TRU, Alm.del - 2018-19 (1. samling) - Bilag 143: Kopi af TRU alm. del - bilag 134, Orientering - EU-Rettens domme om statsstøttegodkendelse af Femern Bælt-projektet, fra transport-, bygnings- og boligministeren

Transport-, Bygnings- og Boligudvalget 2018-19 (1. samling)
TRU Alm.del Bilag 143
Offentligt

JUDGMENT OF THE GENERAL COURT (Sixth Chamber)

13 December 2018

(State aid

—

Public financing of the Fehmarn Belt fixed link project

—

Individual

aid

—

Decision not to raise any objections

—

Decision finding no State aid and

declaring the aid compatible with the internal market

—

Definition of State aid

—

Adverse effect on competition and effect on trade between Member States

—

Conditions governing compatibility

—

Aid to promote the execution of an

important project of common European interest

—

Necessity of the aid

—

Incentive effect

—

Proportionality of the aid

—

Serious difficulties justifying the

initiation of the formal investigation procedure

—

Obligation to state reasons

—

Communication on State aid to promote the execution of important projects of

common European interest)

In Case T-631/15,

Stena Line Scandinavia AB,

established in Gothenburg (Sweden), represented

by P. Alexiadis, Solicitor, and L. Sandberg-Mørch, lawyer,

applicant,

supported by

Föreningen Svensk Sjöfart,

established in Gothenburg, represented by

L. Sandberg-Mørch and J. Buendía Sierra, lawyers,

intervener,

European Commission,

represented by L. Armati, L. Flynn and S. Noë, acting as

Agents,

defendant,

* Language of the case: English.

TRU, Alm.del - 2018-19 (1. samling) - Bilag 143: Kopi af TRU alm. del - bilag 134, Orientering - EU-Rettens domme om statsstøttegodkendelse af Femern Bælt-projektet, fra transport-, bygnings- og boligministeren

UDGMENT OF

13. 12. 2018

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T-631/15

supported by

Kingdom of Denmark,

represented initially by C. Thorning, and subsequently by

J. Nymann-Lindegren, acting as Agents, and by R. Holdgaard, lawyer,

intervener,

APPLICATION pursuant to Article 263 TFEU for annulment of Commission

Decision C(2015) 5023 final of 23 July 2015 on State aid SA.39078 (2014/N)

(Denmark) for the financing of the Fehmarn Belt fixed link project (OJ 2015

C 325, p. 5),

THE GENERAL COURT (Sixth Chamber),

composed of G. Berardis, President, D. Spielmann and Z. Csehi (Rapporteur),

Judges,

Registrar: P. Cullen, Administrator,

having regard to the written part of the procedure and further to the hearing on

26 April 2018,

gives the following

Judgment

Background to the dispute

The applicant

The applicant, Stena Line Scandinavia AB, is part of a ferry operator group

founded in 1962 engaged in the transport of passengers, cars, trains and freight. It

operates a number of ferry routes between Denmark, Germany, Latvia, Poland,

Sweden and Norway.

The project

The Fehmarn Belt fixed link project between

Denmark and Germany (‘the

project’) was approved by the treaty between the Kingdom of Denmark and the

Federal Republic of Germany concerning the Fehmarn Belt fixed link signed on

3 September 2008

and ratified in 2009 (‘the international agreement’).

The

project consists of, on the one hand, infrastructure (‘the fixed link’), and, on

the other, road hinterland connections in Denmark (‘the road connections’) and

rail hinterland connections in Denmark (‘the rail connections’) (together, ‘the

hinterland connections’).

The Federal Republic of Germany is responsible for the

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financing of and modifications to the German hinterland connections, which are

not at issue in the present proceedings.

The fixed link takes the form of an immersed tunnel between Rødby on the island

of Lolland in Denmark and Puttgarden in Germany; it will be approximately 19

kilometres long and consist of an electrified railway line and a motorway. The rail

connections will include the expansion and upgrade of the existing rail link

between Ringsted (Denmark) and Rødby, covering approximately 120 kilometres,

which is owned by Banedanmark, the Danish State public rail infrastructure

manager.

The project was preceded by a planning phase. The Commission was given

notification of the financing of that phase, as regards the fixed link and the

hinterland connections, for reasons of legal certainty. By its decision of 13 July

2009 in Case N 157/2009

—

Financing of the planning phase of the Fehmarn Belt

fixed link (OJ 2009 C 202, p. 2,

‘the project planning decision’), the Commission

concluded, first, that the measures relating to the financing of the planning of the

project may not constitute State aid and, second, that those measures were in any

event compatible with the internal market. It therefore decided not to raise any

objections within the meaning of Article 4(2) and (3) of Council Regulation (EC)

No 659/1999 of 22 March 1999 laying down detailed rules for the application of

Article [88 EC] (OJ 1999 L 83, p. 1).

The estimated cost of the entire project, in fixed 2014 prices, is 64.4 billion

Danish krone (DKK) (approximately EUR 8.7 billion): DKK 54.9 billion

(approximately EUR 7.4 billion) for the planning and construction of the fixed

link, and DKK 9.5 billion (approximately EUR 1.3 billion) for the planning and

construction of the upgrading of the hinterland connections.

According to Article 1 of the international agreement, the Kingdom of Denmark

will be the sole owner of the fixed link and will have sole responsibility and bear

the full risk of financing the fixed link, as well as the upgrading of the Danish

hinterland connections.

Pursuant to Article 6 of the international agreement and the Lov n

575 om anlæg

og drift af en fast forbindelse over Femern Bælt med tilhørende landanlæg i

Danmark (Law No 575 on the construction and operation of the Fehmarn Belt

fixed link project and Danish hinterland connections) of 4 May 2015

(‘the

Construction Law’), two public undertakings were entrusted with the execution of

the project. The first, Femern A/S, established in 2005, is responsible for

financing, construction and operation of the fixed link. The second, A/S Femern

Landanlæg, established in 2009, is responsible for the construction, operation and

financing of the Danish hinterland connections. Femern Landanlæg is a subsidiary

of Sund & Bælt Holding A/S, which is owned by the Danish State. Femern

became a subsidiary of Femern Landanlæg following the latter’s establishment.

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The works relating to the construction of the fixed link will be carried out by

Femern under construction contracts subject to public procurement procedures.

Once the fixed link is operational, Femern will collect fees paid by users for using

the link. Construction of the works necessary for upgrading the road connections

will be undertaken by the Danish Highways Directorate on behalf of the Danish

State. The latter will retain ownership of the hinterland road infrastructure, which

will be made available free of charge to all users. Femern Landanlæg will be

responsible for the construction and management, including maintenance, of the

rail connections. Ownership of the rail connections is to be shared between

Banedanmark (20%) and Femern Landanlæg (80%). Banedanmark will be

responsible for all the costs relating to the operation of the rail connections, while

the costs relating to the maintenance of the rail connection will be borne by

Femern Landanlæg and Banedanmark on a pro rata basis according to their

respective shares.

Femern and Femern Landanlæg have obtained loans to finance the project (see

paragraph 12 below). Those undertakings will be unable to obtain loans for

activities other than the financing, planning, construction and operation of the

fixed link and hinterland connections. In addition, Femern will receive the charges

paid by users of the fixed link in order to discharge its debt and will pay dividends

to Femern Landanlæg, which the latter will use to discharge its own debt. Femern

Landanlæg will also receive 80% of the fees paid by the railway operators for use

of the rail connections, charged by Banedanmark, as ownership of those

connections will be shared by it and Banedanmark.

The contested measures

The contested measures, notification of which was given by the Danish

authorities, include (i) a capital injection for the benefit of Femern and (ii) a State

guarantee and State loans for the benefit of Femern and Femern Landanlæg (‘the

measures at issue’).

More specifically, the planning, construction and operation of the fixed link and

the hinterland connections are financed by loans, raised on the international

financial markets and covered by the State guarantee, or, as an alternative method

of financing, by government-backed State loans from Danmarks nationalbank

(National Bank of Denmark).

Administrative procedure

During 2014 and 2015, the Commission received five complaints, the first lodged

on 5 June 2014, claiming that the Kingdom of Denmark had granted unlawful

State aid that was incompatible with the internal market to Femern and Femern

Landanlæg.

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During that same period, the Commission’s departments sent several requests for

information to the Danish authorities, which replied and provided further

information on a number of occasions.

By letter of 22 December 2014, the Danish authorities gave the Commission

notification, pursuant to Article 108(3) TFEU, of the measures at issue.

The contested decision

On 23 July 2015, the Commission adopted Decision C(2015) 5023 final on State

aid SA.39078 (2014/N) (Denmark) for the financing of the Fehmarn Belt fixed

link project (OJ 2015 C 325, p. 5,

‘the contested decision’).

The operative part of that decision is divided into two parts.

In the first part, the Commission concluded that the measures granted to Femern

Landanlæg for the planning, construction and operation of the hinterland

connections do not constitute State aid within the meaning of Article 107(1)

TFEU.

In particular, the Commission concluded, in the first place, that the upgrading of

the road links did not constitute an economic activity and, in the second place, (i)

that the national rail network was operated and managed on a market that is not

open to competition and (ii) that the financial support granted to Femern

Landanlæg is not liable to affect trade between Member States, as its activities

were carried out on a national, separate and geographically closed market.

In the second part, the Commission concluded that, even if the measures granted

to Femern for the planning, construction and operation of the fixed link did

constitute State aid within the meaning of Article 107(1) TFEU, they are

compatible with the internal market pursuant to Article 107(3)(b) TFEU.

More specifically, the Commission took the view that the aid allegedly granted to

Femern was compatible with Article 107(3)(b) TFEU and with the

Communication of 20 June 2014 on the criteria for the analysis of the

compatibility with the internal market of State aid to promote the execution of

important projects of common European interest (OJ 2014 C 188, p. 4,

‘the IPCEI

Communication’), as well as with the 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’), for the following reasons:

–

first, in accordance with Section 3.1 of the IPCEI Communication, the

construction of the fixed link (and hinterland connections) is a specific,

precise and clearly defined project;

second, in accordance with Section 3.2 of the IPCEI Communication, the

project is, on the one hand, a project of European interest and, on the other,

an important project which benefits the European Union as a whole;

–

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–

third, in accordance with paragraph 28 of the IPCEI Communication, the aid

is necessary because no private investor would carry out the project without

public support;

fourth, in accordance with paragraph 31 of the IPCEI Communication, the

aid is proportional since: (i), its intensity is below the project’s funding gap;

(ii), it is limited in scope and time and covers only the debt related to the

planning, construction and operation of the fixed link until that debt is fully

repaid; and (iii), the Danish authorities undertook to limit the guarantee and

State loans to loans obtained no later than 55 years after the opening of the

fixed link, to give fresh notification of any subsequent measure, and to

report annually on progress in the repayment of Femern’s debt;

fifth, in accordance with paragraph 40 of the IPCEI Communication, the

significant positive effects of the project for the European Union as a whole

outweigh the limited negative effect on competition and trade between

Member States;

sixth, in accordance with paragraph 49 of the IPCEI Communication, the

Kingdom of Denmark has undertaken to submit annual reports regarding

progress in the repayment

of Femern’s debt;

seventh, in accordance with Section 5.3 of the Guarantee Notice, the

mobilisation of the State guarantees is contractually linked to specific

conditions, which may go as far as the compulsory declaration of bankruptcy

of the beneficiary undertaking.

–

The Commission therefore decided not to raise any objections to the measures at

issue.

Procedure and forms of order sought

By application lodged at the Court Registry on 11 November 2015, the applicant

brought the present action.

On 18 February 2016, the Commission lodged its defence. The reply and the

rejoinder were lodged within the period prescribed.

By document lodged at the Court Registry on 6 April 2016, the Kingdom of

Denmark sought leave to intervene in the present proceedings in support of the

Commission. By order of 29 June 2016, the President of the Ninth Chamber of the

Court granted such leave. The Kingdom of Denmark lodged its statement in

intervention and the main parties submitted their observations on that statement

within the period prescribed.

Following a change in the composition of the Chambers of the Court, pursuant to

Article 27(5) of the Rules of Procedure of the General Court, the President of the

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Court reallocated the case to another Judge-Rapporteur, who was assigned to the

Fifth Chamber.

By document lodged at the Court Registry on 7 April 2016, Föreningen Svensk

Sjöfart sought leave to intervene in the present proceedings in support of the

applicant. By order of 30 November 2016, the President of the Fifth Chamber of

the Court granted such leave. Föreningen Svensk Sjöfart lodged its statement in

intervention and the main parties submitted their observations on that statement

within the periods prescribed.

By separate document lodged at the Court Registry on 25 May 2016, the applicant

submitted an application for confidential treatment in relation to the Kingdom of

Denmark and Föreningen Svensk Sjöfart. On the same day, the applicant also

lodged a non-confidential version of the application.

On 10 January 2017, pursuant to Article 27(2) of the Rules of Procedure, the

President of the Court reallocated the case, for reasons relating to the fact that the

cases are connected, to another Judge-Rapporteur, assigned to the Sixth Chamber.

The applicant, supported by Föreningen for Svensk Sjöfart, claims that the Court

should:

–

annul the contested decision;

order the Commission to pay the costs.

The Commission, supported by the Kingdom of Denmark, contends that the Court

should:

–

Law

;dismiss the application;

.order the applicant to pay the costs.

The applicant puts forward four pleas in law in support of its action.

–

the first plea alleges infringement of Article 107(1) TFEU in so far as the

Commission erred in finding that the measures granted to Femern

Landanlæg for the planning, construction and operation of the rail

connections do not constitute State aid;

the second plea, divided into five parts, alleges infringement of

Article 107(3)(b) TFEU in so far as the Commission erred in finding that the

aid measures granted to Femern for the planning, construction and operation

of the fixed link are compatible with the internal market;

–

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the third plea, alleging breach of Article 108(2) TFEU in so far as the

Commission infringed its obligation to initiate the formal investigation

procedure, is made up of two parts, the first alleging infringement of the

obligation to initiate the formal investigation procedure on account of the

length of the procedure and certain circumstances connected with the

conduct of the procedure, and the second alleging such infringement on

account of an insufficient and incomplete analysis of certain aspects of the

contested decision concerning (i) the measures granted to Femern

Landanlæg and (ii) the measures granted to Femern;

the fourth plea alleges failure to state adequate reasons.

–

The Court considers it appropriate to examine the pleas in the following order:

–

first, the fourth plea, alleging an inadequate statement of reasons;

second, the first plea and the second part of the third plea in so far as it

concerns the measures granted to Femern Landanlæg;

third, the second plea and the second part of the third plea in so far as it

concerns the measures granted to Femern.

The fourth plea, alleging failure to state adequate reasons

By its fourth plea, the applicant claims that the Commission failed to provide an

adequate explanation in the contested decision regarding a number of matters it

considered. That matters concern: (i) the analysis of the market for the operation

of railway infrastructure in Denmark; (ii) the assessment of the common European

interest of the project, the reasons given in the contested decision being, in its

view, contradictory as regards the taking into account of competition from ferries;

(iii) the examination of the incentive effect of the project; (iv) the analysis of the

proportionality of the aid; and (v) the assessment of the negative effects of the aid

on competition.

As a preliminary point, it should be noted that, according to settled case-law, the

statement of reasons required by Article 296 TFEU must be appropriate to the act

at issue and must disclose in a clear and unequivocal fashion the reasoning

followed by the institution which adopted the measure in question in such a way

as to enable the persons concerned to ascertain the reasons for the measure and to

enable the competent court to exercise its power of review. The requirements to be

satisfied by the statement of reasons depend on the circumstances of each case, in

particular the content of the measure in question, the nature of the reasons given

and the interest which the addressees of the measure, or other parties to whom it is

of direct and individual concern, may have in obtaining explanations. It is not

necessary for the reasoning to go into all the relevant facts and points of law, since

the question whether the statement of reasons meets the requirements of

Article 296 TFEU must be assessed with regard not only to its wording but also to

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its context and to all the legal rules governing the matter in question (see judgment

of 8 July 2010,

Freistaat Sachsen and Land Sachsen-Anhalt

Commission,

T-396/08, not published, EU:T:2010:297, paragraph 143 and the case-law cited).

It should also be noted, with regard to the nature of the measure in question, that

the contested decision was adopted at the end of the preliminary stage of the

procedure for reviewing aid under Article 108(3) TFEU, the sole purpose of

which is to enable the Commission to form a prima facie opinion on whether the

aid concerned is wholly or partially compatible with the internal market, without

opening the formal investigation procedure laid down in Article 108(2) TFEU,

which, in turn, is designed to enable the Commission to be fully informed of all

the facts pertaining to that aid (see judgment of 11 October 2016,

Søndagsavisen

Commission,

T-167/14, not published, EU:T:2016:603, paragraph 110 and the

case-law cited). Such a decision, which is taken within a short period of time,

must simply set out the reasons why the Commission takes the view that it is not

faced with serious difficulties in assessing the compatibility of the aid at issue

with the internal market (see judgment of 11 October 2016,

Søndagsavisen

Commission,

T-167/14, not published, EU:T:2016:603, paragraph 111 and the

case-law cited).

It is in the light of those principles that it is necessary to examine the applicant’s

arguments.

In the first place, it should be noted that, in recitals 53 to 55 of the contested

decision, the Commission sets out the reasons why it took the view that the market

for the operation of Danish railway infrastructure is not open to competition.

Thus, the Commission concluded, in essence, that the rail connections owned by

Femern Landanlæg would be operated by Banedanmark on the same conditions as

those of other parts of the Danish railway system and that, given that the

management and operation of the Danish national railway is carried out on a

national, separate and geographically closed market, which is not open to

competition, the public financial support made available to Femern Landanlæg for

the rail connections was not liable to affect trade between Member States.

In the second place, it should be noted that, in recitals 88 to 93 of the contested

decision, the Commission sets out the reasons why it took the view that the project

has a common European interest.

The Commission relied essentially on four factors. First, it noted, in recital 89 of

the contested decision, that the common European interest of the project had been

recognised in the project planning decision. Second, it observed, in recital 90 of

the contested decision, that the fixed link is a trans-European transport network

project (‘TEN-T’), in particular, a priority TEN-T

project (No 20), and will

contribute to improving the connection between the Nordic countries and central

Europe as well as providing greater flexibility and time savings for road and rail

traffic. Third, it stated, in recital 91 of the contested decision, that the project

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involves two Member States and will bring benefits which have been defined and

quantified in a profitability study prepared for the Danish ministry of transport,

which showed that the project will produce an economic return of 4.7%. Fourth, it

observed, in recital 92 of the contested decision, that the project had received EU

funding for the planning activities and an application had been submitted for EU

funding for the construction phase.

In the third place, in recitals 98 to 105 of the contested decision, the Commission

sets out the reasons why it considered that the project had an incentive effect.

The Commission observed, in essence, that the Danish authorities, while stating

that there was no viable counterfactual scenario, provided information concerning

a scenario in which no public support was granted to Femern, and that the analysis

carried out in the preliminary phases as well as an inquiry as to commercial

interest conducted

in 2001 (‘the 2001

inquiry

as to commercial interest’) had

concluded that the project could be realised only with substantial public support

and that the private sector was interested in participating in the project on

condition that support well in excess of that envisaged by the project, as approved,

was granted. The Commission also stated that, according to the information

provided by the Danish authorities, the internal rate of return (‘the IRR’) of the

project, on a debt-free basis, was 4.2% over the expected repayment period of 55

years and was therefore below the weighted average cost of capital (‘the WACC’)

that a private investor would be expected to require, estimated at 11.0%.

In the fourth place, in recitals 106 to 111 of the contested decision, the

Commission set out the reasons why it took the view that the aid was proportional.

After calculating the project’s funding gap ratio at 54.9%, the Commission stated

that the aid element granted to Femern was below that ratio. It also noted that the

aid was limited in time and scope, because the guarantee covers only debt relating

to the planning, construction and operation of the fixed link until the debt is fully

repaid, and the Danish authorities had undertaken to limit the State guarantee and

loans to the loans obtained in order to finance eligible costs no later than 55 years

after the opening of the fixed link, to give fresh notification of any public

financing measure granted after that period and to report annually on progress in

the repayment

of Femern’s debt.

In the fifth place, in recital 116 of the contested decision, the Commission

examined the negative effects of the aid on competitors.

The Commission took the view that the opening of the fixed link would have a

negative impact on ferry operators and probably, as a consequence, also on the

ports used by the ferries in terms of traffic volume and revenue. Nonetheless, the

Commission considered that those effects were inherent in the project, which

seeks to offer a quicker and more convenient alternative to ferry services.

In the light of the foregoing, it must be concluded that the statement of reasons in

the contested decision meets the requisite legal standard.

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It should also be added that, by its fourth plea, the applicant refers, on certain

specific points, to the arguments put forward in the first and second pleas

concerning the merits of the Commission’s findings.

Suffice it to observe in this regard that, according to settled case-law, the

obligation to state reasons is an essential procedural requirement, as distinct from

the question whether the reasons given are correct, which goes to the substantive

legality of the contested measure (judgments of 22 March 2001,

France

Commission,

C-17/99, EU:C:2001:178, paragraph 35, and of 18 January 2005,

Confédération nationale du Crédit mutuel

Commission,

T-93/02, EU:T:2005:11,

paragraph 67).

Lastly, it should also be noted that the applicant has been able to develop its

arguments in support of the first, second and third pleas and that the Court is in a

position to conduct its review in the light of all the arguments raised by the

applicant.

The fourth plea must therefore be rejected.

The first plea and the second part of the third plea, alleging infringement of

Article 107(1) TFEU and infringement of the obligation to initiate the formal

investigation procedure in so far as concerns the analysis of the measures

granted to Femern Landanlæg for the planning, construction and operation of

the rail connections

In the first plea, the applicant submits that the Commission made an error of fact

and of law by concluding that the measures granted to Femern Landanlæg

concerning the rail connections did not constitute State aid as they were not liable

to distort competition or to affect trade between Member States within the

meaning of Article 107(1) TFEU.

In the first complaint in the second part of the third plea, the applicant refers to the

errors alleged in the first plea, arguing that those errors show that the Commission

conducted an incomplete and insufficient examination, which brought to light

serious difficulties that should have prompted it to initiate the formal investigation

procedure.

The Commission disputes the applicant’s arguments. The Kingdom of Denmark

also raises doubts concerning the admissibility of the action, in so far as it relates

to measures granted to Femern Landanlæg, on the basis that the applicant is not

individually affected.

It is appropriate to examine first of all whether the applicant’s arguments are well

founded.

Article 107(1) TFEU states as follows:

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‘Save

as otherwise provided in the Treaties, any aid granted by a Member State or

through State resources in any form whatsoever which distorts or threatens to

distort competition by favouring certain undertakings or the production of certain

goods shall, in so far as it affects trade between Member States, be incompatible

with the internal market.’

Classification of a measure as aid incompatible with the internal market, within

the meaning of Article 107(1) TFEU, requires all the conditions laid down in that

provision to be fulfilled.

With regard, in particular, to the conditions relating to the effect on trade between

Member States and the distortion of competition, it should be noted that,

according to established case-law, the Commission is not required to establish that

the aid will in fact have an impact on trade and that competition will actually be

distorted and is required only to examine whether the aid is liable to affect such

trade and distort competition (see judgment of 9 June 2011,

Comitato ‘Venezia

vuole vivere’ and Others

Commission,

C-71/09 P, C-73/09 P and C-76/09 P,

EU:C:2011:368, paragraph 134 and the case-law cited). In particular, according to

case-law, the fact that an economic sector has been liberalised at EU level may

serve to determine that the aid has a real or potential effect on competition and

affects trade between Member States (see judgment of 15 December 2005,

Unicredito Italiano,

C-148/04, EU:C:2005:774, paragraphs 56 and 57 and the

case-law cited). Moreover, it is not necessary for the recipient undertaking itself to

take part in intra-EU trade. Aid granted by a Member State to an undertaking may

help to maintain or increase domestic activity, with the result that undertakings

established in other Member States have less chance of penetrating the market of

the Member State concerned (see judgment of 14 January 2015,

Eventech,

C-518/13, EU:C:2015:9, paragraph 67 and the case-law cited).

In the present case, in recitals 53 to 55 of the contested decision, first, the

Commission expressed the view that the measures granted to Femern Landanlæg

would not give rise to any distortion of competition, as the rail connections owned

by Femern Landanlæg would be upgraded and operated by Banedanmark, the

national railway infrastructure manager, under the same conditions as the other

parts of the Danish national rail network, and that there was no

competition ‘on’

or ‘for’ the market for the operation and management of the national rail network.

Second, it found that those measures were not liable to affect trade between

Member States, as the management and operation of the network in question were

carried out on a national, geographically closed and separate market, which was

not open to competition.

It is in the light of the principles outlined in paragraphs 57 to 59 above and the

wording of the contested decision that the applicant’s arguments must

examined.

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The preliminary finding that the fixed link and rail connections constitute a single

integrated project

The applicant claims, as a preliminary point, that the fixed link and the rail

connections constitute a single integrated project and that, given that the

Commission confirmed that the aid relating to the fixed link was liable to distort

competition and to affect trade between Member States, it follows that the aid

relating to the rail connections was also liable to distort competition and to affect

such trade.

That claim is incorrect. It cannot be concluded that the measures granted to

Femern Landanlæg in relation to the rail connections constitute State aid for the

sole reason that they were adopted in connection with the same project which

granted measures for Femern in relation to the fixed link, and that those measures

were categorised as State aid by the Commission. Those are two separate aid

measures which, admittedly, concern the same project, but they have a different

purpose and different beneficiaries.

Moreover, the applicant claims that there is a contradiction between, on the one

hand, the conclusion that the financing of the costs relating to the hinterland

connections does not constitute State aid for the benefit of Femern Landanlæg

and, on the other, the fact that the costs relating to the hinterland connections were

taken into account for the purpose of determining whether the aid received by

Femern for the fixed link was compatible with the internal market.

In that regard, a distinction must be made between the measures granted to

Femern Landanlæg in connection with the cost of the hinterland connections and

the measures granted to Femern in connection with the costs of the project as a

whole.

First, as is apparent from paragraphs 69 to 102 below, the measures granted to

Femern Landanlæg for the hinterland connections do not constitute State aid

because they produce their effects on a market that is closed to competition.

Second, the measures granted to Femern for the project as a whole may constitute

State aid because those measures have an impact, in the main, on the management

and operation of infrastructure that is in competition with other transport services,

in particular ferry services.

Against that background, whether the aid granted to Femern is compatible with

the internal market must be established in the light of all the measures granted to

that company, including those covering the costs of the rail connection. In other

words, the fact that the indirect financing of the hinterland connections by

dividends paid by Femern to Femern Landanlæg does not constitute State aid for

the benefit of the latter company does not mean that the arrangements for the

financing of the entire project cannot be examined, in the light of the measures

granted to Femern, to determine whether the aid granted to the latter is

compatible.

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The finding that the rail connections form part of the main Danish national rail

network

The applicant maintains that the mere fact that the rail connections will be

operated by Banedanmark is not sufficient to establish that they form part of the

main Danish national rail network.

In that regard, it should be noted that, as is apparent from recital 5 of the contested

decision, the rail connections entail the expansion and upgrading of the existing

rail link between Ringsted and Rødby, which belongs to Banedanmark, and that,

as is made clear in recital 55 of that decision, they will be managed by the latter in

accordance with rules applicable to the entire national network. Therefore,

according to the provisions governing the project, the rail connections simply

connect the fixed link to the existing national network and will thus form an

integral part of it.

In any event, the applicant’s argument is ineffective

because the claim that the rail

connections do not form part of the main rail network, even if it were established,

is not, of itself or in conjunction with the arguments that will be dealt with below,

capable of proving that those connections form part of a network the management

or operation of which are open to competition.

Competition on the markets for the operation and management of the Danish

railway infrastructure

As regards the distortion of competition, the applicant maintains that the measures

at issue granted to Femern Landanlæg affect the markets for the operation and

management of the Danish railway infrastructure and that those markets are,

lege and de facto,

open to competition.

The Court must therefore examine whether the Commission committed errors of

fact or of law or encountered serious difficulties when it stated, in recitals 53 to 55

of the contested decision, that there was no competition ‘on’ or ‘for’ the market

for the management and operation of the national railway network.

–

Preliminary considerations as to the relevant terminology

As a preliminary point, it should be noted that the words ‘operation’ and

‘management’, as used in connection with the railway network, are not used very

precisely in the contested decision or in the parties’

pleadings, which, moreover, is

a reflection of the fact that there is no specific definition of those terms in the

relevant EU legislation, in particular Council Directive 2012/34/EU of the

European Parliament and of the Council of 21 November 2012 establishing a

single European railway area (OJ 2012 L 343, p. 32).

According to the Commission’s interpretation in these proceedings, the contested

decision distinguishes between the operation of the railway infrastructure, in the

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sense of the making available of the infrastructure to railway undertakings for

consideration, and the management of that infrastructure, in the sense of

establishing and maintaining the physical infrastructure. As the Commission

acknowledges, that terminology does tally exactly with that used in Directive

2012/34.

Article 3(2)

of Directive 2012/34 defines ‘infrastructure manager’ as ‘any body or

firm responsible in particular for establishing, managing and maintaining railway

infrastructure, including traffic management and control-command and

signalling’, while at the same time specifying that ‘the functions of the

infrastructure manager on a network or part of a network may be allocated to

different bodies or firms’.

The second subparagraph of Article 7(1) of Directive 2012/34 defines the

‘essential functions’ of the infrastructure manager as follows:

‘(a)

decision-making on train path allocation, including both the definition and

the assessment of availability and the allocation of individual train paths;

and

(b)

decision-making on infrastructure charging, including determination and

collection of the charges …’.

The third subparagraph of Article 7(1) of Directive 2012/34 states as follows:

‘Member States may, however, assign to railway undertakings or any other body

the responsibility for contributing to the development of the railway infrastructure,

for example through investment, maintenance and funding.’

Moreover, Article 3(12)

of Directive 2012/34 defines an ‘operator of service

facility’ as ‘any public or private entity responsible

for managing one or more

service facilities or supplying one or more services to railway undertakings

referred to in points 2

to 4 of Annex II’, namely access to infrastructure (point

2 of

Annex II) and additional and ancillary services (points 3 and 4 of Annex II).

After the contested decision was adopted, Article 1(2)(a) of Directive (EU)

2016/2370 of the European Parliament and of the Council of 14 December 2016

amending Directive 2012/34 as regards the opening of the market for domestic

passenger transport services by rail and the governance of the railway

infrastructure (OJ 2016 L 352, p. 1)

altered the definition of ‘infrastructure

manager’ in

Article 3(2) of

Directive 2012/34, which is now defined as ‘any body

or firm responsible for the operation, maintenance and renewal of railway

infrastructure on a network, as well as responsible for participating in its

development as determined by the Member State within the framework of its

general policy on development and financing of infrastructure’.

Furthermore, Article 1(2)(b) of Directive 2016/2370 added a paragraph 2b to

Article 3 of Directive 2012/34, which introduces a definition of the term

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‘operation of the railway infrastructure’, namely ‘train path allocation, traffic

management and infrastructure charging’.

As a further preliminary point, it should be noted that, notwithstanding the fact

that Directive 2012/34 does not give a definition, the interpretation of the notion

of ‘maintenance’ of railway infrastructure does not give rise to any doubt, as that

term may be equated with ‘works intended to maintain the condition and

capability of existing infrastructure’, which corresponds to the definition

introduced, after the contested decision was adopted, by Article 1(2)(b) of

Directive 2016/2370, which added paragraph 2c to Article 3 of Directive 2012/34.

According to the applicant, that activity is included in the activity of ‘operation’ in

the broader sense.

–

The

opening ‘de lege’ of the relevant markets by Law

No 1249

The applicant submits that, from a legal standpoint, the operation of the railway

infrastructure, including its maintenance, and the management of that

infrastructure were opened up to competition by the Bekendtgørelse af lov n

1249

om jernbane (Law No 1249 on railways) of 11 November 2010 and that there are

in fact a number of railway infrastructure management companies which have

been granted a licence as well as various companies active in the railway

infrastructure operating sector.

The applicant based its arguments on Sections 2 and 3 of Sub-Chapter 3 of

Chapter 3 of Law No 1249,

entitled ‘Authorisation to operate railways and

manage railway infrastructure’, which are worded as follows:

–

Section

2: ‘Management of the railway infrastructure requires authorisation

and a safety certificate issued by the Transport Authority’;

Section 3: ‘Permits issued by other Member States of the European Union

under EU rules are valid in Denmark’.

However, contrary to what is claimed by the applicant, Section 2 of Sub-Chapter 3

of Chapter 3 of Law No 1249 simply provides that, in order to manage railway

infrastructure, it is necessary to obtain authorisation and a safety certificate issued

by the transport authority and does not imply, in any event, that railway

infrastructure is open to competition.

Indeed, it should be noted that, as stated in recital 71 of Directive 2012/34,

railway infrastructure is a natural monopoly and EU directives on the

liberalisation of the railway sector have not required Member States to open up

the management of that infrastructure to competition.

In that context, it should be noted, as observed by the Commission, that the fact

that an undertaking that meets certain conditions can obtain a licence to manage

railway infrastructure and that there are in fact companies in possession of

licences to manage such infrastructure does not mean that there is competition

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‘on’ or ‘for’ the market for the operation and management of the Danish national

railway network, including the rail connections at issue in the present dispute. The

fact that such companies may operate on sections of the railway network which

form a kind of natural monopoly, separate from the national railway network, is

not sufficient to show that the latter, which is managed by Banedanmark under a

statutory monopoly, is open to competition. The same applies with regard to the

rail connections, which involve the expansion and upgrading of the existing

infrastructure held by Banedanmark and will be jointly owned by it and Femern

Landanlæg (see paragraphs 4 to 9 above).

Moreover, Section 3 of Sub-Chapter 3 of Chapter 3 of Law No 1249 simply

allows undertakings established in other EU Member States to rely on permits

issued by their country of origin in Denmark, which does not mean, of itself, that

the market for the management and operation of railway infrastructure in that

country is open to competition.

It should also be noted that, as observed by the Commission, Sub-Chapter 16 of

Chapter 5 of the Jernbanelov n

686 (Law No 686 on the railways) of 27 May

2015, which was in force at the date of the contested decision, provides that

Banedanmark is responsible for the management of the State railway

infrastructure and rail connections.

The same considerations justify the dismissal of the arguments alleging, first, that

Law No 686 dispensed with the obligation to obtain a licence, merely requiring

infrastructure managers to obtain security approval, and, second, that that law

does not impose Banedanmark as manager of railway infrastructure that is owned

by others than the Danish State, merely providing for such a possibility, subject to

the prior agreement of the infrastructure owner.

Any dispensation from the requirement to hold a licence and the fact that it is

possible for railway infrastructure that is owned by third parties to be managed by

operators other than Banedanmark do not show that the markets for the

management and operation of the State infrastructure and, in particular, the rail

connections, are open to competition.

–

The ‘de facto’ opening of the relevant markets, as evidenced by the

presence of network management companies

The applicant submits that the markets for the management and operation of

railway infrastructure in Denmark are de facto open to competition. It relies on the

existence of a number of companies other than Banedanmark which operate as

managers of certain sections of the Danish railway network under a licence or

which are appointed as infrastructure managers in connection with certain projects

in which they participate, in particular the Great Belt Bridge, the Øresund tunnel-

bridge and the Fehmarn Belt fixed link tunnel itself.

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As the Commission and the Kingdom of Denmark have acknowledged, there are

admittedly local railway networks in private hands which do not have to be

managed by Banedanmark. Moreover, that situation is envisaged by Directive

2012/34, in particular in Article 2(4), which allows Member States to exclude

from the scope of Article 8(3) of the directive, concerning the financing of the

infrastructure manager, ‘local and regional railway infrastructures which do not

have any strategic importance

for the functioning of the rail market’ and to

exclude from the scope of Chapter IV, concerning the levying of charges for the

use of infrastructure and the allocation of railway infrastructure capacity, ‘local

railway infrastructures which do not have any strategic importance for the

functioning of the rail market’.

That being the case, even if there was competition ‘for’ the market for the

management of certain local networks, for which concession contracts are

awarded, it must be noted, first, that those networks are natural monopolies

separate from the national railway infrastructure, including the railway

connections (see paragraph 86 above) and, second, that according to paragraph 2

of Chapter 1 of the Construction Law, Femern Landanlæg is ‘authorised

construct and operate the Danish hinterland connections and to take the measures

necessary to carry those tasks out’ —

tasks which are mentioned in that

company’s articles of association as forming part of its objects. Therefore, the

documents before the Court do not show that Femern Landanlæg is active or may

be active on other markets, such as those for which contracts are awarded for the

management of local railway networks.

In conclusion, the existence of local infrastructure managed by operators other

than Banedanmark does not show that the rail connections are also operated as a

result of competitive tendering procedures or that Femern Landanlæg is active on

markets open to competition.

–

The opening of the markets for the construction and maintenance of the

railway infrastructure

The applicant argues that the activities of constructing and maintaining the

railway network, which are open to competition, are part of the activities included

in the concept of ‘railway network operation’, activities

with which Femern

Landanlæg is entrusted by the Construction Law, as acknowledged by the

Kingdom of Denmark and that company’s articles of association.

It is, admittedly, common ground between the parties that the markets for the

construction and maintenance of the railway infrastructure are open to

competition. Nevertheless, those markets, on which Femern Landanlæg is not

active, are separate from the market for the management and operation, in the

strict sense, of the railway infrastructure. Those markets are not therefore affected

by the measures at issue.

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The Lov n

285 om projektering af fast forbindelse over Femern Bælt med

tilhørende landanlæg i Danmark (Law No 285 on the planning of the Fehmarn

Belt fixed link and Danish hinterland connections) of 15 April 2009

(‘the Planning

Law’), referred to in recital 13 of the contested decision, confines the activities of

Femern Landanlæg to planning the hinterland connections, whereas the

Construction Law, referred to in recital 50 of that decision, adds the activities

relating to the construction and operation of the hinterland connections.

In particular, paragraph 2 of Chapter 1 of the Construction Law, referred to by the

applicant, provides that Femern Landanlæg is ‘authorised to construct and operate

the Danish hinterland connections and to take the measures necessary to carry out

those tasks’ and that company’s articles of association refer to the same tasks as

forming part of the company’s objects. Moreover, as observed by the Kingdom of

Denmark, under Article 2(1) of the Bekendtgørelse n

1222 om Banedanmarks

opgaver og beføjelser (Regulation No 1222 on the tasks and powers of

Banedanmark) of 21 November 2014, Banedanmark is responsible for, inter alia,

the construction, upgrading and maintenance of public railway infrastructure.

100 Accordingly, while the provisions referred to in paragraphs 98 and 99 above

confer responsibility on Femern Landanlæg for ensuring that the rail connections

are constructed and operated, it is not apparent from those provisions that that

company is in a position to carry out the tasks of constructing and maintaining the

network itself in competition with other operators

—

a claim which is not,

moreover, made by the applicant.

101 In those circumstances, the existence of companies that construct and maintain

certain parts of the Danish railway network, including following a competitive

tendering procedure, does not demonstrate that the activities of managing or

operating the railway infrastructure, as referred to in the contested decision and

performed by Femern Landanlæg, are open to competition.

102 Therefore, irrespective of whether the activity of maintaining the railway network

is technically part of the activity of operating the network, it is clear, first, that

Femern Landanlæg does not directly perform that activity, or indeed that of

constructing the network, and, second, that the references in the contested decision

to the activities of managing and operating the railway network do not go so far as

to include the exercise of the construction and maintenance activities described to

above.

The effect on trade between Member States

103 With regard to the effect on trade between Member States, the applicant submits

that the measures at issue granted to Femern Landanlæg may prevent

infrastructure operators established in other Member States from penetrating the

Danish market and strengthen that company’s competitive position on railway

infrastructure markets in other Member States.

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104 In the first place, it is clear that it is the fact that there is no competition on the

market for the management of the Danish railway infrastructure which prevents

other companies established in other Member States from penetrating that market,

so that the measures granted to Femern Landanlæg cannot affect the entry of non-

Danish operators onto the Danish market.

105 In the second place, it should be noted that the Planning Law, referred to in recital

13 of the contested decision, does not allow Femern Landanlæg to engage in

activities other than those relating to the planning of the hinterland connections,

whereas the Construction Law, referred to in recital 50 of that decision, does not

allow Femern Landanlæg to engage in activities other than those relating to the

construction and operation of the hinterland connections (see paragraphs 98 to 100

above).

106 It follows that the applicant has not succeeded in showing that Femern Landanlæg

was authorised to carry out activities other than those relating to the project and

that it could therefore penetrate markets in other Member States.

107 Moreover, the claim that Banedanmark maintains the Danish railway network in

competition with other companies and that it may penetrate other national

markets, even if established, does not show, first, that the measures granted to

Femern Landanlæg, but not to Banedanmark, constitute indirect aid for the benefit

of Banedanmark

—

a claim not made by the applicant

—

or, second, that such

measures are liable to distort competition on a market on which Femern

Landanlæg operates.

Conclusion

108 In the light of all the foregoing, it must be concluded that there is no basis for the

applicant’s claim that the Commission’s examination is vitiated by an error of fact

or of law, and that it has failed to demonstrate that the Commission encountered

serious difficulties which should have prompted it to initiate the formal

investigation procedure.

109 As a consequence, the Court rejects as unfounded the first plea and the first

complaint in the second part of the third plea, in so far as concerns the analysis of

the measures granted to Femern Landanlæg for the planning, construction and

operation of the rail connections.

The second plea and the second part of the third plea, alleging infringement of

Article 107(3)(b) TFEU and infringement of the obligation to initiate the formal

investigation procedure in so far as concerns the compatibility with the internal

market of the measures granted to Femern for the planning, construction and

operation of the fixed link

110 The second plea alleges infringement of Article 107(3)(b) TFEU in so far as the

Commission concluded that the aid measures granted to Femern were compatible

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with the internal market. That plea is made up of five parts, by which the applicant

alleges errors of law and manifest errors of assessment in respect of: (i) the

common European interest of the project; (ii) the necessity of the aid; (iii) whether

the aid was proportional; (iv) the distortion of competition; and (v) the conditions

for mobilising State guarantees.

111 The second part of the third plea alleges infringement of the obligation to initiate

the formal investigation procedure, for the purpose of Article 108(2) TFEU, in so

far as the Commission conducted an insufficient or incomplete assessment of the

compatibility of the aid measures. That part of the plea is made up of five

complaints, the first of which has been dealt with at the same time as the first plea.

The second to fifth complaints concern: (i) the common European interest of the

project; (ii) the necessity of the aid; (iii) the proportionality of the aid l; and (iv)

distortion of competition.

112 The Court considers it appropriate to examine first the first four parts of the

second plea together with the corresponding complaints in the second part of the

third plea and, afterwards, the fifth part of the second plea.

The relevant case-law

113 As a preliminary point, with regard to the arguments alleging failure to initiate the

formal investigation procedure, it should be borne in mind that, according to

settled case-law, the procedure under Article 108(2) TFEU must be followed

whenever the Commission encounters serious difficulties in determining whether

aid is compatible with the internal market. It follows that the Commission, when

taking a decision in favour of aid, may restrict itself to the preliminary

examination under Article 108(3) TFEU only if it is able to satisfy itself after an

initial examination that the aid is compatible with the internal market. If, on the

other hand, the initial review leads the Commission to the opposite conclusion or

even if it does not enable the Commission to overcome all the difficulties involved

in determining whether the aid is compatible with the internal market, the

Commission is under a duty to obtain all the requisite opinions and, for that

purpose, to initiate the procedure under Article 108(2) TFEU (see judgment of

27 September 2011,

Commission,

T-30/03 RENV, EU:T:2011:534,

paragraph 53 and the case-law cited).

114 Although it has no discretion in relation to the decision to initiate the formal

investigation procedure, where it finds that such difficulties exist, the Commission

nevertheless enjoys a certain margin of discretion in identifying and evaluating the

circumstances of the case in order to determine whether or not they present

serious difficulties (see judgment of 27 September 2011,

Commission,

T-30/03 RENV, EU:T:2011:534, paragraph 54 and the case-law cited).

115 According to case-law, the concept of serious difficulties is an objective one. The

existence of such difficulties must be sought both in the circumstances in which

the contested measure was adopted and in its content, in an objective manner,

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comparing the grounds of the decision with the information available to the

Commission when it took a decision on the compatibility of the disputed aid with

the internal market. It follows that judicial review by the Court of the existence of

serious difficulties will, by its nature, go beyond simple consideration of whether

or not there has been a manifest error of assessment. The applicant bears the

burden of proving the existence of serious difficulties and may discharge that

burden by reference to a body of consistent evidence, concerning, first, the

circumstances and the length of the preliminary examination procedure and,

second, the content of the contested decision (see judgment of 27 September 2011,

Commission,

T-30/03 RENV, EU:T:2011:534, paragraph 55 and the case-

law cited).

116

Furthermore, with regard to the applicant’s pleas concerning the application of

Article 107(3)(b) TFEU, it should be borne in mind that that article confers on the

Commission a discretion, the exercise of which involves complex economic and

social assessments (see judgment of 22 December 2008,

Régie Networks,

C-333/07, EU:C:2008:764, paragraph 78 and the case-law cited). Judicial review

of the manner in which that discretion is exercised is confined to establishing that

the rules of procedure and the rules relating to the duty to give reasons have been

complied with and to verifying the accuracy of the facts relied on and that there

has been no error of law, manifest error in the assessment of the facts or misuse of

powers (judgment of 22 December 2008,

Régie Networks,

C-333/07,

EU:C:2008:764, paragraph 78 and the case-law cited). In particular, it is not for

the Court to substitute its own economic assessment for that of the author of the

decision (judgment of 25 June 1998,

British Airways and Others

Commission,

T-371/94 and T-394/94, not published, EU:T:1998:140, paragraph 79).

The common European interest of the project

117 By the first part of the second plea, the applicant raises two complaints, alleging

(i) a manifest error of assessment in calculating the socio-economic return of the

project and (ii) misapplication of Article 107(3)(b) TFEU and of the IPCEI

Communication. The second complaint in the second part of the third plea alleges

infringement of the obligation to initiate the formal investigation procedure in so

far as concerns the calculation of the socio-economic return of the project.

118 The Commission disputes

the applicant’s arguments.

119

It is appropriate to examine, first, the Commission’s assessment concerning the

calculation of the socio-economic return of the project in terms of the alleged

manifest error of assessment and infringement of the obligation to initiate the

formal investigation procedure and, second, the Commission’s assessment

concerning the alleged misapplication of Article 107(3)(b) TFEU in terms of

manifest error of assessment.

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–

The calculation of the socio-economic return of the project

120 In the contested decision, the Commission based its assessment of the common

European interest of the project on four factors. First, in recital 89 of the decision,

it stated that the common European interest of the project had been recognised in

the project planning decision. Second, in recital 90, it observed that the fixed link

was a priority TEN-T project (No 20) and contributed to improving the connection

between the Nordic countries and central Europe. Third, in recital 91, it stated that

the project will produce a positive economic return and, lastly, in recital 92, that

the project had obtained EU funding for the planning activities and that an

application had been submitted for EU funding for the construction phase.

121 In particular, recital 91 of the contested decision, which is disputed in the

complaint under consideration, states as follows:

‘The Project involves two Member States, i.e. Denmark and Germany, and the

benefits go beyond those two Member States. The benefits of the Project were

clearly defined and quantified in a cost benefit study prepared for the Danish

Ministry of Transport. The cost benefit analysis shows that the Project will have

wide benefits for Europe. Despite significant investment costs, the Fixed Link will

return a net benefit and

produce an economic return of 4.7 [%].’

122 It is common ground between the parties that that conclusion is based on two

documents: the study of 5 January 2015 and the study of 27 March 2015, carried

out for the Danish Ministry of Transport.

123 The applicant puts forward three arguments in support of the complaints under

consideration.

124 By its first argument, the applicant maintains, in the first place, that it is not the

study of 5 January 2015 but the updated version of that study, namely that of

27 March 2015, which indicates a socio-economic return of 4.7% at European

level.

125 The Commission acknowledges that the figure of 4.7% is based on the new,

updated calculation carried out in the study of 27 March 2015 in response to the

applicant’s

observations.

126 It must

therefore be concluded that the Commission’s

statement in recital 91 and

footnote 31 of the contested decision that the figure of 4.7% is based on the study

of 5 January 2015 is incorrect, as it is common ground between the parties that the

source of that figure is the updated calculation given in the study of 27 March

2015.

127 However, although regrettable, that error did not, of itself, have any bearing on the

Commission’s examination. It is common ground between the parties that, as is

apparent from the wording of recital 91 of the contested decision and irrespective

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of the merits of that assessment, which will be examined below, the Commission

based its decision on an economic return at European level of 4.7%.

128 In the second place, the applicant contends that the calculation of a socio-

economic return of 4.7% is based on the incorrect premiss that the fixed link will

not be in competition with ferries.

129 In that regard, it should be noted that in the contested decision the Commission

based that premiss on the conclusions of the study of 5 January 2015, as revised

by the study of 27 March 2015. That study does not take account of competition

from ferries, ‘in accordance with normal practice’ and the experience gained from

the Great Belt and Øresund bridge projects. Nevertheless, that study measures, in

the interests of prudence, the impact of competition from ferries operating at

reduced frequency. Under that scenario, the socio-economic return was estimated

at 4.1%.

130 The applicant maintains that it will continue with its activities, that the study is

based on a

‘simplistic simulation’ of ferry traffic and that the projects referred to

by the Commission do not support the premiss that the fixed link will not face

competition from ferries, which the Commission disputes.

131 Those arguments are not sufficient to show that the Commission made a manifest

error of assessment or that it carried out an insufficient or incomplete

examination.

132 First, the socio-economic return of 4.7% is just one of the four factors on which

the Commission based its assessment of the common European interest of the

project (see paragraph 120 above). It joins the other factors taken into account by

the Commission,

including the classification of the project as a ‘priority TEN-T’

project, which is a strong indication of the common European interest of the

project.

133 Second, it is reasonable, or at the very least not manifestly incorrect, to conclude

that the opening of the fixed link will lead to the disappearance of ferry services

on the line covered by the fixed link.

134 In any event, the 0.9% reduction, due to account being taken of the presumption

that the ferry services will continue in the sensitivity calculations, even if it

slightly reduced the socio-economic return of the fixed link to a level below the

4% threshold, is not in any event indicative of a manifest error of assessment on

the part of the Commission. As the Kingdom of Denmark observed, the applicant

cannot include the 0.9% negative sensitivity calculation in relation to the

assumption that ferries will continue to operate when all the positive and negative

sensitivity calculations have been disregarded. Moreover, the percentage figure of

4% is simply an indicative ceiling, and merely one of the factors taken into

account by the Commission, including the socio-economic return at Danish level,

which is above 4%.

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135 By its second argument, the applicant submits that the socio-economic return

measured by the Commission does not take account of the costs incurred by the

project before 2015, which, according to the applicant, would give rise to a further

reduction in the return of 0.3%.

136 Nevertheless, as the Kingdom of Denmark observed, the applicant cannot take

account of the sensitivity calculations relating to the inclusion of costs incurred

before 2015 when all the other sensitivity calculations are disregarded. Moreover,

that argument does not alter the conclusion that the socio-economic return

demonstrates that the project is of common European interest.

137 By its third argument, the applicant submits that the Commission was not entitled

to conclude, as it did in recital 91 of the contested decision, that the ‘Project will

have wide benefits for Europe’, as the socio-economic

return of 4.7% at EU level,

even if it were established, is only slightly above the Danish threshold of 4% and

considerably below the 14% threshold of the Great Belt fixed link.

138 In that regard, as the Commission argues, it is sufficient to note that the fact that

the anticipated return of the project, which is above the Danish threshold, is below

that of other projects does not, of itself, show that the project is not of common

European interest.

139 In conclusion, as regards the calculation of the socio-economic return of the

project, first, the applicant is not entitled to claim that the Commission’s

examination is vitiated by an error of law or a manifest error of assessment and,

second, the applicant has failed to show that there were difficulties of assessment

which should have prompted the Commission to initiate the formal investigation

procedure.

140 The first complaint in the first part of the second plea and the second complaint in

the second part of the third plea, concerning the calculation of the socio-economic

return of the project, must therefore be rejected.

–

The application of Article 107(3)(b) TFEU and the IPCEI Communication

141 As a preliminary point, it should be noted that the concept of common European

interest inherent in Article 107(3)(b) TFEU must be interpreted strictly and that a

project may be so classified only if it forms part of a transnational European

programme jointly supported by a number of Member State governments or arises

from concerted action by a number of Member States to combat a common threat

(see judgment of 6 October 2009,

Germany

Commission,

T-21/06, not

published, EU:T:2009:387, paragraph 70 and the case-law cited).

142 The concept of common European interest was explained by the Commission in

the IPCEI Communication, in the light of which that concept must be interpreted,

a point which the applicant does not dispute.

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143 In recitals 89 to 92 of the contested decision, the Commission based its

examination of the common European interest of the project on the following

factors:

–

first, the common European interest of the fixed link was recognised in the

decision regarding the planning of the project;

second, the fixed link will contribute to the development of the TEN-T, in

particular by improving the connection between the Nordic countries and

central Europe;

third, (i) the project involves two Member States and its benefits go beyond

those two Member States and (ii) the benefits of the project were clearly

defined and quantified, the economic return of the project having been

assessed at 4.7%;

fourth, the project obtained EU funding for the planning activities and an

application for EU funding for the construction phase was submitted.

–

144 In support of the complaint under consideration, the applicant puts forward three

arguments.

145

In that regard, it is necessary, first, to dismiss the applicant’s first argument,

alleging, in essence, that the project planning decision and, more generally, the

Commission’s previous decision-making

practice, were irrelevant for the purpose

of examining whether the project was of common European interest.

146 Recital 40 of the project planning decision, which is echoed by the Commission in

recital 89 of the contested decision, simply stresses the importance of the fixed

link in the context of the TEN-T, a point which is repeated by the Commission in

recital 90 of the contested decision and, moreover, is not a decisive factor in the

Commission’s conclusion on the common European interest of the project, albeit

an important indication of the existence of such an interest. In that context, the

argument that the

Commission’s earlier decision-making

practice is irrelevant is

ineffective as the Commission did not base its conclusion on the project planning

decision or any other earlier decision.

147 Next, it is

appropriate to examine together the applicant’s second and third

arguments, alleging, in essence, that the importance of the project in the context of

the TEN-T and the joint funding of the project by the European Union are not

decisive factors for the purpose of establishing that the project is of common

European interest and do not justify disregarding the other cumulative conditions

set out in the IPCEI Communication.

148

It should be noted in that regard that the Commission’s assessment in the

contested decision of whether there is a common European interest is based on the

two factors mentioned in paragraph 147 above, which are not disputed by the

applicant, and on the fact that the project will provide benefits that go beyond the

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two Member States directly concerned and that those benefits are clearly defined

and quantified, the economic return of the fixed link having been estimated at

4.7%.

149 Irrespective of the merits of the latter consideration, which was examined in

paragraphs 120 to 139 above, those three factors meet the conditions set out in the

IPCEI Communication, having regard to the common European interest test.

150

Indeed, those factors form part of the ‘general cumulative criteria’ in

paragraphs 14 to 19 of Section 3.2.1 of the IPCEI Communication and include one

of the ‘general positive indicators’, as set out in

paragraph 20(f) of the

communication.

151 Lastly, it is true that doubts may arise as to whether the condition laid down in

paragraph 18 of the IPCEI Communication, namely that the project must involve

co-financing by the beneficiary, which is disputed by Föreningen Svensk Sjöfart,

is fulfilled. However, as submitted by the Commission, the project is funded in

large part by the beneficiaries of the measures, on account of the fact that tolls and

fees will be charged to users of the fixed link and rail connections, which satisfies

that condition.

152 In conclusion, the Court finds, first, that there are no valid grounds for the

applicant’s claim that the Commission made a manifest error of assessment

concluding that the project was of common European interest and, second, that the

applicant has failed to show that the Commission’s examination disclosed serious

doubts which should have prompted it to initiate the formal investigation

procedure.

153 The first part of the second plea and the second complaint in the second part of the

third plea, concerning the common European interest of the project, must

therefore be rejected in their entirety.

The necessity of the aid

154 By the second part of the second plea, the applicant raises two complaints,

alleging an error of law and a manifest error of assessment in the assessment of

the necessity of the aid, in so far as concerns, first, the incentive effect of the aid

and, second, the counterfactual scenario, including

the calculation of the project’s

IRR. By the third complaint in the second part of the third plea, the applicant also

alleges infringement of the obligation to initiate the formal investigation

procedure in relation to those factors.

155 The Commission disputes those arguments.

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–

The incentive effect of the aid

156 As a preliminary point, it is appropriate to set out the content of paragraph 28 of

the IPCEI Communication:

‘The aid must not subsidise the costs of a project that an undertaking would

anyhow incur and must not compensate for the normal business risk of an

economic activity. Without the aid the project’s realisation should be impossible,

or it should be realised in a smaller size or scope or in a different manner that

would significantly restrict its

expected benefits …’

157 Footnote No 24, in paragraph 28, of the IPCEI Communication states as follows:

‘The aid application must precede the start of the works, which is either the start

of construction works on the investment or the first firm commitment to order

equipment or other commitment that makes the investment irreversible, whichever

is the first in time …’

158 By its arguments, the applicant claims, in essence, that the aid, as referred to in

paragraph 28 of the IPCEI Communication, does not have any incentive effect, as

construction work on the fixed link had already started before an aid application

had been made or a commitment given by the Danish authorities to grant such aid.

159 It should be noted in that regard, first, that a certain number of preparatory works,

anticipated by the Planning Law, were authorised by the project planning

decision, and, as stated in recital 13 of the contested decision, the Danish

authorities confirmed that the standstill obligation had been observed, in

accordance with the measures laid down in the Construction Law, as required by

Article 108(3) TFEU.

160 Next, it is clear from the documents before the Court that Femern was established

for the sole purpose of constructing and operating the fixed link. It is therefore

required by its articles of association to do so.

161 Lastly, it is not disputed that Femern was not in a position to start work on the

project unless it was granted the aid at issue.

162 In those circumstances, a prior aid application or a prior commitment on the part

of the Danish authorities to grant aid are not prerequisites for demonstrating that

the aid had an incentive effect for the purpose of paragraph 28 of the IPCEI

Communication.

163 Moreover, the case-law relied on by the applicant does not alter that conclusion.

The judgments of 15 April 2008,

Nuova Agricast

(C-390/06, EU:C:2008:224),

and of 13 June 2013,

HGA and Others

Commission

(C-630/11 P to C-633/11 P,

EU:C:2013:387), concern aid schemes approved on the basis of the Guidelines on

national regional aid (OJ 1998 C 74, p. 9), the third subparagraph of Section 4.2 of

which states that ‘aid schemes must lay down that an application for aid must be

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submitted before work is started on the projects’.

That is a very different context

from that of the present case and cannot be compared with it.

164 It must therefore be concluded that the applicant is not entitled to claim that the

Commission made a manifest error of assessment in concluding that the aid had

an incentive effect and that it has failed to show that the Commission’s

examination disclosed serious doubts which should have prompted it to initiate the

formal investigation procedure.

165 The first complaint in the second part of the second plea and the third complaint in

the second part of the third plea must therefore be rejected in so far as concerns

the examination of the incentive effect of the aid.

–

The counterfactual scenario

166 As a preliminary point, it is appropriate to refer to the content of paragraphs 29

and 30 of the IPCEI Communication:

‘29.

The Member State must provide the Commission with adequate information

concerning the aided project as well as a comprehensive description of the

counterfactual scenario which corresponds to the situation where no aid is

awarded by any Member State. The counterfactual scenario may consist in

the absence of an alternative project or in a clearly defined and sufficiently

predictable alternative project considered by the beneficiary in its internal

decision-making, and may relate to an alternative project that is wholly or

partly carried out outside the Union.

30.

In the absence of an alternative project, the Commission will verify that the

aid amount does not exceed the minimum necessary for the aided project to

be sufficiently profitable, for example by making possible to achieve an IRR

corresponding to the sector or firm specific benchmark or hurdle rate.

Normal rates of return required by the beneficiary in other investment

projects of a similar kind, its cost of capital as a whole or returns commonly

observed in the industry concerned may also be used for this purpose. All

relevant expected costs and benefits must be considered over the lifetime of

the project.’

167 The applicant raises seven arguments in that regard. By the first and second, it

disputes, in essence, the Commission’s conclusion that there was no

counterfactual scenario, which is at variance with the conclusions of a cost-benefit

report commissioned in 2000 by the Danish and German Ministries of Transport

(‘the 2000 cost-benefit report’).

168 In that connection, recitals 99 and 100 of the contested decision read as follows:

‘99

[With regard to paragraph 29 of the IPCEI Communication] the Danish

authorities submit that there is no counterfactual or an alternative project.

The Danish Parliament has sole decision-making authority as regards the

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project’s scope and its means of financing. Hence, [Femern] and [Femern

Landanlæg] have no power to decide to carry out an alternative project of a

different scale. Consequently, no realistic description of an alternative

project could be provided by Denmark.

100 However, the Danish authorities provided information regarding a scenario

where no public support is granted to [Femern]. The analysis conducted in

the preliminary phases shows that the Fehmarn Belt fixed link project can

only be realised with substantial public support either in the form of State

guarantees or direct grants.’

169 Recital 101 of the contested decision summarises the results of the 2001 inquiry as

to commercial interest, which shows that the project was not feasible without

public support.

170 It is apparent from recitals 99 to 101 of the contested decision that, in the

Commission’s view, the Danish authorities, while claiming that there was no

counterfactual scenario or any realistic alternative project, provided information

relating to a scenario in which no public support would be granted to Femern, a

scenario which confirmed that the project could be completed only with

substantial public support. Moreover, the 2001 inquiry as to commercial interest

confirmed that the private sector was interested in participating in the project on

condition that State subsidies far exceeding the support envisaged by means of the

RTE or State guarantees were granted.

171 It follows that, notwithstanding the ambiguous wording of recital 99 of the

contested decision, which states that ‘the Danish authorities submit that there is no

counterfactual or alternative project’, the Commission based its decision on the

premiss that there was no alternative project, not on the premiss that there was no

counterfactual scenario at all.

172 It should be noted in that regard that, according to paragraph 29 of the IPCEI

Communication, a counterfactual scenario may consist in the absence of an

alternative project.

173 What now remains to be considered is the argument that the Commission did not

take account of the 2000 cost-benefit report, which examined several alternatives

to the project, the most advantageous of which related to a scenario in which no

fixed link was constructed and the existing ferry services were modernised.

174 As the Commission stated, the 2000 cost-benefit report is one of the documents

which served as a basis for the 2001 inquiry as to commercial interest. The

conclusion of that study is as follows:

‘Evaluation results show that the relative efficiency of the investment in an

improved ferry system is considerably higher than for the best ranked fixed link

alternative, whereas the absolute magnitude of net benefits gained by the fixed

link solution is by far not achievable by an improved ferry system.’

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175 Therefore, while it is true that, according to the 2000 cost-benefit report, in terms

of relative efficiency, improvement of the ferry system would be more

advantageous than construction of the fixed link, that report acknowledges that the

net benefits gained by the solution in the form of the fixed link would not be

achieved by improvements to the ferry system. That report cannot call into

question the Commission’s assessment, based

on the results of the 2001 inquiry as

to commercial interest, that report, moreover, having been used as one of the

references in that inquiry.

176 By its third argument, the applicant submits that the Commission has failed to

establish market failure in the present case and has relied solely on the 2001

inquiry as to commercial interest, which is several years old and relates to a

project which was different in scope and costs to those of the current project.

177 It is sufficient to note in that regard that the reference made by the Commission to

the 2001 inquiry as to commercial interest was simply intended to show that the

private sector would not have undertaken such a large project without State

financial support. The applicant has not explained the extent to which that

conclusion may be called into question by the changes in scope and cost in the

original project, by showing, for example, that in the meantime a counterfactual

scenario in which no aid was granted had become viable.

178 By its fourth to sixth arguments, the applicant criticises the lack of detail in the

calculation of the IRR and allege that it is incorrect. It maintains that the

calculation could not be based on a 55-year repayment period, contrary to what is

stated in the contested decision, in particular in footnote 35, in recital 104 thereof.

In particular, it disputes the claim that the IRR was calculated by reference to the

repayment period, estimated by the Commission at 55 years, and not by reference

to the lifetime of the project, which,

as stated in an extract from Femern’s website,

is 120 years. The Commission, it is alleged, applied a test relating to the

proportionality of the aid, not the necessity of the aid.

179 It is appropriate to examine first the arguments relating to the serious difficulties

encountered by the Commission when carrying out its preliminary examination.

180 As a preliminary point, it should be noted that the IPCEI Communication is not

very precise with regard to the analysis of the criteria of the necessity and

proportionality of aid. Paragraph 28 et seq. of the communication does not make a

distinction between those two criteria, as the Commission acknowledges, and even

confuses them.

181 In particular, with regard to the calculation of the profitability of a project,

paragraph 30

of the IPCEI Communication refers, inter alia, to ‘an IRR

corresponding to the sector or firm specific benchmark or hurdle rate’ and states

that, in order to calculate the IRR, ‘all relevant and expected costs and benefits

must be considered over the lifetime

of the project’. That would therefore suggest

a condition which seems to be based primarily on the necessity of the aid, as, if

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the project is not profitable during its lifetime, the aid is necessary. However, the

beginning of paragraph 30 of the IPCEI Communication requires the Commission

to verify that ‘the aid amount does not exceed the minimum necessary for the

aided project to be sufficiently profitable’, which seems to relate to the different,

but complementary, condition that the aid must be proportional.

182 In recital 103 of the contested decision, the Commission applied the conditions

laid down in paragraph 30 of the IPCEI Communication when examining the

necessity of the aid. It took the view that, if the IRR was greater than the WACC,

the net present value of the project would be positive and the project profitable,

and that if, on the contrary, the IRR was lower than the WACC, the project would

not be profitable and aid would therefore be necessary.

183 However, in recital 104 of the contested decision, the Commission calculated the

IRR of the project ‘over the expected repayment period of 55 years’. Footnote 35

specifies that the calculation of the 55-year repayment period is based, inter alia,

on ‘the project planning and construction costs of

EUR

7.4 billion (2014 prices)’.

The figure of EUR 7.4 billion, according to Table 1 in recital 8 of the contested

decision, covers only the construction costs of the fixed link.

184 In that regard, first, the Court notes that, when referring to the repayment period

for the aid, the Commission failed to apply correctly paragraph 30 of the IPCEI

Communication, which states that the IRR is to be calculated taking into account

all expected costs and benefits ‘over the lifetime of the project’. Furthermore, to

base the calculation of the IRR on a very uncertain repayment period, as in the

present case, is also arbitrary, as that period may vary depending on subjective

factors, including the type of aid and the arrangements for repayment negotiated

between the beneficiary and the financial institution granting the loan.

185 Second, in the calculation of the IRR for the purpose of examining the necessity

of the aid, the Commission did not take account of the construction costs of the

fixed link, whereas it conducted its compatibility analysis by reference to the

project as a whole, including the construction costs of the hinterland connections

and the operating costs of the fixed link (see paragraph 208 below).

186 In its pleadings, the Commission states that the IRR was calculated over the

expected repayment period of 55 years, in accordance with paragraph 31 of the

IPCEI Communication, which indicates that the funding gap is defined as ‘the

difference between the positive and negative cash flows over the lifetime of the

investment’.

It adds that the lifetime of the investment refers to its economic

lifetime, in accordance with the Directorate-General (DG) for Regional and Urban

Policy’s document of December 2014 entitled ‘Guide

to Cost-Benefit Analysis of

Investment Projects’,

which

refers to a standard reference period of 25 to 30 years

for calculating the funding gap for the purpose of establishing the maximum

contribution from the European Regional Development Fund (ERDF) for

infrastructure projects for roads and railways, while at the same time stating that,

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in the present case, given the exceptional nature of the project and the unusually

long construction period, it took a more conservative approach.

187 In that regard, it is clear that paragraph 31 of the IPCEI Communication does not

concern the calculation of the IRR but that of the funding gap, which relates

mainly to the different requirement that the aid must be proportional (see

paragraph 195 below). Next, it should be noted that the DG for Regional and

Urban Policy’s document

referred to by the Commission provides only guide

values as to the profitability of certain types of project, while at the same time

indicating that, in cases involving unusually long construction periods, longer

values may be used. In any event, that document cannot prevail over the wording

of the IPCEI Communication. Lastly, the Commission does not explain in the

contested decision in what way the lifetime of the investment corresponds to the

repayment period, on which the calculation of the IRR is based.

188 In conclusion, while it cannot be ruled out that, in principle, aid was necessary for

the realisation of such a large project, it must be nonetheless be found that the

Commission’s examination of the necessity of the aid in the contested decision

was, at the very least, insufficient and imprecise. This indicates that there were

serious difficulties, which should have prompted the Commission to initiate the

formal investigation procedure, and also means that it is not possible to examine

whether the Commission made a manifest error of assessment.

189 By its seventh and final argument, the applicant disputes the calculation of the

WACC. It maintains that the 11.0% WACC level assumed in the contested

decision is too high by comparison with the WACC for similar long-term

infrastructure projects, according to data provided by a Professor at the New York

University (New York, United States), which suggests a WACC level of between

5.68% and 6.71%.

190 As the Commission was correct to observe in that regard, the document referred to

in paragraph 189 above simply shows a one-page table containing figures, without

explanations or sources, which are, in any event, higher than the IRR of the

project. That evidence cannot therefore call into question the Commission’s

assessment.

191 In the light of all the foregoing, the third complaint in the second part of the third

plea must be upheld in so far as the Commission failed to have regard to its

obligation to initiate the formal investigation procedure when faced with serious

difficulties concerning its assessment of the necessity of the aid. It is not therefore

possible, in the light of the inadequate examination carried out by the

Commission, to rule on the second complaint in the second part of the second

plea, alleging a manifest error of assessment.

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The proportionality of the aid

192 By the third part of the second plea, the applicant alleges an error of law and a

manifest error of assessment in the assessment of the proportionality of the aid. By

the fourth complaint in the second part of the third plea, which refers to arguments

set out in connection with the third part of the second plea, it submits that the

Commission’s analysis of whether the aid was proportional was insufficient and

incomplete.

193 It is appropriate to consider first the arguments relating to the serious difficulties

encountered by the Commission when carrying out its preliminary examination.

194 First, it should be noted that the principle of proportionality requires that measures

adopted by EU institutions should not exceed the limits of what is appropriate and

necessary in order to attain the objectives legitimately pursued by the legislation

in question; when there is a choice between several appropriate measures,

recourse must be had to the least onerous, and the disadvantages caused must not

be disproportionate to the aims pursued (see judgment of 8 April 2014,

ABN Amro

Group

Commission,

T-319/11, EU:T:2014:186, paragraph 74 and the case-law

cited). As a general principle of EU law, the principle of proportionality is a

criterion for determining whether any act of the institutions of the European Union

is lawful, including decisions taken by the Commission in its capacity as

competition authority (see judgment of 8 April 2014,

ABN Amro Group

Commission,

T-319/11, EU:T:2014:186, paragraph 75 and the case-law cited).

195 It should also be noted that paragraph 28 of the IPCEI Communication states that

aid will be deemed proportionate only if the same result cannot be achieved with

less aid. Paragraph 31 of that communication indicates that the maximum aid level

will be determined with regard to the identified funding gap in relation to the

eligible costs, the funding gap being defined as ‘the difference between the

positive and negative cash flows over the lifetime of the investment, discounted to

their current value on the basis of an appropriate discount factor reflecting the rate

of return necessary for the beneficiary to carry out the project notably in view of

the risks involved’. Aid

is therefore proportionate up to the amount at which the

project becomes profitable.

196 With regard in particular to State aid in the form of a guarantee, footnote 27, in

paragraph 36

of the IPCEI Communication, states that ‘aid in the form of

guarantees must be limited in time, and aid in the form of loans must be subject to

repayment periods’. Moreover, point (b) of the third subparagraph of Section 4.1

of the Guarantee Notice, concerning guarantees, states that guarantees must be,

inter alia, ‘limited in time’ and that ‘unlimited’ guarantees are incompatible with

Article 107 TFEU.

197 In the contested decision, the Commission stated that the aid intensity was below

the funding gap of the project. In recital 107 of the decision, the Commission

indicated that the funding gap was EUR 3.1 billion and that the net present value

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of the eligible investment costs was EUR 5.6 billion, giving a funding gap ratio

for the project of 54.9%. In recital 108 of the decision, it stated that the aid

granted to Femern was EUR 2.8 billion, which gives aid intensity of 50.8%.

198 Furthermore, in recital 109 of the contested decision, the Commission added that

the State guarantee and State loans were limited in scope and time. According to

the Commission, the guarantee covers only the debt relating to the planning,

construction and operation of the fixed link until the debt is fully repaid and there

is no risk that the guarantee may be used to subsidise other non-eligible costs and

activities.

199 In recital 110 of the contested decision, the Commission also stated that the

Danish authorities had ‘committed to limit the guarantees and State loans to loans

obtained in order to finance eligible costs no later than 55 years after the opening

of the Fixed Link’, to give fresh notification of any public

financing measures

granted after that period and deemed necessary to ensure the sustainability of the

project and to report annually on progress in the repayment of Femern’s debt. The

Commission also indicated that the guarantee would terminate earlier if the

project debt was repaid before the end of that period.

200 The applicant claims, in essence, that the Commission erred in law or made a

manifest error of assessment in so far as concerns the calculation of the duration

of the aid and its scope, having regard to the eligible costs, and in therefore

concluding that the maximum aid level was permissible.

201 In the first place, it should be noted that the contested decision does not contain

any precise indications concerning the duration and end dates of the State

guarantees and loans. As is apparent from recitals 109 and 110 of the decision, the

grant of those measures is ‘limited’ to 55 years from the date —

which remains

uncertain

—

on which the fixed link will be opened, and those measures will

cover Femern’s

debt until it ‘is fully repaid’. In any event, a period of at least 55

years is, in itself, extremely long, especially as it relates only to the provision of

guarantees in respect of loans taken out up to that date and which will therefore be

repaid long after that date.

202 In its pleadings, the Commission argues that a temporal limitation is not,

according to the IPCEI Communication, an essential requirement when

determining proportionality, and states that, in recital 109 of the contested

decision, it gave a precise indication of the scope and duration of the aid merely

for the sake of completeness. According to the Commission, linking the use of the

guarantees to the repayment of the costs ensures, via a limitation that is as much in

scope as it is in time, that the project will not receive more aid than is needed.

203 The question therefore arises as to whether, in principle, the very long and

imprecisely determined duration of the measures referred to in paragraph 198

above has a bearing on the proportionality of those measures. That question must

be addressed in the light of the principles set out by the Commission in the IPCEI

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Communication and in the Guarantee Notice, which expressly provide that

guarantees must be ‘limited in time’.

204 In those circumstances, first, it should be noted that those guarantees are linked to

an object that is specific but the precise cost of which has not been determined,

namely the loans and obligations relating to the debt connected with the planning,

construction and operation of the fixed link until that debt has been repaid in full

(recitals 31 and 109 of the contested decision). Second, it should also be noted that

the provision of those guarantees is, in principle, limited to a period of 55 years

from the opening of the fixed link, the Danish authorities having undertaken to

give fresh notification of any new measure granted after that period (recital 110 of

the contested decision), which, according to the Commission, is the expected

repayment

period of Femern’s debt, as explained in footnote 35, in recital 104 of

the contested decision. All guarantees still valid at that date will remain so until

they ‘naturally’ expire, that is, until the underlying debts have been repaid, which

may be long after that date.

205 Accordingly, the fact that the object is only partially determined and the extremely

long and indeterminate, or indeed unforeseeable, debt repayment period, which

determines the duration of the guarantees, should have prompted the Commission

to investigate more closely the proportionality of that aid measure.

206

In the second place, the assessment of the Commission’s analysis also raises

difficulties as to the scope of the aid in the form of State guarantees and loans, in

particular with regard to the account taken, as eligible costs, of the costs of the

hinterland connections.

207 It is clear from recital 18 of the contested decision and, what is more, it is not

disputed by the Commission, that it took into account the costs of the hinterland

connections, as eligible costs, among the relevant costs when calculating the

length of the repayment period and the funding gap.

208 It is true that, in the context of the project, as notified, the costs of the hinterland

connections are indirectly payable by Femern, which is obliged, inter alia, to pay

dividends to Femern Landanlæg to enable the latter to meet those costs. Those

costs could therefore, in principle, be taken into account when examining whether

the aid granted to Femern was compatible.

209 That said, the Commission fails to explain in the contested decision whether and

to what extent those costs were taken into account in its analysis of compatibility,

which, in principle, appears to concern only the funding measures for the fixed

link. Moreover,

the Commission’s assessment appears to be contradictory in that

regard. While, in recital 107 of the decision, the Commission indicates that the

calculation of the funding gap takes account of the financing of the hinterland

connections, footnote 35, in recital 104 of the decision, states that the calculation

of the repayment period, which is decisive for determining whether the measures

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at issue are proportional, is based only on the construction costs of the fixed link

(see paragraph 183 above).

210 It follows

that the Commission’s examination of that aspect is incomplete, or even

contradictory, so that it was not entitled to take the view that it had overcome all

the serious difficulties raised by the analysis of the proportionality of the measures

at issue.

211 In the third place, it is apparent from the contested decision that the measures at

issue granted to Femern covered not only the debt connected to the planning and

construction of the fixed link but also that relating to the operation of the link,

until the debt has been repaid in full.

212 It should be borne in mind in that regard that, as the aid at issue covers the

operating costs of the fixed link, it cannot be ruled out that, to some extent, it may

constitute operating aid, that is, aid which is intended to release an undertaking

from costs which it would normally have had to bear in its day-to-day

management or ordinary activities (see, to that effect, judgment of 19 September

2000,

Germany

Commission,

C-156/98, EU:C:2000:467, paragraph 30, and the

case-law cited).

213

As observed by the applicant, the aid should have expired at ‘the point in time

when the beneficiary would be able, on the basis of its cash flow, to borrow on the

open market without the support of State guarantees or State loans’. That point

normally reached when the amount of the beneficiary’s debt has reached a level at

which its income is likely to exceed operating costs and debt repayments under

normal market conditions, and therefore before the debt has been repaid in full.

Aid in excess of that level may therefore be regarded as operating aid, for which

the Commission has not provided any justification in the contested decision.

214 That possibility was not even taken into account by the Commission, as the

contested decision makes no distinction, in the analysis of the compatibility of the

aid, on the basis of whether it covers, on the one hand, the costs relating to the

planning and construction of the fixed link, which may, in principle, be classified

as investment costs and, on the other, the costs of operating the link, which may,

by contrast, constitute operating aid.

215

It follows from all the foregoing that the Commission’s analysis in the contested

decision concerning the proportionality of the measures at issue granted to

Femern, in particular the calculation of the repayment period of the aid and of the

eligible costs, was, at the very least, insufficient and imprecise, or even

contradictory, which is indicative of the existence of serious difficulties that

should have prompted the Commission to initiate the formal investigation

procedure.

216 The Court therefore upholds the fourth complaint in the second part of the third

plea, in so far as the Commission failed to have regard to its obligation to initiate

the formal investigation procedure when it encountered serious difficulties

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concerning the assessment of the proportionality of the aid, although it is not

possible, on account of the inadequate examination carried out by the

Commission, to rule on the third part of the second plea, alleging a manifest error

of assessment.

Undue distortion of competition and balancing test

217 By the fourth part of the second plea, the applicant contends that, contrary to the

requirements of the IPCEI Communication, the Commission failed to examine

whether the aid gave rise to undue distortion of competition. By the fifth

complaint in the second part of the third plea, the applicant also alleges

infringement of the obligation to initiate the formal investigation procedure in so

far as concerns those matters.

218 Paragraph 40

of the IPCEI Communication states that ‘the Member State should

provide evidence that the proposed aid measure constitutes the appropriate policy

instrument to address the objective of the project’ and that ‘an aid measure will

not be considered appropriate if other less distortive policy instruments or other

less distortive types of aid instrument make it possible to achieve the same result’.

219 Under Article 41

of the IPCEI Communication, ‘for the aid to be compatible with

the internal market, the negative effects of the aid measure in terms of distortions

of competition and impact on trade between Member States must be limited and

outweighed by the positive effects in terms of contribution to the objective of

common European interest’.

220 In accordance with those principles, paragraph 42 of the IPCEI Communication

states that ‘in assessing the negative effects of the aid measure, the Commission

will focus its analysis on the foreseeable impact the aid may have on competition

between undertakings in the product markets concerned, including up- or

downstream markets, and on the risk of overcapacity’.

Paragraph 43 of the

communication adds that ‘the Commission will assess the risk of market

foreclosure and dominance, in particular in case of absence of, or limited

dissemination, of the research results’ and that ‘projects involving the construction

of an infrastructure must ensure open and non-discriminatory access to the

infrastructure and non-discriminatory

pricing’.

221 In the present case, with regard to the positive effects of the project, the

Commission refers in recital 115 of the contested decision to recitals 88 to 93

thereof, concerning the analysis of the common European interest of the project,

and states that ‘the Fixed Link is part of a wider plan

to promote mobility, further

integration and cultural exchange of people living on both sides of the Fixed Link,

and to improve the connection between the Nordic countries and central Europe

for passengers as well as road and railway freight’, expected

benefits which have

been ‘recognised at a European level by including the Fixed Link in the list of

TEN-T

priority projects’. It refers, inter alia, to the ‘positive effects on a number

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of economic sectors in the region, such as gas stations, retail, restaurants, hotels,

amusement parks and rail and bus transport’.

222 With regard to the negative effects, in recital 116 of the contested decision the

Commission states that the opening of the fixed link will have ‘a negative impact

on the ferry operators, both serving Rødby and Puttgarden routes as well as other

ferry routes in the region’, and that the decline in the number of ferry operations

‘may also have a negative impact on the ports used by those ferries in terms of

traffic volumes and revenues’. It adds that those effects ‘are inherent in the

project, which seeks to offer a quicker and more convenient alternative to the ferry

services’.

223 The Commission states in recital 117 of the contested decision that the Fehmarn

Belt fixed link will be open to all users on an equal and non-discriminatory basis

and that the pricing structure will be non-discriminatory and transparent.

224 In recital 118 of the contested decision, the Commission adds, relying on the study

of 5 January 2015,

that ‘the cost benefit analysis of the

Fehmarn Belt Fixed Link

project clearly shows that the expected socio-economic outcome of the Fehmarn

Belt Fixed Link in the long run is positive, regardless of the fact whether the ferry

service continues or is terminated’. It states that the study in

question calculated,

so far as possible, all possible gains and costs of the fixed link in comparison with

a situation involving the continuation of the ferry services, and concluded that,

despite the significant investment costs of the fixed link and the hinterland

connections, the project will return a net benefit and produce an economic return

of 4.7% for Europe (and an economic return of 5.3% for Denmark), a benefit

consisting mainly in time saving and greater flexibility in departure times for the

various users of the fixed link.

225 Essentially, the applicant contends that the Commission failed to analyse the

effect of the aid on competition, with regard in particular to the creation of a

dominant position for Femern and possible abuse of that position, and the risk of

overcapacity on a market that is already saturated by ferry operators.

226 In that regard, in recital 116 of the contested decision, the Commission took into

account

—

admittedly succinctly

—

the negative effect of the opening of the fixed

link on ferry operators and the ports used by those operators, while at the same

time stating that those effects ‘are inherent in the project, which seeks to offer a

quicker and more convenient alternative to the ferry services’. Moreover, in recital

118 of the decision, the Commission stated that the expected socio-economic

outcome of the Fehmarn Belt fixed link will in the long run be positive, whether

or not the ferry services are discontinued.

227

The Commission’s conclusion in this respect is not vitiated by a

manifest error of

assessment. It is reasonable to conclude that a project involving the construction

of infrastructure that will provide an alternative to existing modes of transport

entails the risk that the latter will disappear and, as that project provides a solution

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which, on the whole, has positive results, it is not for the Commission to call into

question the choice made by the public authorities.

228 Furthermore, the argument that the calculation of the socio-economic return is

incorrect because it does not take into account competition from ferries has

already been addressed and rejected in connection with the first complaint in the

first part of the second plea and the second complaint in the second part of the

third plea, which should be referred to (see, in particular, paragraphs 128 to 134

above).

229 It follows, first, that the Commission did not make any manifest error of

assessment in its examination of undue distortion of competition and of the

balance test and, second, that that examination did not give rise to serious doubts

which should have prompted it to initiate the formal investigation procedure.

230 The fourth part of the second plea and the fifth complaint in the second part of the

third plea must therefore be rejected.

The conditions for the mobilisation of State guarantees

231 The applicant contends that the Commission erred in law and made a manifest

error of assessment with regard to the conditions for the mobilisation of State

guarantees.

232 As a preliminary note, it should be observed that Section 5.3 of the Guarantee

Notice is worded as follows:

‘The Commission will accept guarantees only if their mobilisation is contractually

linked to specific conditions which may go as far as the compulsory declaration of

bankruptcy of the beneficiary undertaking, or any similar procedure. These

conditions will have to be agreed between the parties when the guarantee is

initially granted. In the event that a Member State wants to mobilise the guarantee

under conditions other than those initially agreed to at the granting stage, then the

Commission will regard the mobilisation of the guarantee as creating new aid

which has to be notified under Article [108(3) TFEU].’

233 As a further preliminary point, it should be noted that, in adopting rules of conduct

and announcing through their publication that they will henceforth apply to the

cases to which they relate, the Commission imposed a limit on the exercise of its

discretion and cannot depart from those rules without running the risk of suffering

the consequences of being in breach of general principles of law, such as equal

treatment or the protection of legitimate expectations, unless it can provide

reasons justifying its departure from its own rules, in view of those same

principles (see, to that effect, judgments of 28 June 2005,

Dansk Rørindustri and

Others

Commission,

C-189/02 P, C-202/02 P, C-205/02 P to C-208/02 P and

C-213/02 P, EU:C:2005:408, paragraph 211, and of 11 September 2008,

Germany

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and Others

Kronofrance,

C-75/05 P and C-80/05 P, EU:C:2008:482,

paragraph 60).

234 In the specific field of State aid, the EU Courts have previously indicated that the

Commission may adopt guidelines on the exercise of its powers of assessment and

that, in so far as they do not contradict Treaty rules, the policy rules which they

contain are to be followed by that institution (see judgment of 13 June 2002,

Netherlands

Commission,

C-382/99, EU:C:2002:363, paragraph 24 and the

case-law cited).

235 By its first argument, the applicant claims, in essence, that the conditions for the

mobilisation of the guarantees had not been determined when the guarantees were

initially granted.

236

The Commission maintains that the applicant’s speculation that the Danish

authorities might have granted guarantees before the adoption of the contested

decision, without the Commission having been informed of the conditions for the

mobilisation of those guarantees, is not supported by any evidence.

237 It should be recalled that in recital 122 of the contested decision the Commission,

while acknowledging that the conditions for the mobilisation of the guarantees at

issue are not set out in the Construction Law itself, states that, as confirmed by the

Danish authorities, those conditions were determined by the Minister for Finance

before Femern and Femern Landanlæg obtained loans and other financial

instruments and form part of the loan agreements which those companies

concluded with financial institutions.

238 It must therefore be found that the conditions for the mobilisation of the

guarantees at issue, as referred to in Section 5.3 of the Guarantee Notice, were not

known at the time the aid was granted. Those conditions were nevertheless

determined, according to the Commission, by the Danish Minister for Finance

before the guaranteed loans were granted and were included in the loan

agreements concluded between Femern and the financial institutions concerned.

239 In that regard, it is nevertheless clear that the contested decision does not explain

how the Danish Minister for Finance will impose those conditions.

240 Furthermore, it is apparent from the contested decision that the Commission found

that the conditions for mobilisation were introduced, on a case-by-case basis,

when the loans were granted, but that it did not formally impose those conditions

as conditions for ensuring that the aid was compatible. There is therefore some

doubt as to whether the Commission can intervene in a situation where, when a

specific loan is granted, no condition for mobilisation may be imposed.

241 In any event, in the light of Section 5.3 of the Guarantee Notice, it is clear that the

Commission was not in a position to find that the guarantees at issue were

compatible with the internal market without knowing the conditions for

mobilisation attaching to the grant of the guarantees.

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242 Accordingly, the Court finds that the Commission erred in law and made a

manifest error of assessment.

243 By its second argument, the applicant maintains, in essence, that, as regards the

State guarantees covering non-financial obligations, the Commission was content

to accept the assurance received from the Danish authorities that the principles of

Danish law ensure that the rules laid down in the Guarantee Notice will be

applied, without stating what those principles are or requiring an undertaking in

that regard from the Danish authorities.

244

The Commission disputes the applicant’s arguments.

245 It should be noted that in recital 123 of the contested decision the Commission

states that, with regard to State guarantees covering non-financial obligations, as

affirmed by the Danish authorities, the general principles of Danish law regarding

obligations require Femern or Femern Landanlæg to be declared bankrupt before

the guarantee can be mobilised.

246 It is true that the Commission has not provided any explanation concerning the

provisions of Danish law applicable in the present case. Nevertheless, as the

Commission itself observes, it had no reason to doubt the interpretation of the

principles of Danish law provided to it by the Danish authorities, an interpretation

which, moreover, the applicant has not disputed.

247

Therefore, there are no grounds to support the applicant’s claim that the

Commission made a manifest error of assessment in that regard.

248 That argument cannot therefore succeed.

249 In conclusion, the fifth part of the second plea must be upheld, as the Commission

did not impose any conditions in respect of the mobilisation of the guarantees

before the aid was granted.

Conclusion

250 In the light of all the foregoing, it must be concluded that the Commission (i)

failed to have regard to its obligation to initiate the formal investigation procedure

in so far as concerns the assessment of the necessity and proportionality of the aid

and (ii) erred in law and made a manifest error of assessment in so far as concerns

the examination of the conditions for the mobilisation of the State guarantees.

251 As a consequence, the Court upholds the second part of the third plea, without

there being any need to examine the first part of that plea, alleging infringement of

the obligation to initiate the formal investigation procedure on account of the

length of and certain circumstances connected with the conduct of the procedure,

and annuls the contested decision in so far as the Commission decided not to raise

any objections to the measures granted by the Kingdom of Denmark to Femern for

the planning, construction and operation of the Fehmarn Belt fixed link.

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Costs

252 Under Article 134(1) of the Rules of Procedure, the unsuccessful party is to be

ordered to pay the costs if they have been applied for in the

successful party’s

pleadings. Since the Commission has been largely unsuccessful, it must be

ordered to pay the costs, in accordance with the form of order sought by the

applicant.

253 Under Article 138(1) of the Rules of Procedure, Member States which intervene

in the proceedings are to bear their own costs. Accordingly, the Kingdom of

Denmark, intervener in support of the Commission, must bear its own costs.

254 Article 138(3) of the Rules of Procedure provides that the Court may order an

intervener other than those referred to in paragraphs 1 and 2 of that article is to

bear its own costs. In the present case, the Court has decided that Föreningen

Svensk Sjöfart is to bear its own costs.

On those grounds,

THE GENERAL COURT (Sixth Chamber)

hereby:

Annuls Commission Decision C(2015) 5023 final of 23 July 2015 on

State aid SA.39078 (2014/N) (Denmark) for the financing of the

Fehmarn Belt fixed link project (OJ 2015 C 325, p. 5) in so far as the

Commission decided not to raise any objections to the measures granted

by the Kingdom of Denmark to Femern A/S for the planning,

construction and operation of the Fehmarn Belt fixed link;

Dismisses the action as to the remainder;

Orders the Commission to bear its own costs and to pay the costs

incurred by Stena Line Scandinavia AB;

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Orders the Kingdom of Denmark and Föreningen Svensk Sjöfart to

bear their own costs.

Berardis

Spielmann

Csehi

Delivered in open court in Luxembourg on 13 December 2018.

E. Coulon

Registrar

President

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Table of contents

Background to the dispute ....................................................................................... 2

The applicant........................................................................................................ 2

The project ........................................................................................................... 2

The contested measures ....................................................................................... 4

Administrative procedure .................................................................................... 4

The contested decision ......................................................................................... 5

Procedure and forms of order sought ....................................................................... 6

Law .......................................................................................................................... 7

The fourth plea, alleging failure to state adequate reasons .................................. 8

The first plea and the second part of the third plea, alleging infringement of

Article 107(1) TFEU and infringement of the obligation to initiate the formal

investigation procedure in so far as concerns the analysis of the measures

granted to Femern Landanlæg for the planning, construction and operation of

the rail connections ............................................................................................ 11

The preliminary finding that the fixed link and rail connections constitute a

single integrated project ................................................................................. 13

The finding that the rail connections form part of the main Danish national

rail network .................................................................................................... 14

Competition on the markets for the operation and management of the Danish

railway infrastructure ..................................................................................... 14

–

Preliminary considerations as to the relevant terminology .................. 14

– The opening ‘de lege’ of the relevant markets by Law No

1249 ......... 16

– The ‘de facto’ opening of the relevant markets, as evidenced by the

presence of network management companies ........................................... 17

–

The opening of the markets for the construction and maintenance of the

railway infrastructure ................................................................................. 18

The effect on trade between Member States .................................................. 19

Conclusion ..................................................................................................... 20

The second plea and the second part of the third plea, alleging infringement of

Article 107(3)(b) TFEU and infringement of the obligation to initiate the formal

investigation procedure in so far as concerns the compatibility with the internal

market of the measures granted to Femern for the planning, construction and

operation of the fixed link .................................................................................. 20

The relevant case-law .................................................................................... 21

The common European interest of the project ............................................... 22

–

The calculation of the socio-economic return of the project................ 23

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The application of Article 107(3)(b) TFEU and the IPCEI

Communication .......................................................................................... 25

The necessity of the aid ................................................................................. 27

–

The incentive effect of the aid .............................................................. 28

–

The counterfactual scenario ................................................................. 29

The proportionality of the aid ........................................................................ 34

Undue distortion of competition and balancing test ...................................... 38

The conditions for the mobilisation of State guarantees................................ 40

Conclusion ..................................................................................................... 42

Costs....................................................................................................................... 43