The Court of Appeal's judgment on illegal state aid to a fitness centre was set aside

Frogn municipality had given grants and operational support to a fitness centre organised as a municipal undertaking. Three private fitness centres sued the municipality, claiming compensation because the support constituted illegal state aid under EEA regulations. The Court of Appeal found in favour of the private fitness centres. The Supreme Court set aside the Court of Appeal's judgment. 

The municipality argued that the legal framework for municipal undertakings, particularly the fact that municipalities cannot go bankrupt, constitutes an existing support scheme that is older than the EEA Agreement, and that the grants were given to the fitness centre under this scheme. Therefore, the grants could be given without prior approval from the EFTA Surveillance Authority (ESA).

The Supreme Court did not consider whether municipal legislation constitutes such an existing support scheme, as it found that the grants were not given due to the municipality's bankruptcy immunity. The grants must therefore be assessed against the criteria for state aid in Article 61 (1) of the EEA Agreement. The Supreme Court found that all conditions for illegal aid were met, except for the requirement that an economic advantage must have been granted. Regarding this requirement — which was first presented in the Supreme Court — the Court did not have sufficient evidential basis to rule on the merits of the case. The Court of Appeal's judgment was therefore set aside, and the issue of economic advantage must be reconsidered by the Court of Appeal. One justice found that the Court of Appeal's judgment was correct and that the municipality's appeal should be dismissed.

The judgment provides guidance on when operational grants from municipalities to municipal undertakings can be considered given under the rules on bankruptcy immunity in municipal law. It also prescribes what should be included in the economic advantage assessment under Article 61 (1) of the EEA Agreement when giving grants municipal undertakings.

Read the judgment from the Supreme Court (Norwegian only) (PDF)

Areas of law: The EEA Agreement. State aid. Municipal law. 

Key paragraphs: 49, 53-54, 56, 69, 72, 82

Justices: Webster, Thyness, Sæther, Stenvik, Lund