Ferreira da Silva e Brito was a case on business transfers referred to the European Court from Portugal. Over 20 years ago, in February 1993, Air Atlantis (AIA), a charter airline company, was wound up and close to 100 employees were made redundant. From May 1993, TAP, the main shareholder in AIA, began operating some of the flights which AIA had contracted to provide over the period from May to November 1993.
TAP also started operating a number of charter flights. This was a market in which TAP had not previously been active, as the routes concerned had, until then, been served by AIA. In operating these flights, TAP used some of the equipment and assets which AIA had used for its business, including four planes. TAP also assumed responsibility for the leasing of those aircraft and took over AIA’s equipment in two Portuguese offices, as well as other moveable property. In addition, TAP recruited a number of former AIA employees.
After protracted litigation, the Portuguese Supreme Court decided in 2009 that there had not been a transfer of a business between AIA and TAP. The commercial activity had “merely continued”; the business had not retained its identity. In operating the flights previously run by AIA, TAP had used its own business, not AIA's.
The European Court of Justice has now rejected this analysis, deciding that there had been a transfer of a business within the meaning of the European Directive. In the air transport sector, the fact that equipment and assets are transferred is a key factor. TAP took over assets that were essential for pursuing the activity previously carried on by AIA – it replaced AIA in the aircraft leasing contracts and actually used its aircraft.
The Court commented on the "functional link of interdependence" between the various elements of the business that were transferred. This allowed the transferee to use the equipment and assets to pursue an identical or similar activity, albeit that the assets were integrated, after the transfer, in a new and different organisational structure.
There seems no reason why the applicability of this decision should be confined to the airline sector – it could potentially be relevant to a transfer of any asset-heavy business.