Air travel tax aid can be clawed back from Aer Arann, court ruling says

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The Court of Appeals (CoA) upheld a High Court ruling that illegal state aid in the form of air travel tax to the former Aer Arann airline could be clawed back.

Judge Brian Murray, on behalf of the Three-Judge CoA, said High Court Judge Max Barrett was correct in concluding that the clawback of aid, resulting from a European Commission ruling on the tax, was mandatory.

Exam

Aer Arann passed an exam in 2010 and in 2014 it became Stobart Air under a major refinancing deal. Stobart himself collapsed earlier this year due to the pandemic’s effects on aviation.

One of the effects of Aer Arann’s survival plan has been to limit the ability of some of its creditors, including contingent creditors, to collect their debts.

At the same time, the European Commission was examining a complaint that Aer Arann had benefited from illegal state aid regarding a reduction of the € 10 per flight which applied to air destinations within 300 km of Dublin.

The Commission subsequently ruled that it was illegal and the Minister of Finance took legal action against the airline to recover the aid with compound interest.

Judge Murray said the issues the High Court had been asked to consider were whether, in light of the information available at the time, whether the conditions of the survival regime had the effect of preventing the recovery of this help from Aer Arann.

“Potential creditor”

These questions revolved around whether the state was a “contingent creditor” with regard to state aid and if not, the airline accepted that it was recoverable, a he declared.

The other question was whether there was a principle of law which would allow Aer Arann to avail itself of the survivorship scheme in such a way as to substitute for the obligation otherwise flowing from EU law to obtain recovery. of this help.

The airline, in its appeal, argued that this effect would be seen in light of the state’s knowledge of the travel tax complaint filed with the EU when the survival program was approved. The Minister disputed this allegation.

Justice Murray declared the High Court in 2019, in a cautious, comprehensive and detailed judgment. found, among other things, that the State was not a potential creditor, but this did not preclude the recovery of aid from the airline.

He said he generally agreed with the High Court’s finding.

Obligatory

An injunction to recover illegal state aid resulting from a Commission decision was mandatory, he said.

This obligation has not been displaced by the argument that issues which had already been argued cannot be called into question, or because of legal certainty.

While uncrystallized liability for unlawful state aid may present some of the indicia of ‘possible liability’ “and may constitute such liability for the purposes of certain legislative regimes, company law provisions should be interpreted to mean that the state is not a contingent creditor of the aid, he said.

“The position in this regard is, in EU law, clear and I see no basis for a referral to the EU Court of Justice.”

The judge added that the State, having won its case in this appeal, would be entitled to its costs. However, the CoA would hold a new hearing to determine the costs, he said.


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