The Leipzig-Halle judgment of the CJEU: is the financing of a transport infrastructure an economic activity subject to State aid rules?

Leipzig-HalleThe financing and construction of transport infrastructure has often been considered in the past to fall outside the ambit of State aid rules, on the basis that it constituted a public interest task and not an economic activity. The Commission’s 1994 Aviation guidelines for example reflected this view by stating that “the construction or enlargement of infrastructures projects (such as airports, motorways, bridges, etc.) represents a general measure of economic policy which cannot be controlled by the Commission under the Treaty rules on State aid”.

This reasoning was, however, invalidated by the General Court in its Aéroports de Paris judgment of 12 December 2000 (T-128/98, confirmed on appeal by the Court in case C-82/01 P), which clarified that the operation of an airport constitutes an economic activity, although the case concerned Article 102 TFEU and rules on predatory pricing. Since then, the Commission has thus followed the Court’s approach, but has recognised that due to the legitimate expectation that may have been created, the financing of infrastructure granted before the date of the judgment in Aéroports de Paris should not lead to the recovery of the possible State aid involved.

The financing of the new southern runway of Leipzig Halle airport was decided in November 2004. Interestingly, this decision took place after several rounds of negotiations with DHL, who was deciding from where to operate its express parcel delivery activities, and who finally chose to move its European freight hub from Brussels to Leipzig Halle from 2008. The Commission opened the procedure under Article 108(2) TFEU in November 2006 and took a final decision in July 2008 declaring the aid compatible with the common market, except for some measures (notably unlimited warranties) provided for in the framework agreement concluded between the airport and DHL in 2005. The Commission in its decision thus only ordered the recovery of this part of the aid already put at DHL’s disposal.

One of the interesting arguments made by the applicants in this case was that the activities of construction and the operation of airport infrastructure should be dissociated. According to them, the Aéroports de Paris judgment only applies to the operation of an airport infrastructure, as it consisted in offering services to airlines and various service providers in exchange of a fee which is (to a large degree) freely fixed by the manager. The same could not be said about the mere financing of an airport infrastructure, for which, especially in the case of small regional airports, there would be no private operator willing to deliver the same results.

This argument was dismissed by the General Court in its judgment at first instance, on the basis that the construction of a runway was inherently linked to its operation by the airport manager. Therefore, as it could not be argued that the construction of a runway constitutes the exercise of prerogatives of a public authority (exercice de la puissance publique), it had to be considered as the other side of a same coin, namely the exploitation of airport facilities for commercial purposes, which constitutes an economic activity.

The Court largely upheld this reasoning in its judgment on appeal, recalling that the Leipzig-Halle airport was in competition with other regional airports to become DHL’s European hub for air freight (paragraph 40 of the judgment). It also recalled that the infrastructure would be operated for commercial purposes by the airport manager, which would demand fees for its use. Those fees would constitute the main source of income for the purposes of financing that runway, which would allow the airport manager to increase its capacity and to extend its business of operating Leipzig-Halle airport (paragraph 41). Lastly, the Court agreed with the General Court that “having regard to its nature and its purpose, the construction of that runway did not, as such, fall within the exercise of State authority”. The Commission had indeed conceded in its decision that certain expenses covered by capital contribution – namely the expenses relating to security and police functions, to fire-protection measures and public security measures, to operating security measures, to the German meteorological service and to the air-traffic control service – fell within the performance of public duties and could not therefore be treated as State aid.

There is one point on which the Court disagreed with the General Court however, finding its considerations “admittedly unsuitable, by reason of their general nature and because they might also apply to certain activities which fall within the exercise of State authority, for establishing the economic nature of a given activity of airport infrastructure construction” (paragraph 47). This point concerned paragraphs 96, 110 and 111 of the General Court’s judgment, in which it stated that “runways are essential for the purposes of the economic activities performed by an airport operator”, that “the objective of constructing a runway is linked to the main economic activity of an airport”, and that “the construction and extension of the runway are pre-conditions for its operation”. The Court considered however that these errors were not sufficient to affect the validity of the General Court’s judgment as it established, taking account of the specific circumstances, that the activity of constructing a new runway could not be dissociated from the operation of the airport infrastructure, which constitutes an economic activity. Moreover, the General account duly took account of the fact that the construction of the new southern runway could not be linked, as such, by its nature or purpose, to the exercise of State authority.

It seems therefore that we cannot deduce from this judgment that all transport infrastructure will automatically fall under the remit of State aid rules. A distinction between the construction and the operation is not relevant in that respect, but it needs to be examined whether the new infrastructure (or an extension of it) serves, by its nature or purpose, the exercise of an economic activity, rather than the exercise of State authority. Arguably, the dividing line may be thin in certain cases (think about regulatory fire-prevention facilities for example), but if it can be linked, by its nature and purpose, to the exercise of an economic activity (the commercial use of a transport infrastructure), arguably, that activity will also be considered as economic and therefore will be caught by the State aid rules.

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