The European Court of Justice: Capital injection in FIH Erhvervs­bank in 2012 was state aid

Judgment of the European Court of Justice of 6 March 2018 in case C-579/16 P – European Commission vs FIH Holding A/S and FIH Erhvervsbank A/S

By assistant attorney Søren Overgaard Eriksen

Background

In the context of the global financial crisis, FIH Erhvervsbank received state aid in 2009. The aid was granted over two rounds under the Danish Act on State-Funded Capital Injections and the Danish Financial Stability Act. In total, the bank received a little over DKK 2 billion. The state aid had been approved in advance by the European Commission.

In 2012, FIH Erhvervsbank received an additional capital injection from the Danish State because it envisaged liquidity problems in 2012 and 2013. This capital injection gave rise to a dispute between the European Commission and FIH Erhvervsbank. The parties disagreed whether the capital injection could be characterised as state aid and, if so, to what extent. 

When assessing state aid measures, the Commission relies on the so-called “private operator principle” to determine how a private investor operating in a market economy would have acted.  Based on such an analysis, the Commission in 2014 concluded that the capital injection constituted state aid, and that the transaction had therefore conferred a selective economic advantage on FIH Erhvervsbank. Accordingly, the Commission ordered FIH Erhvervsbank to repay approx. DKK 310 million.

The judicial review

FIH Erhvervsbank appealed the decision to the General Court, which in 2016 set aside the Commission’s decision, finding that the Commission had erred in its application of the private operator principle. The General Court held that the Commission, when assessing whether the Danish State acted like a private operator would have done, should have applied the private creditor test and taken the state aid received by FIH in 2009 into account. The General Court concluded that the 2012 injection did not amount to state aid as it reduced the risk to which the Danish State was exposed on account of the lawful 2009 measures.

The Commission subsequently filed an appeal against the decision to the ECJ. The ECJ agreed with the Commission that the transaction was to be regarded as state aid, finding that the General Court had erred in its application of the private operator principle. The ECJ held that the capital injection did confer a selective economic advantage on the bank and could therefore be characterised as state aid. As a result of this finding, the General Court should, when applying the private operator test to the State, have taken the behaviour of a private investor into account – not that of a private creditor. Accordingly, it should not be taken into account that the capital injection in 2009 had reduced the State’s risk exposure resulting from the 2009 state aid, since the 2009 aid had been granted in the State’s capacity as public authority and not as a private operator. The ECJ therefore referred the assessment of the exact state aid back to the General Court, including the question of repayment and payment of interest.