State aid in Spanish football - EU General Court annuls European Commission decision on Valencia CF & Elche CF

Between 2009 and 2011, the Instituto Valenciano de Finanzas - the financial institution of the Region of Valencia in Spain - granted a number of guarantees to the football club foundations to cover bank loans taken to finance an increase of the capital of three football clubs: Valencia CF, Hércules CF, and Elche CF. In 2010, the guarantee granted to Valencia CF was increased in order to cover the increase of the bank loan.

On 4 July 2016, the European Commission adopted a decision against the three clubs finding that the public guarantees for loans from commercial banks entailed incompatible state aid and required the three Spanish football clubs to recover the aid: [1] Valencia (20.4 million euros), Hércules (6.1 million euros) and Elche (3.7 million euros).[2]  

The three clubs each brought actions for annulment[3] against the Commission Decision before the EU General Court.[4] On 12 March 2020, the EU General Court delivered two judgments by which it annulled the Commission Decision in relation to Valencia CF[5] and Elche CF[6]. The EU General Court had annulled the Commission Decision in relation to Hércules CF on 20 March 2019.[7]

This article provides an overview of the rulings and what lessons can be drawn from them.  Specifically, it looks at:

• Brief recap on State aid rules and Sport
• State aid issues assessed by the EU General Court
  • The application of the state aid rules to sports
  • A public bank guarantee on a commercial loan can entail state aid
  • Evaluation of whether the football clubs were in difficulty
  • Evaluation of whether a public guarantee for a commercial loan entails an advantage
  • The burden of proof for the existence of an advantage
• Analysis and comment

By way of disclosure, the authors acted for Elche CF in the proceedings.