Abstract
This chapter sets the Almunia reform package in its historical context and analyses the thinking of the Commission behind the new measures. The analysis argues that the Commission has made an attempt to introduce flexibility into the rules for small-scale SGEI and created a practical framework for assessing larger scale SGEI. Combined with the application of the EU competition and procurement rules, the new package would appear to have substantially limited the Member States’ discretion to organise larger SGEI. The new rules are complex, with some overlaps and it is concluded that the Commission must exercise its discretion in applying the rules in a consistent and predictable manner if the Commission’s objectives of clarifying and simplifying the rules relating to SGEI financing are to be achieved.
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Notes
- 1.
Joaquín Almunia, Vice President of the European Commission, responsible for Competition Policy Reform of the State aid rules for Services of General Economic Interest (SGEI). SPEECH/11/901. Joaquín Almunia Vice President of the European Commission responsible for Competition Policy Reforming EU State aid rules on public services: The way forward EPC policy Dialogue, Brussels Brussels, 2 May 2011 SPEECH/11/300.
- 2.
Goethe’s Elective affinities (1809) mentions the fact that the ropes used in the British Navy, from the largest to the smallest, were twisted in such a way that a red thread ran through them from end to end, which could not be extracted without undoing the whole. Apparently, the reason for the inclusion of the red thread was that if any rope was lost or stolen, it would be obvious who the owner was.
- 3.
For a more detailed explanation of how the different positions interact, see Buendía Sierra 2008.
- 4.
CJEU, Case C-280/00, Altmark Trans GmbH and Regierungspräsidium Magdeburg v Nahverkehrsgesellschaft Altmark GmbH, and Oberbundesanwalt beim Bundesverwaltungsgericht [2003] ECR I-7747.
- 5.
Ibidem.
- 6.
A general overview of the situation can be found at paras 34 et seq. of the Opinion of AG Jääskinen delivered on 24 March 2010 in CJEU, Case C-399/08 Commission v Deutsche Post AG. [n.y.r]. For the non-aid approach, see CJEU, Case 240/83 Procureur de la République v ADBHU [1985] ECR 531 and CJEU, Case C-53/00 Ferring [2001] ECR I-9067. For the ‘aid approach’, see CJEU, Case C-387/92 Banco Exterior de España v Ayuntamiento de Valencia [1994] ECR I-877 and CJEU, Case C-332/98, France v Commission [2000] ECR I-4833.
- 7.
These conditions are set out in paras 89–93 of the Altmark judgment (n 4 above):
First, the recipient undertaking must actually have public service obligations to discharge, and the obligations must be clearly defined. In the main proceedings, the national court will therefore have to examine whether the public service obligations which were imposed on Altmark Trans are clear from the national legislation and/or the licences at issue in the main proceedings.
Second, the parameters on the basis of which the compensation is calculated must be established in advance in an objective and transparent manner, to avoid it conferring an economic advantage which may favour the recipient undertaking over competing undertakings.
Payment by a Member State of compensation for the loss incurred by an undertaking without the parameters of such compensation having been established beforehand, where it turns out after the event that the operation of certain services in connection with the discharge of public service obligations was not economically viable, therefore constitutes a financial measure which falls within the concept of State aid within the meaning of Article [107] (1) of the Treaty.
Third, the compensation cannot exceed what is necessary to cover all or part of the costs incurred in the discharge of public service obligations, taking into account the relevant receipts and a reasonable profit for discharging those obligations. Compliance with such a condition is essential to ensure that the recipient undertaking is not given any advantage which distorts or threatens to distort competition by strengthening that undertaking's competitive position.
Fourth, where the undertaking which is to discharge public service obligations, in a specific case, is not chosen pursuant to a public procurement procedure which would allow for the selection of the tenderer capable of providing those services at the least cost to the community, the level of compensation needed must be 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.
- 8.
Szyszczak 2011.
- 9.
Commission Decision 2005/842/EC on the application of Article 86(2) of the EC Treaty to State aid in the form of public service compensation granted to certain undertakings entrusted with the operation of services of general economic interest OJ 2005 L 312/67.
- 10.
Community Framework for State aid in the form of public service compensation, OJ 2005 C 297/4.
- 11.
Commission Directive 2005/81/EC amending Directive 80/73EEC on the transparency of financial relations between Member States and their public undertakings as well as on financial transparency within certain undertakings, OJ 2005 L 312/47.
- 12.
For further details see Buendía Sierra 2008.
- 13.
Communication from the Commission on the application of the European Union State aid rules to compensation granted for the provision of services of general economic interest, OJ 2012 C 8/15.
- 14.
Commission Decision of 20 December 2011 on the application of Article 106(2) of the Treaty on the Functioning of the European Union to State aid in the form of public service compensation granted to certain undertakings entrusted with the operation of services of general economic interest, OJ 2012 L7/3.
- 15.
However, contrary to what the Commission stated in its press release, it is not clear from Article 2 of the Decision that all social services could be included therein.
- 16.
The cases in which specific aid to the provision of SGEIs to airports can benefit from the Decision have also been amended and reduced to those cases in which ‘(…) average annual traffic during the 2 financial years preceding that in which the service of general economic interest was assigned does not exceed 200,000 passengers (…)’ (Article 2(1) e). The previous threshold was one million passengers for the same period of time. Compensation for the provision of services of general economic interest as regards air or maritime links to islands has remained unchanged. Support can be provided when average annual traffic during the two financial years preceding that in which the service of general economic interest was assigned does not exceed 300,000 passengers.
- 17.
With the exception, according to Article 2(2) of the Decision, of those cases in which ‘a significant investment is required from the service provider that needs to be amortised over a longer period in accordance with generally accepted accounting principles.’
- 18.
Communication from the Commission, European Union framework for State aid in the form of public service compensationOJ 2011 C 8/15.
- 19.
Draft Commission Regulation on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid granted to undertakings providing services of general economic interest, OJ 2012 C 8/23.
- 20.
Commission Regulation of 25 April on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid granted to undertakings providing services of general economic interest OJ 2012 L 114/8.
- 21.
Buendía Sierra 2008.
- 22.
See the minutes of the penultimate plenary session of the European Convention held in Brussels on 4 July 2003, CONV 849/03, according to which the initiative for the adoption of this provision came from the Presidium of the Convention. In the last session, certain members of the Convention stated their disagreement with the introduction of this amendment, on the basis that it was not of a technical nature. See the minutes of the last plenary session of the European Convention held in Brussels on 9 and 10 July 2003, CONV 853/03.
- 23.
Buendía Sierra 2011.
- 24.
Paragraph 3 of the Communication.
- 25.
For a more detailed description of the content of the Communication, in particular as regards the engagement of public funds Buendía Sierra and Muñoz de Juan 2012.
- 26.
Paragraph 12 of the Communication reads: ‘The question whether a market exists for certain services may depend on the way those services are organised in the Member State concerned. The State aid rules only apply where a certain activity is provided in a market environment. The economic nature of certain services can therefore differ from one Member State to another. Moreover, due to political choice or economic developments, the classification of a given service can change over time. What is not a market activity today may turn into one in the future, and vice versa.’
Paragraph 14 of the Communication states: ‘Since the distinction between economic and non-economic services depends on political and economic specificities in a given Member State, it is not possible to draw up an exhaustive list of activities that a priori would never be economic. Such a list would not provide genuine legal certainty and would thus be of little use. The following paragraphs instead seek to clarify the distinction with respect to a number of important areas.’
- 27.
Paragraph 33 of the Communication.
- 28.
Paragraph 45 of the Communication.
- 29.
Paragraph 50 of the Communication.
- 30.
Community Guidelines for the application of State aid rules in relation to rapid deployment of broadband networks, OJ 2009 C 235/7.
- 31.
Paragraph 66 of the Communication.
- 32.
Paragraph 68 of the Communication.
- 33.
Idem.
- 34.
See n 7 above.
- 35.
Paragraphs 70–72 of the Communication.
- 36.
Paragraphs 73–75 of the Communication.
- 37.
Paragraph 76 of the Communication.
- 38.
Paragraph 77 of the Communication.
- 39.
Article 2(1) c of the Decision.
- 40.
Article 2(2) of the Decision.
- 41.
Idem.
- 42.
Article 5(2) of the Decision.
- 43.
We have assumed that this value is always positive as normally the provision of SGEI entails net losses for undertakings entrusted with running them.
- 44.
The value will be positive in the case of profit and negative in the case of loss.
- 45.
Articles 5(3) and 5(4) of the Decision and paras 28–32 of the Framework.
- 46.
Paragraph 30 of the Framework and para 5.3 a of the Decision.
- 47.
Paragraph 31 of the Framework and para 5.3 b and c of the Decision.
- 48.
Article 5.4 of the Decision and para 32 of the Framework.
- 49.
Bishop and Walker 2010, p. 345. For some proposals on how to allocate these costs see the contribution of Kavanagh to this book.
- 50.
Article 5.5 of the Decision and para 33 of the Framework.
- 51.
Article 5.7 of the Decision. See also paras 33 et seq of the Framework.
- 52.
Article 5.8 of the Decision.
- 53.
Article 5.6 of the Decision and paras 39–43 of the Framework.
- 54.
Article 5(6) of the Decision and para 53 of the Framework.
- 55.
See paras 40 and 41 of the Framework.
- 56.
Paragraph 13 of the Framework.
- 57.
Paragraph 14 of the Framework.
- 58.
For a detailed analysis of the interface between State aid, public procurement and financing to SGEI, including a critique of the approach taken by the Commission, see the contribution of Sanchez Graells to this book.
- 59.
For an explanation of the transitional provisions contained in the Decision and the Framework see Buendía Sierra and Muñoz de Juan 2012.
- 60.
Paragraph 18 of the Framework provides as follows: ‘Aid will be considered compatible with the internal market on the basis of Article 106(2) of the Treaty only where the undertaking complies, where applicable, with Directive 2006/111/EC. Aid that does not comply with that Directive is considered to affect the development of trade to an extent that would be contrary to the interest of the Union within the meaning of Article 106(2) of the Treaty.’
- 61.
Paragraph 31 of the Framework.
- 62.
Paragraph 55 of the Framework.
- 63.
Idem.
- 64.
Paragraph 56 of the Framework.
- 65.
Paragraph 57 of the Framework. Here the Commission recognises that the main means of challenging such rights would be under Article 106(1) TFEU. However, State aid cannot be declared compatible with the internal market when the exclusive or special rights provide an advantage that cannot be quantified and therefore the compensation cannot be properly assessed. This should be put into context with the difficulties of quantifying the extra revenue arising from the grant of special or exclusive rights mentioned in section IV (b) above.
- 66.
Paragraph 58 of the Framework.
- 67.
Paragraph 13 of the Regulation provides as follows: ‘This Regulation should not restrict the application of Regulation (EC) No 1998/2006 to undertakings providing services of general economic interest. Member States should remain free to rely either on this Regulation or on Regulation (EC) No 1998/2006 as regards aid granted for the provision of services of general economic interest.’
- 68.
In visual art, the Latin expression horror vacui (‘fear of empty space’) means filling the entire surface of a work of art with detail.
References
Bishop S, Walker M (2010) The economics of EC competition law: concepts, applications and measurement. Sweet and Maxwell, London
Buendía Sierra JL (2008) Finding the right balance: state aid and services of general economic interest. In: EC State Aid Law: Liber Amicorum Francisco Santaolalla. Kluwer, The Hague
Buendía Sierra JL (2011) Writing straight with crooked lines: competition policy and services of general economic Interest in the Treaty of Lisbon. In: Biondi A, Eeckhout P (eds) European Union law after the Treaty of Lisbon. OUP, Oxford
Buendía Sierra JL, Muñoz de Juan M (2012) Some legal reflections on the Almunia package. In: Proceedings of the conference The reform of state aid rules on services of general economic interest from the 2005 Monti-Kroes package to the 2011 Almunia reform, Lexxion, Berlin
Szyszczak E (2011) Altmark assessed. In: Szyszczak E (ed) Research handbook on European state aid law. Edward Elgar, Cheltenham
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Buendía Sierra, J.L., Panero Rivas, J.M. (2013). The Almunia Package: State Aid and Services of General Economic Interest. In: Szyszczak, E., van de Gronden, J. (eds) Financing Services of General Economic Interest. Legal Issues of Services of General Interest. T.M.C. Asser Press, The Hague, The Netherlands. https://doi.org/10.1007/978-90-6704-906-1_7
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