State aid21/03/04 / cata_european-union-news

Judgement of the European Court of Justice in Altmark (C-280/00) of 24 July 2003

The significance of this ECJ judgement extends far beyond the immediate concerns of the travel sector, as it lays down general principles for interpreting the concept of "state aid" granted to state enterprises providing "services of general economic interest" as defined in Article 86 of the EC Treaty.

In this case, the ECJ was responding to the question of whether payments to an undertaking for the provision of services of general economic interest constitute notifiable state aid under the EC Treaty (and which, under Article 86(2) of the EC Treaty could subsequently escape application of competition rules), or whether such payments are to be viewed as compensation for costs and hence not falling within the definition of state aid. This decision was particularly long awaited, not least because the tests applied hitherto in this domain have not been fully consistent (e.g. see Ferring C-53/00 dated 21 November 2001).

The ECJ held that where a state subsidy is regarded as compensation for the services provided by the recipient undertakings in order to discharge their public service obligations, such that the recipient undertaking does not obtain a financial benefit, and the measure (subsidy) does not have the effect of giving the recipient undertaking a better competitive position than its competitors, then the subsidy cannot be held to constitute state aid.

In each case, a four part, cumulative test will be applied, as follows:

the recipient undertaking is actually required to discharge public service obligations and such obligations are clearly defined;

the parameters on the basis of which the compensation is calculated have been established beforehand in an objective and transparent manner;

the compensation does not exceed what is necessary to cover all or part of the costs incurred in discharging the public service obligations, taking into account the relevant receipts and a reasonable profit for discharging those obligations; and

where the undertaking which is to discharge public service obligations is not chosen in a public procurement procedure, the level of compensation needed has been determined on the basis of an analysis of the costs which a typical undertaking, well run and adequately provided with means of transport so as to be able to meet the necessary public service requirements, would have incurred in discharging those obligations, taking into account the relevant receipts and a reasonable profit for discharging the obligations.

Judgement of the European Court of Justice in Chronopost (C-83/01 P, C-93/01 P a C-94/01 P) of 3 July 2003

The dispute was initiated by a trade association of companies now known as UFEX, offering express courier services. UFEX claimed that its competitor - SFMI Chronopost, a private company - received logistical and commercial assistance from its parent company (the French post office - La Poste) that amounted to state aid, on the basis that Chronopost did not have to pay the normal market price for such assistance. As in October 1997, the Commission ruled that the assistance did not constitute state aid, UFEX filed an action at the Court of First Instance seeking an annulment of the Commission's decision.

Although the Court of First Instance concurred with the Commission on many points, it held that the Commission had erred while examining market conditions, on the basis that it had examined only the costs paid by La Poste during La Poste's provision of assistance to its subsidiary, Chronopost. The Court held that the Commission should have verified that the remuneration paid by Chronopost to La Poste was comparable to remuneration that would have been demanded by a private company not operating in a reserved sector.

On appeal against the decision by the Court of First Instance, the ECJ held that the Court of First Instance had incorrectly interpreted the concept of normal market conditions. La Poste had an obligation to provide a service of public economic interest under Article 86(2) of the EC Treaty and to discharge this obligation, La Poste possessed the requisite infrastructure and resources allowing it to provide a basic postal service. In these circumstances, it is not possible to compare the position of La Poste with that of a private company or a group of undertakings not operating in a reserved sector; normal market conditions must be viewed in the light of objective and verifiable criteria. In the given case, the ECJ held that such objective and verifiable criteria were the amount of costs incurred by La Poste in providing assistance to its subsidiary, Chronopost. Hence assistance will not amount to state aid, provided that the price charged covers all additional and variable costs incurred in providing logistical and commercial assistance, an appropriate contribution to fixed costs arising in connection with use of the postal infrastructure and an adequate return on the basic investment. Simultaneously, there should be nothing to suggest that such criteria have been under-estimated or fixed on an arbitrary basis.

Other significant judgements in this area of law include in particular the ECJ judgement in Gemo (C-126/01) of 20 November 2003 and in Enirisorse (C-34/01) of 27 November 2003.