Judgment Title: Kingdom of Belgium v Ryanair Limited
Neutral Citation:  IEHC 213
High Court Record Number: 2005 998S
Date of Delivery: 30/06/2006
Court: High Court
Composition of Court: O'Neill J.
Judgment by: O'Neill J.
Status of Judgment: Approved
- 2 -
Neutral Citation Number  IEHC 213
THE HIGH COURT
[2005 No. 998 S]
KINGDOM OF BELGIUM
JUDGMENT of O’Neill J. delivered the 30th June, 2006.
The defendants by their Notice of Motion on 28th day of October, 2005, seek an order staying these
proceedings pending the determination of case TT196/04 Ryanair Ltd. v. the Commission of the
European Communities, which is currently before the Court of First Instance of the European
Communities (hereinafter referred to as the “CFI”).
The background to this matter is as follows.
By its decision published on 12th February, 2004, the Commission of the European Communities
(hereinafter referred to as the “Commission”), decided that certain arrangements or transactions which had been concluded between the Walloon region and the defendants and implemented by the plaintiff
were determined to be illegal state aids and incompatible with Article 87(1) of the Treaty. The conclusion of the Commission was expressed at paragraph 6 of the decision in the following
The Commission notes that Belgium has unlawfully provided aid for the benefit of the
airline Ryanair in violation of Article 88(3) of the Treaty. However, for the contribution
that this aid can make to the launching of new air transport services and the sustainable
development to a regional airport, a portion of this aid may be declared compatible with
the common market, subject to the conditions set out in ss. 338 to 334.
HAS ADOPTED THIS DECISION:
The aid measures implemented by Belgium in the contract of the 6th November, 2001,
concluded between the Walloon Region and Ryanair in the form of a reduction in airport
landing charges that goes beyond the official tariff set in Article 3 of the Walloon
Government decree of 16th July 1998 laying down charges to be levied for the use of
airports in the Walloon Region, and the general discounts provided for in Article 7(1)
and (2) of the said Decree, are incompatible with the common market within the
meaning of Article 87(1) of the Treaty.
The aid measures implemented by Belgium through the contract of 2nd November, 2001
concluded between Brussels South Charleroi Airport (BSCA) and Ryanair, in the form of
discounts on ground handling services in comparison with the official airport tariff, are
incompatible with the common market within the meaning of Article 87 (1) of the Treaty.
Belgium shall determine the total aid recoverable by calculating the difference between
the operating costs borne by BCSA and linked to the ground handling services provided
to Ryanair and the price invoiced to the airline. So long as the two-million passenger
threshold provided for in Directive 96/67/EC remains unattained, Belgium may deduct
from this total any profits realised by BCSA or other strictly commercial activities.
Belgium shall ensure that the compensation guarantees granted in the contract of 6th
November, 2001 by the Walloon Region in the event of losses suffered by Ryanair
through the exercise by the Walloon of its regulator powers are void. The Walloon
Region shall have with Ryanair, as with other airline companies all the necessary
freedom and fixing airport charges, airport opening hours, or other provisions of
The other types of aid granted by BSCA, including marketing contributions, one-shot
incentives and provision of office space, are declared compatible with the common
market as start-up aid for new routes, subject to the following conditions:
(1) The contributions must relate to the opening of a new route and be limited in time. In
view of the intra-European destinations covered, the time period must not exceed five
years following the opening of a route. The contributions may not be paid for a route opened as a replacement for another route closed by Ryanair in the preceding five
years. In future, aid may not be granted for a route that Ryanair has provided in
replacement for another route that served previously from another airport located in the (2) The marketing contributions, currently set at EUR 4 per passenger, must be justified same economic or population catchment area.
in a development plan compiled by Ryanair and validated by BSCA for each route
concerned. The plan shall specify the costs incurred and eligible, which must relate
directly to the promotion of the route with the aim of making it viable without aid after
an initial period of five years. At the end of the five year period BSCA shall a posteriori
validate the start-up costs incurred by each airline, and BSCA shall where necessary
enlist an independent auditor in the task.
(3) With regard to the portion of contributions already paid by BSCA, a similar exercise
must be carried out to validate this aid on the same principles. (4) The one shot contributions paid in a lump sum when Ryanair set up at Charleroi, or
whenever a route was opened, must be recovered, except for any portion that Belgium
can justify being directly linked to the costs that were incurred by Ryanair at the Charleroi airport hub and are proportional and incentive in nature. (5) The sum total of aid for which a new route benefits must never exceed 50% of start-up marketing and one shot costs aggregated for the two destinations in question,
including Charleroi. In the same way, the contributions granted for the destination must
not exceed 50% of the actual costs for that destination. Specific attention shall be paid in
these evaluations to routes that link Charleroi to a major airport, such as those included in Categories A and B as defined in the Committee of the Regions outlook opinion of 2nd
July 2003 on the capacity of regional airports and identified in the present decision,
and/or to co-ordinated or fully coordinated airports within the meaning of Regulation EEC No. 95/93.
(6) The contributions paid by BSCA that at the end of the five year start-up period exceed the criteria laid down must be repaid by Ryanair. (7) The contributions paid where applicable for the Dublin-Charleroi route under the November 2001 contracts examined herein shall be recovered. (8) Belgium shall set up a non-discriminatory aid scheme intended to ensure equality of
treatment for airlines wishing to develop new air services departing from Charleroi
airport in accordance with the objective criteria laid down in the present Decision.
(1) Belgium shall take all the necessary measures to recover from the beneficiary the aid
mentioned in Articles 2 and 2 and unlawfully made available to it. The aid mentioned in Article 1 may however remain partly unrecovered, for the portion that does not exceed
the ceiling, in compliance with the conditions laid down in Article 4. The recovery shall
be effected immediately in accordance with the procedures of national law, insofar as
they allow immediate and effective enforcement of the present decision. The aid to be
recovered shall include interest running from the date at which it was made available to
the beneficiary to the date of recovery. The interest shall be calculated on the basis of
the reference rate used for calculating the subsidy equivalent for regional aid. It shall be
(2) If the conditions laid down in Article 4 are not complied with a portion of the aid, calculated on a compound basis.
whether that portion corresponds to a category of aid or an aided route, or if the terms
for balancing the agreements concluded between Ryanair and BSCA are substantially
altered, Belgium shall be required to recover all the corresponding aid referred to in the
Belgium shall inform the Commission within two months of the date of notification of
this decision of the measures taken to comply with it”. Following on this decision there ensued correspondence between the plaintiff and defendant herein
with a view to the recovery of the shortfall in the airport landing charges, the discounts on ground
handling services, and the marketing contributions, one shot incentives and other payments made to
This correspondence led to an agreement whereby 4 million euro was placed in a joint escrow account pending the determination of the case taken by the defendants against the Commission in which the
defendants seek the annulment of the Commission decision. This sum represented recovery of the
reductions in airport landing charges condemned in Article 1 and the discounts on ground handling
charges condemned in Article 2 of the decision.
Insofar as the payments to Ryanair are concerned the correspondence failed to resolve the issue of
their recovery, the defendants terminating correspondence in that regard by indicating an
unwillingness to engage in any further clarification or exploration of the issue pending the outcome of
the case before the CFI.
As a result of failure to achieve agreement on this, the plaintiffs issued these proceedings seeking the recovery of the sum of ?2,288,000.00 together with interest which as of the 1st November, 2005, was
claimed in the sum of ?333,606.00.
In the meantime as already indicated the defendants have brought a case to the CFI in which they seek
the annulment of the decision of 12th February, 2004. It is common case that if the defendants are
successful in that case there will be no legal basis for the recovery of the sums sought as liquidated
sums in these proceedings.
In seeking a stay on these proceedings Mr A. Collins S.C. for the defendants makes the following
1. The defendants will inter alia as part of their defence to these proceedings claim that
the decision of the 12th February, 2004, of the Commission is invalid and if necessary
will seek a reference to the European Court of Justice (hereinafter referred to as the
“E.C.J.”) on that point under Article 234 of the Treaty.
2. The defendants have initiated proceedings in the C.F.I. seeking an annulment of the
decision. These proceedings were initiated within time and raise issues of the utmost
importance to the defendants and to the airline industry in general. The defendants case
is bona fide and weighty, the salient elements of which are set out in paragraph 8 of the
affidavit of Jim Callaghan for the defendants and summarised in the official journal of
3. The courts of this jurisdiction have no jurisdiction to question or determine the the European Union on 11th September, 2004.
validity of the decision of the 12th February, 2004, that jurisdiction being reserved to the
courts of the European Union either C.F.I. or E.C.J. as appropriate as per the decision of
the E.C.J. in case 314/85 Foto-Frost v. Hauptzollamt Lubeck – Ost  E.C.R. 4199.
4. As the plaintiffs right to make the claim that is made in these proceedings depends
wholly upon the validity of the decision of the 12th February, 2004, and as Irish courts cannot do otherwise than proceed upon the basis of the validity of this decision, if these
proceedings are permitted to continue to final judgment, there is a risk of an injustice to
the defendant insofar as a judgment may be obtained on the basis of an E.U. decision which may ultimately be annulled by the C.F.I. and/or the E.C.J. 5. At best there is a risk, having regard to the fact that the trial of these proceedings
would take four to five days, that there would be a waste of judicial resources in this jurisdiction, by permitting these proceedings to continue in advance of a determination
on the validity of the aforesaid decision by the C.F.I.
7. In any event when the matter would come on for trial the defendants intend to apply to
the court for a reference to the E.C.J. pursuant to Article 234 of the Treaty on the
question of the validity of the said decision and in the event of the court granting to that
request the proceeding would be automatically stayed.
8. Irish case law and in particular the cases of Merck and Co. Ink v. G.D. Searle and Co.
and Monsanto and Co.  3 I.R. 614 and the case of Friends of the Irish Environment v. the Minister of the Environment, judgment delivered the 15th April,
2005 by Murphy J, favour the granting of a stay in circumstances similar to those in this
case. Similarly the case of the Department of Trade v. British Aerospace  C.L.M.R. 165 demonstrates a similar approach in the Courts of England and Wales. 9. The judgment of the ECJ in the case of Masterfoods Limited v. HB Ice-Cream Limited
 E.C.R. 1-11 369 establishes a binding jurisprudence throughout the community
which governs issues such as arise on this motion. The following passage from that
judgment illustrates the pith of the defendant’s case on this motion.
“When the outcome of the dispute before the national court depends upon
the validity of the Commission decision, it follows from the obligation of
sincere cooperation that the national court should in order to avoid
reaching a decision that runs counter to that of the Commission, stay its
proceedings pending final judgment in the action for annulment by the
community courts, unless it considers that in the circumstances of the case
a reference to the Court of Justice for a preliminary ruling on the validity
of the Commission decision is warranted.”
In this motion the defendant is not seeking to stay the operation of a national measure
based on a community regulation, but was merely seeking to stay a court proceeding
which relates only to a specific claim by the plaintiff against the defendant herein and
hence a stay has no wider effect and accordingly it was submitted that the jurisprudence
of the E.C.J. in regard to the suspension of national measures based on community
regulation as set out in the joined cases of C – 413/88 and C – 92/89 Zuckerfabrik
Suederdithmarschen A.G. Hauptzllamt Itzehoe and Ors  E.C.R. 415, does not
10. The governing principle of European law relevant to the issues arising on this
appliation are set out in the case of Masterfoods Limited v. HB Ice-Cream limited and
not in the Zuckerfabrik case.
11. The plaintiffs will not suffer any prejudice as a result of the stay being granted, it
being clear that the defendants have ample resources ultimately to meet a judgment and
any delay is compensatable in favour of the plaintiff by the application of interest
pursuant to Article 5 of the decision which involves, compound interest.
12. Having regard to the fact that the plaintiffs had initiated these proceedings and
pursued them with vigour, if a stay were to be granted it could not reasonably or
realistically be said, as was apprehended by the plaintiffs that there was a risk to the
plaintiffs of infringement proceedings pursuant to Article 226 of the Treaty, being taken
against the plaintiffs by the Commission.
For the plaintiffs it was submitted by a Mr. Donal O’Donnell S.C. as follows: 1. Article 87(1) of the Treaty prohibits the granting of aid by a Member State in any form whatsoever
which distorts or threatens to distort competition by favouring certain undertakings and insofar as
such aid effects trade between Member States it is declared to be incompatible with the common
2. Articles 1 and 2 of the decision of the Commission of the 12th February, 2004, found that the reduction in landing charges and discounts on ground handling charges which were conceded to the
defendants by the plaintiffs through the Walloon region at the BSCA were illegal State aids. Article 4
of the decision listed the type of start up aid considered to be compatible with the common market
provided that certain conditions were met. As the defendant in correspondence eventually declined to
provide information which would have enabled a decision to be made as to whether or not these conditions were met, the plaintiffs were left with no option but to proceed immediately to recover the
aid given as it was required to do by Article 5 of the decision. Insofar as the aid which was
condemned in Articles 1 and 2 of the decision was concerned, recovery in respect of that was satisfied
by the placing in escrow of the sum of four million euro. The failure to reach any agreement on the
amount due in respect of the aids dealt with in Article 4 has led to these proceedings.
3. The plaintiffs are obliged by virtue of Article 5 of the said decision to
recover the illegal aid provided. This obligation arises by virtue of Article 5
of the said decision and also by virtue of Article 14 of Council Regulation
(E.C.) No. 659/1999.
4. The reason or philosophy which underpins the policy of the speedy
recovery of illegal aids is to restore the equilibrium of the market distorted
by the provision of illegal state aid to an undertaking. If this is not done
speedily, in sensitive markets undertakings which profit from illegally granted aid, may well distort the conditions of competition in such a way as
the competitive structure is permanently altered. Thus the policy of speedy
recovery of a illegal State aids is integrally bound up with the underlying
policy, fundamental to the common market, of protecting competition from
5. Article 242 of the Treaty provides that actions before the Court of Justice distortion by the provision of illegal State aids.
do not have a suspensory effect. Accordingly the initiation of its proceedings before the CFI did not have the effect of staying the decision
of the 12th February, 2004.
6. See in this respect Case-137/92P, Commission v. BASF  E.C.R. 1/2555, para. 48. National Courts do not have a power to annul a
Commission decision that jurisdiction being reserved to the community
courts, either the E.C.J or C.F.I. (see Case 314/85 Foto-Frost  E.C.R. 4199).
7. A national court may stay proceedings where those proceedings involve
the validity of a community measure until a decision has been given in any
action for annulment in respect of that decision by the C.F.I. or E.C.J. In
this regard reference was made to Case C-344/98, Masterfoods Limited v. HB Ice-Cream Limited  E.C.R. 1-11369. 8. Any decision to stay these proceedings is a decision to suspend the
enforcement of the decision of the Commission made the 12th February,
2004. Whilst this court has a jurisdiction to do that, it must exercise its discretion in that regard in accordance with the principles laid out by the
E.C.J in the joint cases C-413/88 and C-92/89, Zuckerfabrik  E.C.R 415 which governs the staying or suspension of the enforcement of an
administrative measure based upon a community regulation. In this case it
was held that national courts could grant relief only on the same basis as
the community courts, applying the same principles. 9. Pursuant to the judgment in the Zuckerfabrik case, the defendants in order to obtain a stay or suspension must satisfy a three part test. Firstly,
they must persuade this court that serious doubts exist as to the validity of
the community measure, i.e. the decision of the 12th February, 2004.
Secondly, they must show that a stay is necessary in order to avoid serious
and irreparable damage to the defendant and that such harm is likely to
materialise before the decision of the community courts. In this regard
financial loss simpliciter will not be regarded in principle as irreparable. It must be established that immediate enforcement of the community decision
is likely to result in irreversible damage to the defendant which could not
be made good if the Community Act were declared to be invalid. Thirdly,
the court must take account of the community’s interest and must consider
whether the community measure in question would be deprived of
effectiveness if not immediately implemented.10. The defendants in a letter of 25th October, 2005, have accepted, in
explaining why they did not apply to the C.F.I. for a suspension that “the
Court of First Instance would not be likely to grant such a stay because our
client’s exposure was financial and was at a level within its capacity to
meet”. On the basis that this court should approach the application for a
stay on the same basis as would the C.F.I., the acknowledgment by the
defendant that it would not be successful in getting a suspension from the
C.F.I., of itself is sufficient to persuade this court to refuse the application
for a stay.
11. Without prejudice to the foregoing, it is submitted that the defendants have failed to place before
this court sufficient material to enable this court to determine whether or not there exists serious
doubts as to the validity of the decision of the 12th February, 2004, and hence this court is not in a
position to ascertain whether there is a real possibility of the invalidity of that decision. The defendant
has wholly failed to put forward any evidence to demonstrate that in the absence of a stay they will suffer irreparable harm and have contented themselves with merely contending that the plaintiffs will
suffer no prejudice by the grant of a stay. The aforesaid acknowledgment in the letter of the 25th
October, 2005, demonstrates that the only potential consequence for the defendants of enforcement of
the decision is purely financial and well within its capacity to bear and hence demonstrates that no
irreparable loss is apprehended.
12. Insofar as the third condition is concerned the interest of the
community in the restoration of competition in the market in question
requires that the defendants repay immediately the aids received so that
they are not continuing to trade with the benefit of those financial
advantages. Insofar as the illegal aids which were condemned in Articles 1
and 2 of the decision are concerned recovery has already been achieved by
the placing of the ?4 million in escrow. There remain outstanding sums
sought in these proceedings and so long as the defendants continue to retain
those funds they continue to trade with that advantage over other
competitors in that market. Hence any delay in the enforcement of the
decision of the 12th February, 2004, injures a fundamental community
interest, i.e. the protection of competition from distortion by illegal State
13. The judgment of the E.C.J. in the Masterfoods case is distinguishable
because in that case there was a real risk that without a stay the judgments
of the Supreme Court might have been in conflict with the judgment of the
community courts so, that the parties would have found themselves subject
to conflicting judgments which would have been inimical to the principle
of legal certainty. In this case it was submitted no such risk exists and this
court in refusing a stay honours the status of the current decision of the
14. Insofar as the defendants contend that they would in due course seek a 12th February, 2004, as a valid act without suspensory effect.
reference under Article 234 to the E.C.J. in this case, it was submitted that
the circumstances which might give rise to such a reference should not be
anticipated at this stage nor could this court at this stage on this application
proceed upon the basis that such a reference would be sought and/or if it
was sought that the circumstances would exist which would warrant such a
15. The plaintiffs in this case, if a stay is granted, are at risk of
infringement proceedings being taken against them by the Commission
pursuant to Article 226 of the Treaty. In this regard reference is made to
case no. C-232/05 Commission v. France and the decision of the E.C.J., in
case C-224/01, Kobler where the judgment of the court was delivered on
the 30th September, 2003, and held that in certain circumstances Member
States may be liable in damages for breach of E.U. law where the
infringement is attributable to a national court.
The first issue to be confronted is to determine what is the correct approach to be adopted to ascertain
whether or not a stay should be granted. This comes down to whether or not the rulings of the E.C.J.
in the Zuckerfabrik case applies or not. Mr. Collins submitted that it did not because the Zuckerfabrik
case was to be distinguished as applying only where a stay or suspension was sought in relation to a
national measure based on community regulation and also he drew attention to the absence of any linkage in the judgment of the E.C.J. in the Masterfoods case to the three part test for a suspension set out in the Zuckerfabrik case.
In my view the Zuckerfabrik case and the Masterfoods case form part of a cohesive jurisprudence. In circumstances such as existed in the Masterfoods case where there was a real risk of two courts of
competent jurisdiction i.e. community court and a national court producing judgments which
conflicted with each other, there would be an overriding imperative to avoid the parties being subject
to conflicting judgments, and hence it would seem to follow that notwithstanding non-compliance with the three part test set out in the Zuckerfabrik case that a stay or suspension should be granted by
the national court. That is the approach that was taken by McCracken J. in the Monsanto case.
There is of course perhaps the more fundamental question raised by Mr. Collins and that is whether
the Zuckerfabrik judgment is to be distinguished, as confined to applications to suspend or stay the national measures based upon community regulation.
If Mr. Collins is correct in his submission it would have the strange effect of excluding from the
Zuckerfabrik test decisions of the Commission generally on the grant of illegal aids to particular parties and also decisions of the Commission condemning anti competitive practices on the part of
particular parties. Given that the provisions of Article 87 of the Treaty can only be given effect
through the decisions of the Commission in regard to particular alleged illegal state aids, and having
regard to the fact that pursuant to Article 249 of the treaty decisions of the Commission are binding on
those to whom they are addressed, I am of opinion, having regard to the fundamental importance of decisions of this type in achieving one of the most important policy objectives of the Treaty namely
the establishment of a common market free from distortion, inter alia by illegal state aids or anti
competitive practices, that it would necessarily follow that where a suspension of a decision was
sought or a stay sought on enforcement proceeding pending the outcome of annulment proceedings in
the community courts, that the three part test set as out in the Zuckerfabrik case applies, notwithstanding the absence of an express reference in the Zuckerfabrik case to decisions of the
Commission such as is in issue in this case. The obligation of sincere co-operation enjoined on Member States by Article 10 of the Treaty, in my
view implies that National Courts, in an application for a stay on enforcement of a decision of the
Commission, must apply the general jurisprudence of the Community Courts on such issues as set out
in the Zuckerfabrik case.
In my view therefore the correct approach to this application for a stay is to apply the three part test as
set out in the Zuckerfabrik case.
The first requirement here is that this court should have serious doubts as to the validity of the
decision of the 12th February, 2004. In that regard the plaintiff submitted that the defendants had not placed sufficient material before the court to enable it to form any view on the validity of the decision.
Clearly what is required here is not that this court should be required to form any kind of a decisive or
conclusive opinion on the question of validity. I do not think that a national court could be expected to
go any further than to do as is done in the judicial review jurisdiction here on the ex parte application
for leave, namely, simply to ascertain that there are arguable grounds for contending that the decision
is invalid. If more were required of the national court it would necessitate a much deeper inquiry as to
the nature of or merit of the challenge to the decision, than I think is envisaged on an application such as this.
The material which is available to this court setting out the nature of the defendants challenge to the
validity of the decision is set out in the affidavit of Jim O’Callaghan sworn for the purposes of this
application and particular paragraph 8 thereof. In addition there is set out in the Official Journal of the
E.U. Union of the 11/9/2004, pleas in law and main arguments of the defendants. There is sufficient
material between these two sources to persuade me that the defendants have arguable grounds for contending that the decision is invalid or to put it another way to establish serious doubts as to the
validity of the decision.
The second requirement is that the defendants demonstrate that they will suffer irreparable harm if a
stay is not granted. It is quite clear that the defendants have put forward no evidence which can come
close to satisfying this test. The letter of the 25th October, 2005, candidly acknowledges that the only
harm apprehended is pure financial loss which is well within their capacity to bear. This brings me to the third aspect of the test namely the interest of the community. The interests
asserted here is, as mentioned earlier, the necessity to restore the equilibrium of the market by the
recovery of the sums paid to the defendants as claimed in these proceedings. Specifically what has to