Finding the Silver Lining in the Financing of the Services of General Economic Interest: How the Fourth Altmark Makes It Harder?
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Master Thesis in European Competition Law and Regulation Finding the silver lining in the financing of the Services of General Economic Interest: How the Fourth Altmark makes it harder? by Irene Hadjiyiangou Supervised by Dr. K.J. Cseres ABSTRACT: The treatment of the Services of General Economic Interest has garnered an increasing number of academic commentary following the Altmark ruling. By creating four broadly defined criteria the Court succeeded not only to put the monitoring of SGEI high up on the list of priorities of the European Commission, but also to create a hype in regards to their interpretation and applicability. This thesis explores the fourth and most challenging Altmark criterion and seeks to clarify its scope of application. What is more, it attempts to shed some light as to the developments that the Commission has adopted throughout the years, and how they shaped the current context of SGEI. Due to the relatively new status of the Altmark criteria, and the evolving nature of the State aid rules on SGEI, there is a shortage of comprehensive analysis that is solely focusing on the unique prominence of the fourth criterion. Table of Contents INTRODUCTION ...................................................................................................................... 4 Chapter 1: SERVICES OF GENERAL ECONOMIC INTEREST: LEADING UP TO THE 2005 ALTMARK PACKAGE ................................................................................................................................ 6 1.1 Deciphering the Services of General Economic Interest ............................................................... 6 1.2 The Altmark Judgement .............................................................................................................. 9 1.3 The 2005 Altmark Package ........................................................................................................ 10 Chapter 2: THE PECULIAR CASE WITH THE FOURTH ALTMARK CONDITION ........................... 12 2.1 The interrelationship of EU Public Procurement Law and State Aid ........................................... 12 2.2 The two-tier approach to the fourth Altmark condition ............................................................ 14 2.2.1 Selection of Public Service Operator Pursuant to Public Procurement Procedure. ................. 15 2.2.2 Efficiency Benchmarking ........................................................................................................... 17 2.3 The Court methodology on the application of the condition ..................................................... 18 2.3.1 The BUPA Judgement ............................................................................................................... 18 2.3.2 TV 2/Danmark A/S and Viasat Broadcasting v Commission ..................................................... 20 Chapter 3: LEGAL AMBIGUITY AND RECENT DEVELOPMENTS ................................................. 22 3.1 The 2012 Almunia Package ....................................................................................................... 22 3.2 The Courts’ view in Germany v European Commission (Zweckverband Tierkörperbeseitigung) . 24 3.2 The Commission Notice on the Notion of State Aid ................................................................... 27 CONCLUSION .................................................................................................................... 30 INTRODUCTION The services of general economic interest (SGEI) make up the foundation of the European Union’s socio-economic model of the welfare state, a model that has as its core priority the protection of a minimum income and the access to essential services regardless of wealth or privilege.1 Those fundamental services are largely bestowed through the SGEI. The Treaty on the Functioning of the European Union (TFEU) lays down several provisions regarding the services of general economic interest, most notably with Article 106(2), which is exempting SGEI operators from the Treaty rules insofar as those rules are obstructing the performance of the public service. The TFEU however, fails to provide any definition of the notion, something that is mainly attributed to the unwillingness of the Member States to agree on the economic status of certain services. As a result, the Member States are left with wide discretion to identify SGEI, and apart from established Union rules for certain sectors, their only other constraint was the indication that there is “a manifest error of assessment”.2 The obscurity around the classification of SGEI has proved to be confusing, with the Member States repeatedly failing to apply the state aid rules on SGEI and thus, unable to properly define those services and fund them. The Altmark judgment and the subsequent Altmark Packages, in 2005 and 2012 respectively, have brought a revolution in the treatment of SGEI. The Altmark judgment established four cumulative criteria according to which, if all four conditions are satisfied, then the aid is compatible with Article 107(1) of the TFEU, and hence not a state aid. Despite, being a welcome addition to the murky realm of the SGEI, the judgment had nevertheless, only partially tackled the financing of such services, with the Court being criticised for leaving many questions unresolved and insufficiently answered.3 Particularly, the fourth criterion has been proved to be the most problematic because even if it is not met, an aid can be still found compatible with the internal market based on the exception of Article 106(2).4 This, along with other uncertainties 1 N Boeger, ‘Solidarity and EC competition law’ (2007) European Law Review 319 2 Case T-289/03 British United Provident Association Ltd (BUPA) (2008) ECLI:EU:T:2008:29, para 169 3 A Sanchez Graells, ‘The Commission’s Modernization Agenda for Procurement and SGEI’ (2012) https://poseidon01.ssrn.com/delivery.php?ID=69210200508106909909901210301303007711802002001904400610 502512306407010109302907010512103503703802300404507009408900406407206402508501406101607910602 202101208706807005002200007700209712311111110301607900400400509201109811602008806502207209507 0068022&EXT=pdf accessed 12 June 2017 4 W Sauter, ‘The Altmark package mark II: new rules for state aid and the compensation of services of general economic interest’ (2012) European Competition Law Review 307 deriving from the four conditions, led the Commission to introduce the first Altmark Package which aimed to provide guidance for the cases where SGEI did not meet all four Altmark conditions but fell within the Article 106(2) exemption. Subsequently, the second package, in 2012, implemented a number of modifications to the first Altmark package and adopted a de Minimis Regulation. As a final phase in the State Aid Modernisation initiative, the Commission implemented the much-awaited Notice on the notion of State aid, which intended to navigate the Member States through the appropriate procedures of funding SGEI without contradicting Article 107(1). The Notice aims to clarify the connection of State aid law with public procurement law by rationalising certain procurement practices and models through a State aid approach.5 The message that is being conveyed throughout the Notice is that as long as SGEI are awarded according to the EU public procurement rules then, it is safe to perceive them as State aid free.6 This paper will focus on the important legal and judicial developments that followed the judgment in Altmark. In particular, the paper will be divided into three parts. In the first part, there will be an introduction to the general principles governing the SGEI in conjunction with Article 106(2) TFEU and the complexities arising from its loose definition. Accordingly, the paper will deal with the Altmark ruling and the aftermath, namely the introduction of the first package and what that meant to the treatment of SGEI. The second part will focus on the fourth Altmark and the complex clarifications that the Court has provided on its judgements. The section will break down the fourth condition and examine how it is interpreted and supporting it with established case law. Finally, the last part will focus on the most recent developments by the Commission along with a recent case law analysis focusing on the approach of the Court to the fourth Altmark and what this conveys in regards to the evolution of the rules on SGEI. 5 G Skovgaard Ølykke, ‘Commission Notice on the notion of state aid as referred to in article 107(1) TFEU – is the conduct of a public procurement procedure sufficient to eliminate the risk of granting state aid?’ (2016) Public Procurement Law Review 197 6 Ibid Chapter 1: SERVICES OF GENERAL ECONOMIC INTEREST: LEADING UP TO THE 2005 ALTMARK PACKAGE 1.1 Deciphering the Services of General Economic Interest The European Commission defines the services of general economic interest as “economic activities that public authorities identify as being of particular importance to citizens and that would not be supplied (or would be supplied under different conditions) if there were no public intervention”.7 Sectors that according to the Commission can be SGEI are among others, the transport networks, the waste sector, the postal services and the health care.8 The access to SGEI is formally recognised in Article 36 of the Charter of the Fundamental Rights of the European Union.9 Article 107 TFEU, in turn, enables Member States from providing financial aid, insofar as this aid has social characteristics and is compatible