Why did Coventry City FC’s State aid claim fail?

The High Court recently handed down judgment¹ in a challenge brought by the owners of Coventry City Football Club (“Coventry”) against the legality of a £14.4m loan that Coventry City Council (the “Council”) provided to the leaseholders of the Ricoh Arena (“ACL”) – the stadium that Coventry used to play its home games at until 2013.

The claim failed; Hickinbottom J held that provision of the loan was lawful. The action was by way of a judicial review of the decision of the Council – a public body – to make the loan and the main substance to the challenge was that the loan amounted to State aid (i.e., subsidy) within the meaning of Article 107(1) of the Treaty on the Functioning of the EU (“TFEU”)². Any such State aid would have had to have been notified to the European Commission in advance, as required by Article 108(3) TFEU.

 

Essentially, the claim was that a rational private investor in the shoes of the Council would not have made the loan in the amount and on the terms (fixed interest rate of 5% and a 41 year term) agreed with ACL.

The background to the provision of the loan is the sorry tale of Coventry’s decline following its 2001 relegation from the Premier league (losing to Aston Villa on the final day of the season after taking a two-goal lead³).