International Law

This reference for a preliminary ruling concerned Arts 73 EC and 87 EC and Regulation 1191/69.

Carris was a public undertaking which, by administrative contract, obtained a public service concession for passenger transport by bus , electric vehicles and mechanical lifts within the administrative limits of the city of Lisbon.

The STCP was a public undertaking which held a public service concession for passenger transport within the administrative limits of the city of Oporto, pursuant to a law converting a municipal service into a limited company.

In accordance with its public service obligations, Carris was, inter alia, required to ensure that the conceded service operated smoothly and continuously under the price conditions specified by the awarding authority.

The STCP, for its part, was a public undertaking which held a public service concession for passenger transport within the administrative limits of the city of Oporto, pursuant to a law converting a municipal service into a limited company.

In return for the provision of the urban passenger transport services, Carris and the STCP had, for many years, enjoyed various advantages awarded by the State. These consisted of, inter alia, compensation payments, capital injections and State credit guarantees.

Outside the geographical limits of the areas covered by their respective concessions, Carris and the STCP, without being subject to a public service obligation, also operated bus routes on which other undertakings were active, inter alia Antrop and Others.

Those latter undertakings provided transport services under the public service delegation regime and were subject to rules concerning routes, times and fares. The activity of Carris and SCTP on those routes led Antrop and Others to claim a distortion of competition and challenge Resolution 52/2003.

Antrop and Others submitted that their only resource was operating revenue from the fares charged, so that operating losses from their activity were covered exclusively by their own capital, whereas any losses, the investment costs and the capital costs of Carris and the STCP were covered by public subsidy. The award of that subsidy was consequently a factor distorting competition.

Therefore, the appellants in the main proceedings claimed that the part of Resolution 52/2003 under challenge infringed the national legislation relating to competition and the provisions of Community law on State aid, in particular Arts 86 EC, 87(1) EC, 88 EC and 89 EC, Regulations 1191/69 and Regulation 1107/70.

In those circumstances, the issue was raised before the national court of the need for an order for reference to the Court of Justice. The referring Court inter alia asked whether the grant by a Member State of compensation payments, such as those at issue in the main proceedings, to transport undertakings holding a public service concession and which were entitled, within specific urban districts, to carry on their activity on an exclusive basis because of the public service obligations to which they were subject, constituted State aid prohibited by Art. 87(1) EC where, in addition, those undertakings also carried on their activity in competition with private operators outside those specified districts and where it was not possible to calculate the additional cost deriving from the performance of the public service obligations.

The Court reiterated that Article 87 EC was one of the general provisions of the Treaty on State aid, whereas Art. 73 EC created an exception in the field of transport to the general rules applicable to State aid, by providing that aids which meet the needs of coordination of transport or represented reimbursement for the discharge of certain obligations inherent in the concept of a public service were compatible with the Treaty. The Court held that Regulation 1191/69 established a system which the Member States must comply with when they consider imposing public service obligations on undertakings in the land transport sector (see C-280/00, Altmark Trans and Regierungspräsidium Magdeburg (2003)).

Art. 10 of Regulation 1191/69 provided, inter alia, that the amount of the compensation must, in the case of an obligation to operated or to carry, be equal to the difference between the reduction in financial burden and the reduction in revenue of the undertaking if the whole or the relevant part of the obligation in question were terminated for the period of time under consideration. However, where the calculation of economic disadvantage was made by allocating among the various parts of its transport activities the total costs borne by the undertaking in respect of those transport activities, the amount of the compensation was to be equal to the difference between the costs allotable to that part of the undertaking?s activities affected by the public service obligation and the corresponding revenue.

Since the activities of Carris and the STPC outside their respective areas of exclusivity were not subject to a public service obligation, it was not possible to ascertain on the basis of reliable data from the accounts of those two undertakings the difference between the costs imputable to the parts of their activities in the areas covered by the respective concessions and the corresponding income and consequently it was not possible to calculate the additional cost deriving from the performance of public service obligations by those undertakings.

The Court held that, accordingly, the requirement set out in Art. 10 of Regulation 1191/69 was not fulfilled, since the costs imputable to the part of the activity of Carris and the STPC carried out in the areas in which each was granted an exclusive concession could not be clearly established.

The Court reiterated that in such a case, since the compensation payments paid to those undertakings were not granted in accordance with Regulation 1191/69, they were consequently not compatible with Community law and it was therefore unnecessary to examine them in the light of the Treaty provisions relating to State aid, in particular Art. 87(1) EC (see the Altmark case, paragraph 65).

The Court concluded that Regulation 1191/69 precluded the grant of compensation payments, such as those at issue in the main proceedings, where it was not possible to determine the amount of the costs imputable to the activity of the undertakings concerned carried out in the performance of their public service obligations. The Court held that where a national court found certain aid measures to be incompatible with Regulation 1191/69, it was a matter for that court to establish all the consequences, under national law, as regards the validity of the acts giving effect to those measures.

Text of judgment

Full post as published by ECJBlog.com on July 13, 2009 (boomark / email).