Euro court says "non' to aid for Air France

Hammond Suddards and Clearly Gottlieb Steen & Hamilton are claiming victory for their airline clients in a European court battle with Air France, represented by Paris-based Gide Loyrette Nouel.

Hammonds Suddards' client British Midland and Cleary Gottlieb's clients - a group of airlines including British Airways, KLM and SAS - claimed the European Commission failed to provide sufficient legal justification for its 1994 approval of FFr20bn (£2bn) state aid to Air France.

Five judges at the European Court of First Ins-tance last week upheld the complaints and annulled the commission's approval. They found there was insufficient reasoning for the decision to grant FFr11.5bn aid, earmarked for aircraft.

Hammonds' Brussels-based partner Konstantinos Adamantopoulos said: "The commission can no longer ride roughshod over the rights of interested parties." The aid "distorted competition to the detriment of other European airlines who had to raise capital for their operations privately," he added.

Cleary Gottlieb competition partner Romano Subiotto, whose clients' complaints were heard at the same time as British Midland's, said: "This judgment is going to provide a strong base for the European Commission to resist political pressures from member states in future state aid cases."

Gide Loyrette competition partner Olivier D'Ormesson said only two of the 26 complaints against Air France were upheld. He expected the commission to re-issue its decision with the necessary justification and there would be no need for Air France to repay the aid.

Subiotto said his clients were adopting a "wait-and-see" stance to repayment.