The High Court has rejected Aer Arann’s arguments that an examinership scheme barred recovery of pre-examinership State aid and that any recovery should be reduced by setting off tax it said was unlawfully collected.
In a judgment delivered on 2 July 2019, Mr Justice Max Barrett accepted the contentions advanced by Ireland and the Minister for Finance. The court said it would discuss the form of the orders with the parties; the judgment does not itself specify a final payment order or amount.
The proceedings seek recovery under a European Commission decision concerning Ireland’s former air travel tax. From March 2009 to March 2011, the tax was €2 per passenger for certain shorter routes and €10 for other destinations. The Commission found the lower rate was unlawful State aid and directed Ireland to recover the aid from beneficiaries. The Court of Justice of the European Union upheld that decision in December 2016.
Aer Arann argued that its November 2010 examinership scheme covered the State’s claim for the period before the company entered examinership. The High Court held that the State was not a contingent creditor when the scheme was approved: the Commission had not yet made its State aid decision, and the court found no relevant prior obligation giving rise to a real prospect of that liability. It also concluded that, even if the scheme had covered the debt, national law could not prevent recovery required by EU law.
The company also sought to rely on the illegality of the higher tax rate and to set off a potential repayment claim against the State’s recovery claim. The judgment said the Court of Justice had made clear that the tax’s alleged illegality on other grounds did not provide a defence to State aid recovery. It further held that set-off required a cross-claim to be determined. Aer Arann’s restitution proceedings and counterclaim had been struck out under a settlement agreement, which the court said extinguished the claim needed for set-off.
The court considered evidence about the financial risks to investors and the costs of pursuing the restitution case. It said those matters did not justify refusing recovery. The judgment identified no absolute impossibility of recovery, which it said was the relevant exception under the EU law principles it applied.
The two recovery cases had become effectively consolidated after Aer Lingus stepped out following resolution of which airline operated the relevant flights. The judgment addressed the remaining dispute over Aer Arann’s defences and liability; the precise form of the resulting orders was left for discussion with the parties.