').

( 2 ) OJ 2004 C 244, p. 2 (‘the Rescue and Restructuring Guidelines').

( 3 ) OJ 2008 C 155 p. 10 (‘the Guarantee Notice').