Tuesday, September 25, 2007

Partial Victory for Olympic Airways

Forbes Online has reported that the European Union’s Court of First Instance has partially annulled an earlier ruling where the Greek-based Olympic Airways was ordered to repay aid given to it by the Greek government.

The dispute, which dates back thirteen years, began with a 1994 declaration by the European Commission that State aid to Olympic Airways was compatible with the common market so long as certain commitments were met. Following the suspected breach of those commitments, the Commission opened a new procedure on the matter and began a series of negotiations with the Greek government over the scope and conditions of the restructuring aid. Following a complaint filed by the Hellenic Air Carriers Association, the Commission adopted Decision 2003/372/EC in which it found that the objectives of the restructuring aid to Olympic Airways had not been met and that Greece had provided new, non-notified aid to Olympic Airways through its toleration of non-payment or payment deferments on taxes, airport charges, and social security contributions. The dispute made its way before the European Court of Justice where it ruled that Greece had not fulfilled its obligation to recover the wrongly implemented aid given to Olympic Airways. The latter brought an immediate action before the Court of First Instance against the European Commission challenging the validity of the latter’s decision concerning both the restructuring and non-notified aid.

According to the official EU press release on the case, the Court of First Instance has ruled that with regard to the restructuring aid, the Commission was right in its decision. However, regarding the new, non-notified aid, the Court found that the Commission failed to state adequate reasons for its decision concerning both the prolonged non-payments by Olympic Airways of airport charges and Value Added Tax (VAT) on fuel. The Court also found with regard to the non-payment of VAT on spare parts by Olympic Aviation—a subsidiary of Olympic Airways—, the Commission did not consider whether such non-payment conferred a real economic advantage amounting to State aid. The Court thus invalidated those parts of the Commission’s decision concerning the new, non-notified aid while dismissing the other claims made by Olympic Airways. The dispute may not be over yet, however.  An appeal—limited to points of law—may still be brought before the Court of Justice within two months from the notification date of the Court of First Instance’s decision.

Not surprisingly, the Greek government has embraced the recent decision. Greek Deputy and Finance Minister Petros Doukas stated that the decision “is a justification of efforts made in the last few years to the benefit of both the airline and the Greek state” and noted that the “Greek government [had] dealt with the Olympic Airlines issue with a sense of responsibility towards the company's workers, customers and the Greek taxpayer.” A recent article appearing in the academic journal Government and Opposition has examined in detail the history of the Olympic Airways dispute. Though it was published prior to the most recent installment, the authors concluded that the case brings out the tensions “of the Commission possessing executive authority in certain areas (state aids) and utilizing them across a broader agenda on which its direct competences are more limited (the form of restructuring privatization).” The article noted that despite Brussels and Athens seeking “parallel strategies” of divesting from Olympic Airways and eliminating State aid at the outset, the contentious results were a product of “differences over the clarity and consistency of the signals each gave; the time horizons each operated within; and the credibility and trust each had with the other.” Based upon the most recent ruling, it appears that the authors are correct that the case will continue to illustrate the problems of macro-level reform and State-level implementation at the heart of shared governance in the EU.


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