Belgium has brought High Court proceedings against Ryanair for the recovery of more than €2.28 million provided by the Belgian authorities to the private airline for services to and from Charleroi Airport.

The Belgian move follows a decision by the European Commission in February 2004 that many of the financial arrangements agreed between Ryanair and the Walloon region of Belgium constitute state aid incompatible with the common market.

Ryanair yesterday asked the High Court to put a stay on the proceedings by Belgium pending the determination of Ryanair's appeal against the European Commission decision, which is currently before the Court of First Instance of European Communities. Belgium is opposing the stay.

The €2.28 million state aid relates to the launching costs of new routes, hotel and other accomodation, and subsistence for Ryanair staff and associated companies during the development of the base at Charleroi and aid for the recruitment and training of pilots and aircraft staff.

Counsel for Ryanair told the High Court yesterday that, if the proceedings by Belgium are stayed now, the cost to the public purse will be limited.

This was not a case where Ryanair has run away, he said. The airline had an interest in testing the European Commission decision. Money had been paid into an account by Ryanair and, if the airline does not succeed in Europe, the money goes to Belgium.

In an affidavit, the head of regulatory affairs at Ryanair, Jim Callaghan, said that, in the late 1990s, Charleroi Airport had an average of 57 passengers daily. Ryanair decided to set up a base there even though it was a wholly unknown airport and a very risky venture.

Since Ryanair's arrival at Charleroi in 1997, Mr Callaghan said passenger numbers had grown to about two million per annum.

Following an anonymous complaint, the European Commission's director general for transport and energy investigated the incentives offered to Ryanair and "purported to conclude that they constituted a package of both lawful and unlawful State aid", he said.

The European Commission decision has very serious ramifications for Ryanair, Mr Callaghan said. It seriously hampered the ability of state-owned regional airports to compete with monopolistic major airports which were typically extremely expensive to operate from.

On December 22nd, 2004, Ryanair had, under protest and without prejudice to its appeal, lodged €4 million into an escrow account with the government of the Walloon region in respect of the first tranche of the payments that the European Commission has required to be made to Belgium. This was because, he claimed, the Walloon region failed to comply with its own legislation in terms of granting discounts.

The European Commission had rejected back-up documentation provided by Ryanair and demanded that the Walloon region bring these proceedings.

In an affidavit, the director general of legal affairs of the Belgian federal public service Jan Devadder said the appeal process may take some considerable years and a judgment was unlikely to be reached before early 2007.