Judgments nº T-732/16 of Tribunal General de la Unión Europea, March 12, 2020

• Resolution Date: March 12, 2020
• Issuing Organization: Tribunal General de la Unión Europea
• Decision Number: T-732/16

(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)

In Case T-732/16,

Valencia Club de Fútbol, SAD, established in Valencia (Spain), represented by J. García-Gallardo Gil-Fournier, G. Cabrera López and D. López Rus, lawyers,

applicant,

supported by

Kingdom of Spain, represented by M.J. García-Valdecasas Dorrego and M.J. Ruiz Sánchez, acting as Agents,

intervener,

v

European Commission, represented by G. Luengo, B. Stromsky and P. Němečková, acting as Agents,

defendant,

ACTION under Article 263 TFEU seeking annulment of 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 GENERAL COURT (Fourth Chamber),

composed of H. Kanninen (Rapporteur), President, J. Schwarcz and C. Iliopoulos, Judges,

Registrar: J. Palacio González, Principal Administrator,

having regard to the written part of the procedure and further to the hearing on 12 March 2019,

gives the following

Judgment

Background to the dispute

1 The applicant, Valencia Club de Fútbol, SAD, is a professional football club whose head office is located in Valencia, Spain.

2 Fundación Valencia is a non-profit foundation whose primary aim is to preserve, disseminate and promote the sporting, cultural and social aspects of the applicant and its relationship with its fans.

3 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 70.6% of the applicant’s shares.

4 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 the applicant 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 the applicant acquired by the Fundación Valencia.

5 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 by Bankia in order to cover payment of the overdue principal, interest and costs arising from the non-payment of interest on the guaranteed loan on 26 August 2010. As a result of that increase, the initial payment schedule was modified and supplemented by a repayment of EUR 40.5 million planned for 26 August 2014 and a repayment of EUR 40.5 million planned for 26 August 2015. The interest rate for the loan remained unchanged.

6 Having been informed of the existence of alleged State aid granted by the Regional Government of Valencia in the form of guarantees on bank loans in favour of Elche Club de Fútbol, SAD, Hércules Club de Fútbol, SAD, and the applicant, the European Commission, on 8 April 2013, invited the Kingdom of Spain to comment on that information. The latter replied to the Commission on 27 May and 3 June 2013.

7 By letter of 18 December 2013, the Commission informed the Kingdom of Spain of its decision to initiate the formal investigation procedure provided for in Article 108(2) TFEU. By letter of 10 February 2014, the Kingdom of Spain submitted its observations on that opening decision.

8 During the formal investigation procedure, the Commission received observations and information from the Kingdom of Spain, the IVF, the Liga Nacional de Fútbol Profesional (‘the LFP’), the applicant and the Fundaciόn Valencia.

9 By its 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), the Commission found that the State guarantee provided by the IVF on 5 November 2009 to cover the bank loan to Fundación Valencia for the subscription of shares in the applicant, in the context of the capital increase decided by the applicant (‘Measure 1) and its increase decided on 10 November 2010 (‘Measure 4’) (together ‘the measures at issue’) constituted unlawful State aid incompatible with the internal market, in the sum of EUR 19 193 000 and EUR 1 188 000 respectively (Article 1). Accordingly, the Commission ordered the Kingdom of Spain to recover that aid from the applicant (Article 2), such recovery to be ‘immediate and effective’ (Article 3).

10 In the contested decision, the Commission, in the first place, considered that the measures at issue granted by the IVF involved State resources and were imputable to the Kingdom of Spain. In the second place, it took the view that the recipient of the aid was the applicant and not the Fundación Valencia, which acted as a financial vehicle, bearing in mind, in particular, the aim of the measures at issue consisting in facilitating the financing of the increase in the applicant’s capital. The applicant’s financial situation at the time the measures at issue were granted was that of a firm in difficulty within the meaning of paragraph 10(a) or paragraph 11 of the Community guidelines on State aid for rescuing and restructuring firms in difficulty (OJ 2004 C 244, p. 2, ‘the Rescue and Restructuring Guidelines’). With regard to its Notice on the application of Articles [107] and [108 TFEU] to State aid in the form of guarantees (OJ 2008 C 155, p. 10, ‘the Guarantee Notice’), and bearing in mind the applicant’s financial situation and the conditions of the State guarantee which it benefited from, the Commission concluded that there was an unfair advantage which could distort or threaten to distort competition and affect trade between Member States. Moreover, in the contested decision, the Commission quantified the aid element allegedly given to the applicant, relying on the applicable reference rate in accordance with its Communication on the revision of the method for setting the reference and discount rates (OJ 2008 C 14, p. 6, ‘Reference Rates Communication’), in default of any meaningful comparison on the basis of similar transactions in the market. When the aid in question was quantified, the Commission considered that the value of the shares in the applicant pledged to the IVF as a counter-guarantee was close to zero. Finally, in the contested decision, the Commission considered that the aid at issue was not compatible with the internal market, in particular with regard to the principles and conditions laid down in the Rescue and Restructuring Guidelines. In that regard, the Commission stated that the applicant’s viability plan of May 2009 was insufficiently complete to enable a return to viability within a reasonable time limit.

Procedure and forms of order sought by the parties

11 By application lodged at the Registry of the General Court on 20 October 2016, the applicant brought the present action.

12 By separate document lodged at the Court Registry on 28 October 2016, the applicant submitted an interlocutory application principally for suspension of operation of Articles 3 and 4 of the contested decision in so far as the Commission thereby orders the recovery from the applicant of the aid which was allegedly given to it.

13 The Commission lodged its defence at the Court Registry on 24 January 2017.

14 By order of 23 March 2017, the President of the Fourth Chamber of the General Court granted the Kingdom of Spain leave to intervene in support of the form of order sought by the applicant.

15 The applicant lodged a reply at the Court Registry on 29 March 2017.

16 The Kingdom of Spain lodged its statement in intervention at the Court Registry on 2 June 2017.

17 The Commission lodged its rejoinder at the Court Registry on 19 June 2017.

18 By documents lodged at the Court Registry on 1 February, 15 February, 5 April and 27 June 2017, the applicant requested confidential treatment of certain material in the application, the defence, the reply and the rejoinder, vis-à-vis the Kingdom of Spain. The Kingdom of Spain did not raise any objections to the requests for confidential treatment.

19 The Commission and the applicant submitted their observations on the statement in intervention at the Court Registry, respectively on 14 and 17 July 2017.

20 By order of 22 March 2018, Valencia Club de Fútbol v Commission (T-732/16 R, not published, EU:T:2018:171), confirmed on appeal (order of 22 November 2018, Valencia Club de Fútbol v Commission, C-315/18 P(R), EU:C:2018:951), the President of the General Court rejected the interlocutory application and reserved the costs.

21 By orders of 26 April 2018, Valencia Club de Fútbol v Commission, (T-732/16, not published, EU:T:2018:237); of 26 April 2018, Valencia Club de Fútbol v Commission, (T-732/16, not published, EU:T:2018:238); and of 26 April 2018, Valencia Club de Fútbol v Commi...