The EU General Court rules that limiting State aid due to COVID-19 to companies which have a durable link with the local economy can be compatible with the internal market (Ryanair)

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By prohibiting barriers to free movement and establishment in the internal market, the EU seeks to make the choice of location of a company largely irrelevant. All companies should be treated the same regardless of where they happen to be. Member States, however, enjoy considerable discretion in how they regulate their economies, as long as their rules comply with EU law. This variation of national rules does influence the choice of location of companies even when the rules do not overtly discriminate against foreign companies.

A perennial question in the field of State aid is what kind of links the beneficiaries of State aid should have with the economy of the aid-granting Member State. It makes sense that a country should make aid available only to those companies which are active in its own territory and can contribute to correcting the particular market failure that is targeted by State aid. Crude exclusion of companies established abroad, licensed abroad or owned by foreign shareholders is not allowed. But there is a big difference between outright exclusion and the minimum necessary local presence.

In February 2021, the General Court upheld Commission decisions authorising State aid schemes that were limited to airlines licensed in the aid granting Member States on the grounds that that was a more effective means of combating the effects of covid-19. In April and May 2021, the General Court upheld Commission decisions authorising individual aid measures which by definition excluded all competitors even though they were also affected by covid-19.

This article reviews the judgment of 19 May 2021 in case T‑628/20, Ryanair v European Commission, by which the General Court also upheld restrictions in terms of the place of establishment and the principal place of business. This is a worrying development because the restrictions appeared to go beyond what was necessary to remedy the serious economic disturbance caused by covid-19.