State aid: Court of Justice of the EU partially annuls European Commission’s decision in the Nürburgring case

On 2 September 2021, the Court of Justice of the EU (“CJEU”) annulled the judgments of the General Court of 19 June 2019 declaring the plaintiffs’ actions inadmissible and confirming the legality of the European Commission’s decision in the Nürburgring case. The Commission decision of 2014 had required Germany to recover unlawful and incompatible aid given to various public entities between 2002 and 2012, but it found that no aid was involved in the preliminary proceedings in favour of the buyer of the Nürburgring complex following a public tender. The complex includes the famous motor-racing circuit, a leisure park, hotels and restaurants and could therefore be considered a key economic activity in the Rhineland-Palatinate region of Germany.

The European Commission investigation

In 2011, Ja zum Nürburgring, a German motorsport association, lodged a complaint with the Commission alleging that the Land of Rhineland-Palatinate had granted illegal and incompatible State aid between 2002 and 2012 to the public companies owning the Nürburgring complex at the time.

Following the preliminary investigation, the Commission initiated a formal investigation procedure in 2012. In the same year, the owners were found insolvent, which led to the sale of their assets to the company Capricorn through a public tender. Following the sale, the Commission decided to extend its investigation into additional financial aid measures that were intended to prevent the insolvency of those public companies.

In 2013 and 2014, Ja zum Nürburgring and NeXovation (a privately owned US undertaking active in the information technology, consumer products, energy and automotive fields) lodged further complaints with the Commission on the grounds that the tender process had not been open, transparent, non-discriminatory and unconditional. According to the complainants, the allegedly incompatible State aid obtained through the public tender amounted to the difference between the actual market price and the price paid by Capricorn.

The European Commission decisions

In its decision of 1 October 2014, the Commission concluded that:

1. some of the support measures benefitting the sellers between 2002 and 2012 constituted illegal and incompatible aid. However, the aid given to the sellers could not have been transferred to Capricorn nor its subsidiaries and could therefore not be recovered from them as there was no economic continuity between the former complex owners and Capricorn (first decision adopted following the formal investigation procedure);
2. Capricorn had not benefitted from aid in the sale since the tender procedure had been conducted in an open, transparent and non-discriminatory manner and the ultimate sale price was deemed to reflect the market price (second decision not to raise objections, adopted in the context of the preliminary investigation).

General Court judgments

Both complainants, Ja zum Nürburgring and NeXovation, challenged the legality of the Commission decision before the General Court of the EU. The applicants submitted several lines of reasoning, including the (i) misinterpretation of the concept of State aid, (ii) misinterpretation of the principle of economic continuity, (iii) failure to take account of the continuation of the sales process, (iv) infringement of their procedural rights, (v) infringement of the obligation to state reasons and (vi) breach of the right to sound administration, while also stating that the Commission failed to carry out a diligent and impartial examination of the applicants’ complaints.

The General Court decided that Ja zum Nürburgring and NeXovation did not have legal standing in the context of the action brought against the first contested decision, in which the Commission rejected any economic continuity between the former complex owners and Capricorn, because they were not considered to be individually and directly concerned within the meaning of established EU case law and in particular of the Plaumann judgment.

NeXovation could not be substantially affected by the Commission’s decision, since it was not active in the relevant markets at that time. Those relevant markets were defined as the operation of racetracks, off-road parks, leisure parks, accommodation facilities, restaurants, safety driving centres, driving schools, multifunctional halls and cash-free payment systems as well as those concerning the promotion of tourism, project development, the construction of real property, business management and trade in cars or motorbikes.

As to Ja zum Nürburgring, it had not established, in the context of the formal investigation procedure that preceded the adoption of the first contested decision, that it held a position as negotiator, clearly circumscribed and closely linked to the decision subject matter, on which it may have based its individual concern.

By contrast, the General Court also ruled that Ja zum Nürburgring and NeXovation had legal standing to challenge the second Commission decision in order to safeguard their procedural rights in the preliminary stage. If the General Court had annulled the second Commission decision for breach of their procedural rights, the Commission would have had to open a formal investigation procedure requesting the applicant, as an interested party, to submit its comments. It follows that the interested party’s procedural guarantees in a preliminary investigation are therefore significantly more limited and that annulling the second Commission decision would have greatly affected the applicant’s position, making it individually concerned.

Nevertheless, the General Court declared both appeals lodged by Ja zum Nürburgring and NeXovation as far as the second decision was concerned in part inadmissible and unfounded as to the remainder.

Judgments by the CJEU

Ja zum Nürburgring and NeXovation appealed to the CJEU against the judgments of the General Court. The CJEU set aside the judgments regarding the inadmissibility of the appeals relating to the public tender procedure and the second Commission decision not to raise objections in this regard without opening a formal procedure. As a result, the CJEU annulled the article of the Commission’s decision relating to the sale of the Nürburgring complex assets while leaving in place the first decision on the lack of economic continuity.

In making its assessment, the CJEU pointed out that having obtained secured financing is one of the key parameters in ultimately selecting the successful bidder in a public tender procedure. At the heart of its decision not to raise objections, the Commission was consequently wrong to consider that there was no doubt as to the financing of Capricorn’s bid, since a particular letter from its bank did not contain any binding financing commitment. According to the CJEU, this finding implies that Capricorn had received preferential treatment and did not have its bid rejected, while NeXovation’s higher bid was rejected as it lacked adequate proof of financing. In other words, there was no guarantee that the public tender procedure, as it was conducted, fulfilled the non-discriminatory requirement.

Consequently, the Commission will have to open an in-depth investigation into the sale process of the Nürburgring complex. However, it does not necessarily mean that the outcome of the case will be different from the Commission decision of 2014 as there are several ways to demonstrate the market price of assets.

Conclusion and outlook

These judgments demonstrate the difficulty of assessing the notion of individual and direct concern in certain cases despite the abundant jurisprudence.

Furthermore, the CJEU is putting more and more pressure on the Commission regarding the soundness of its assessment in its preliminary ruling as it extends the notion of doubts that oblige the Commission to open a formal procedure. This procedure, which could take several years, would entail adopting a formal decision sent to the Member State concerned and giving it the opportunity to respond, its publication in the Official Journal of the EU and the option for interested parties to submit their observations to the Commission.

In this context, the Commission will now have to re-evaluate whether or not State aid was effectively granted to Capricorn.

Furthermore, this case reveals the impact of State aid issues on such transactions, especially as the whole Nürburgring project was not considered economically viable in the long term. Various stakeholders were therefore of the opinion that it should not be artificially maintained through State aid.

Regarding past aid granted to the Nürburgring complex, it is worth emphasising that the General Block Exemption Regulation provides for several categories of aid that can be applied to the funding of sport, multifunctional and local infrastructure. Assessing the legality of public funding must be completed prior to the decision to grant the public measure.

For more information, don't hesitate to contact us!