Amsterdam Court of Appeal: guarantee by the Port of Rotterdam Authority null and void on grounds of state aid

In a judgement of 9 July 2019, the Amsterdam Court of Appeal ruled that a guarantee provided by the Port of Rotterdam Authority (PRA) in favour of Commerzbank Nederland (Commerzbank) is nuIl and void on the grounds that it infringes State aid rules.

The case

On 5 November 2003, the Rotterdam Municipal Port Management (RMPM) provided a guarantee for a € 25 million loan granted by Commerzbank to RDM Vehicles. At that time, RMPM was a body of the municipality of Rotterdam. As of 1 January 2004 RMPM became a government owned stock corporation and was renamed Port of Rotterdam Authority (PRA). On 4 June 2004 PRA provided a new guarantee for the aforementioned loan. In return, Commerzbank waived its rights under the guarantee granted by RMPM on 5 November 2003.

The loan granted to RDM Vehicles was cancelled by Commerzbank on 20 August 2004. When the outstanding amount (€ 19,843,541.80) was not repaid, Commerzbank addressed the PRA. It refused to pay, alleging the guarantee would constitute unlawful State aid. This initiated a long legal battle. The District Court of Rotterdam and the The Hague Court of Appeal ruled in favour of PRA and dismissed Commerzbank’s claims. The case then ended up before the Supreme Court. Latter Court referred the matter to the EU Court of Justice (ECJ) for a preliminary ruling. After receiving the ECJ preliminary ruling, the Supreme Court annulled the judgementof the The Hague Court of Appeal in a judgement of 27 May 2016 and referred the case to the Amsterdam Court of Appeal.

Judgment of the Amsterdam Court of Appeal

Attribution of the guarantee of 4 June 2004 to the Municipality

First, the Court examines whether the guarantee of 4 June 2004 could be attributed to the Municipality of Rotterdam (Municipality) as the (then) sole shareholder of the PRA. In this context, it has to be examined whether the municipality “was either involved in the granting of the guarantee […] (or unlikely not to be involved) or was not involved in the granting of that guarantee”. The required involvement “does not have to be demonstrated by positive evidence. It is sufficient to show that it is unlikely that the State was not involved in the adoption of the measure” [recital 3.11]. In particular, the fact that PRA commissioners appointed by the Municipality explicitly approved the provision of the guarantee afterwards leads the Court to conclude that the Municipality was involved in the provision of the guarantee [recital 3.14]. Consequently, the imputability requirement was met.

Advantage

The next question is whether Commerzbank benefited from the guarantee of 4 June 2004. This guarantee replaced the guarantee of 5 November 2003. The latter guarantee was provided by the Director of the RMPM, who was not competent to do so. This lack of  authority may be invoked against Commerzbank. Consequently, the guarantee of 5 November 2003 was invalid. According to the Court, it is irrelevant that, at the beginning of 2004, the parties “may have assumed that the guarantee of 5 November 2003 was valid”.

Since the guarantee of 5 November 2003 was invalid, the loan granted to RDM Vehicles on 5 November 2003 was effectively unsecured. Thanks to the guarantee of 4 June 2004, Commerzbank still obtained “one hundred percent” security. It favoured Commerzbank, since the conditions of the loan granted to RDM Vehicles were not modified [recitals 3.22-3.39].

Invalidity

Finally, since the guarantee of 4 June 2004 constitutes unlawful State aid which favoured Commerzbank, the Court has to assess whether the guarantee is nulI and void. Commerzbank argued that the aid it received had become existing aid under Article 17 Reg. 2015/1589. The competence of the European Commission (Commission) to recover the aid in question would be time-barred. Consequently, PRA’s reliance on State aid should be rejected [recitals 3.40-3.41].

The Court refuses Commerzbank’s line of reasoning. The fact that the Commission may no longer be able to recover the aid granted to Commerzbank is without prejudice to the obligation of a national court “to ensure that measures are taken which result in or contribute to restoring the competitive situation prevaling prior to the granting of the State aid in question” [recital 3.42]. In this context, the Residex judgment empowers a national court to annul a guarantee in its entirety, provided that is is “an appropriate (effective) and proportionate measure” [recitals 3.43-3.44]. According to the Court, that is the case. Commerzbank had granted RDM Vehicles a large unsecured loan. Moreover, due to the uncertain financial situation of the RDM group, the guarantee represented a high financial risk in the first half of 2004 [recital 4.46].

Finally, according to the Court, reasonableness and fairness do not impede total nullity of the guarantee. In the light of recital 98 of the Eesti Pagar judgment, Commerzbank could not, at the time the guarantee was provided, “have any legitimate expectation that the aid would be granted Iawfull” [recital 3.50].

Final conclusion

Commerzbank’s claims relating to the guarantee of 4 June 2004 are rejected by the Court because this guarantee is null and void [recital 3.52].

Commentary

Legal battle

The “warm relationship” that existed for years between the RMPM/PRA and the RDM group of companies has led to a lot of interesting jurisprudence over the past 15 years. The question is whether the present judgment will end this. Commerzbank once again went empty handed. The case can be referred to the Supreme Court a second time. Commerzbank’s financial interest in doing this seems to be considerable enough.

The facts that changed

The present judgement is worth reading anyway. For example, it appears that the facts can change. Prior to the present judgment, we always assumed that the managing director of the PRA acted entirely arbitrarily, deliberately kept the guarantee provided to Commerzbank secret and had not asked the supervisory board of the PRA for approval. According to the Amsterdam Court of Appeal, this assumption appears to be “not in line with the facts”. Apparently, approval has been requested and obtained after all [recital 3.13].

The favouring of Commerzbank

The way Commerzbank was favoured by the aid in question, is also quite remarkable. According to the Amsterdam Court of Appeal, Commerzbank received an advantage, because the invalid guarantee provided on 5 November 2003 was replaced by a new guarantee provided on 4 June 2004. As a result, Commerzbank obtained 100% security for the loan it granted to RDM, which it previously did not have. Furthermore Commerzbank did not have to adjust the conditions of the loan. And that collectively constitutes the advantage Commerzbank received.

Notification?

When Commerzbank called on PRA to pay, there was no longer any willingness to honour the guarantee granted on 4 June 2004. This is without prejudice to the fact that PRA has willingly issued a guarantee. The guarantee has even been approved by the supervisory board. Why is PRA not ordered to notify the guarantee to the Commission? After all, the Commission can declare unlawful State aid compatible with the internal market. Unfortunately, the judgment does not deal with this aspect [recital 3.51]. And that is a pity. It is not uncommon for public authorities to use (misuse?) the State aid rules in an attempt to circumvent unfavourable contractual obligations, or to obtain better conditions.



Als advocaat ben ik gespecaliseerd in mededingingsrecht, staatsteun, marktordening in de landbouw (GMO) en compliance. Naast mijn werk bij Kneppelhout ben ik buiten promovendus bij de Rijksuniversiteit Groningen en de Wageningen Universiteit en onderzoek ik de ‘De rol van producentenorganisaties in het gemeenschappelijke landbouwbeleid’.

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