The Court of Appeal has upheld the State’s right to recover pre-examinership aid from Comhfhorbairt (Gaillimh), trading as Aer Arann, after finding that a 2010 company rescue scheme did not bar recovery under European Union law.
The judgment, delivered by Mr Justice Murray on 15 October 2021, concerned two appeals brought by Aer Arann. Ireland and the Minister for Finance sought repayment of aid linked to a lower air travel tax rate for flights to destinations less than 300 kilometres from Dublin. The European Commission found in 2012 that the two-rate tax system was unlawful State aid and directed Ireland to recover it from beneficiaries, including Aer Arann.
Aer Arann entered examinership in August 2010. The High Court approved a scheme of arrangement in November that year, binding affected creditors and limiting the recovery of certain debts. State agencies knew a European Commission complaint about the tax was under consideration, but the company, its investors and the examiner were not told during the examinership, according to evidence recounted in the judgment. The Revenue Commissioners participated in the process; there was no evidence that the Revenue personnel involved knew of the complaint.
Aer Arann argued that the State was a contingent creditor when the scheme was approved and that the scheme, legal certainty and the State’s failure to disclose the complaint prevented recovery. The Court of Appeal agreed that the potential aid liability had some characteristics of a contingent liability: the airline had received the reduced tax rate, and a complaint was before the Commission. But it held that, under the relevant examinership provisions, the State was not a contingent creditor for this liability before a Commission decision directed recovery.
The court also rejected the argument that the scheme’s finality or legal certainty defeated the recovery obligation. It said the High Court’s approval had not adjudicated any State aid issue, and that Aer Arann had not challenged the Commission’s recovery decision before the EU courts. The State’s failure to disclose the complaint did not provide a basis to prevent recovery, the judgment said.
The High Court had previously ruled for the State. The Court of Appeal dismissed Aer Arann’s appeals on both issues and refused its request for a reference to the Court of Justice of the European Union. The judgment records that the State’s total outstanding claim against Aer Arann was €3,247,386 before interest, across the two actions. It does not itself specify a final monetary order for payment. The State was successful on the appeals; the court said it would normally be entitled to costs, but gave Aer Arann seven days to raise any case against that outcome, with a further hearing to be fixed if it did.