5.3 The case of FIH

The main issue in the case of FIH concerned the private investor principle. According to the applicants in this case, the Commission should have applied the market economy creditor principle. By contrast, the Commission claims to have applied the correct test, namely, the market economy investor principle. FIH is a Danish bank. In 2009, FIH received State aid under the Danish support scheme. In particular, FIH received a hybrid tier 1 capital injection of DKK 1.9 billion (approximately EUR 225 million) and it benefited from a State guarantee. These aid measures were approved as compatible aid.1

In 2012, Denmark adopted further measures in favour of FIH: the most problematic assets of FIH were to be transferred to NewCo, a new subsidiary of FIH Holding. Subsequently, the Financial Stability Company (FSC)2 was to buy the shares in NewCo, which would be wound up in an orderly manner thereafter. The measures thus effectively amounted to a transfer of impaired assets. In its decision on FIH of 11 March 2014 (“the FIH-decision”), the Commission held that these measures in favour of FIH constituted State aid within the meaning of Article 107(1) TFEU. In particular, the Commission considered that these measures did not observe the principle of the market economy investor, since no market economy operator would have invested in NewCo on equivalent terms and conditions.

FIH and its holding company (FIH Holding) brought an action for annulment against the FIH-decision. According to the applicants, the Commission should have applied the market economy creditor principle instead of the market economy investor principle. The applicants argued that the Commission failed to take into consideration the pre-existing risk for Denmark of suffering very large losses on the DKK 1.9 billion hybrid tier 1 capital injection and the DKK 42 billion in State guaranteed bonds issued by FIH. According to the applicants, the transfer of assets was intended to remove this risk.

On 15 September 2016, the General Court rendered its judgment. The General Court considered that it may be economically rational for Denmark to accept measures such as a transfer of impaired assets, in so far as they have a limited cost and involve reduced risk and that, without such measures, it would be highly likely that it would have to bear losses in an amount greater than that cost. The General Court held that the Commission had applied an incorrect legal test, namely, the market economy investor principle, instead of examining the measures in the light of the market economy creditor principle. The General Court considered that Denmark’s conduct, when it adopted the measures at issue in 2012, could not be compared to that of an investor seeking to maximise its profit, but that of a creditor seeking to minimise the losses to which it is exposed in the event of inaction. The General Court therefore concluded that the Commission committed an error in law in applying an incorrect legal test.3