E-14/10-45 REPORT for the HEARING in Case E
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E-14/10-45 REPORT FOR THE HEARING in Case E-14/10 APPLICATION to the Court pursuant to the second paragraph of Article 37 of the Agreement between the EFTA States on the Establishment of a Surveillance Authority and a Court of Justice in the case between Konkurrenten.no AS and EFTA Surveillance Authority, supported by Kollektivtransportproduksjon AS seeking the annulment of the EFTA Surveillance Authority’s Decision No 254/10/COL of 21 June 2010 (AS Oslo Sporveir and AS Sporveisbussene). I Introduction 1. The applicant Konkurrenten.no AS (hereinafter “Konkurrenten”) is a privately owned operator in the express bus market between the Central and Southern Region of Norway. It is owned by Olto Holding AS, which owns also Risdal Touring AS, a company active in the tour bus market. The group had a combined turnover of NOK 54 million in 2009 and operates a fleet of 17 buses serving approximately 200,000 passengers per year. 2. The case concerns the decision by the EFTA Surveillance Authority (hereinafter “ESA”) to close case No 60510 on the grant of State aid by the Norwegian authorities to AS Oslo Sporveir (hereinafter “Oslo Sporveier”) and AS Sporveisbussene (hereinafter “Sporveisbussene”) for the provision of scheduled bus services in Oslo. In the decision, ESA concluded that the contested measures, although being aid incompatible with the EEA Agreement, constituted existing aid and, in view of the termination of those aid measures, considered that no further measures were required. - 2 - 3. The application is based on three pleas in law, namely that ESA infringed its duty to open the formal investigation procedure for aid granted between 2000 and 2008; that ESA infringed its duty to open the formal investigation procedure for aid granted between 1997 and 2000; and that ESA infringed its duty to state reasons. II Legal background EEA law 4. Article 61(1) of the Agreement on the European Economic Area (hereinafter “EEA”) reads: Save as otherwise provided in this Agreement, any aid granted by EC Member States, EFTA States or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Contracting Parties, be incompatible with the functioning of this Agreement. 5. Article 1 of Part I of Protocol 3 to the Agreement between the EFTA States on the Establishment of a Surveillance Authority and a Court of Justice (hereinafter “Protocol 3 SCA”) reads: 1. The EFTA Surveillance Authority shall, in cooperation with the EFTA States, keep under constant review all systems of aid existing in those States. It shall propose to the latter any appropriate measures required by the progressive development or by the functioning of the EEA Agreement. 2. If, after giving notice to the parties concerned to submit their comments, the EFTA Surveillance Authority finds that aid granted by an EFTA State or through EFTA State resources is not compatible with the functioning of the EEA Agreement having regard to Article 61 of the EEA Agreement, or that such aid is being misused, it shall decide that the EFTA State concerned shall abolish or alter such aid within a period of time to be determined by the Authority. […] 3. The EFTA Surveillance Authority shall be informed, in sufficient time to enable it to submit its comments, of any plans to grant or alter aid. If it considers that any such plan is not compatible with the functioning of the EEA Agreement having regard to Article 61 of the EEA Agreement, it shall without delay initiate the procedure provided for in paragraph 2. The State concerned shall not put its proposed measures into effect until this procedure has resulted in a final decision. 6. Under Section I of Part II of Protocol 3 SCA Implementing provisions, Article 1 Definitions reads: […] (b) 'existing aid' shall mean: - 3 - (i) all aid which existed prior to the entry into force of the EEA Agreement in the respective EFTA States, that is to say, aid schemes and individual aid which were put into effect before, and are still applicable after, the entry into force of the EEA Agreement; (ii) authorised aid … […] (v) aid which is deemed to be an existing aid because it can be established that at the time it was put into effect it did not constitute an aid, and subsequently became an aid due to the evolution of the European Economic Area and without having been altered by the EFTA State. Where certain measures become aid following the liberalisation of an activity by EEA law, such measures shall not be considered as existing aid after the date fixed for liberalization; (c) 'new aid' shall mean all aid, that is to say, aid schemes and individual aid, which is not existing aid, including alterations to existing aid; […] (f) 'unlawful aid' shall mean new aid put into effect in contravention of Article 1(3) in Part I; […] 7. Article 16 of the Agreement between the EFTA States on the Establishment of a Surveillance Authority and a Court of Justice (hereinafter “SCA”) reads: Decisions of the EFTA Surveillance Authority shall state the reasons on which they are based. 8. Article 36 SCA reads: The EFTA Court shall have jurisdiction in actions brought by an EFTA State against a decision of the EFTA Surveillance Authority on grounds of lack of competence, infringement of an essential procedural requirement, or infringement of this Agreement, of the EEA Agreement or of any rule of law relating to their application, or misuse of powers. Any natural or legal person may, under the same conditions, institute proceedings before the EFTA Court against a decision of the EFTA Surveillance Authority addressed to that person or against a decision addressed to another person, if it is of direct and individual concern to the former. […] National law 9. Local bus transport was governed in Norway by the provisions of the 1976 Transport Act and its implementing regulations. Under these rules, concessions for local bus transport were granted for fixed ten year periods, without public tendering. The concession to carry out local bus transport included a right, and - 4 - also an obligation, to serve the area or route in question, in return for ticket income from passengers. 10. Concerning additional compensation for specific, unprofitable transport services paragraph 1, Section 24a of the 1976 Transport Act provided that it was the responsibility of the County (fylkekommune: in this context the City of Oslo) to provide for contributions to local bus transport services it wanted to set up or continue to operate within the County. This provision is now to be found in Section 22 of the 2002 Commercial Transport Act which replaced the 1976 Transport Act with effect of 1 January 2003.1 11. An amendment to the 1976 Transport Act of 11 June 1993, which took effect on 1 January 1994, permitted local bus transport to be submitted to public tendering. The concession would follow the successful bidder for the duration of the contract. The provisions relevant for the rights and duties of the concession holder remained essentially unchanged. III Pre-litigation procedure 12. By letter dated 11 August 2006, Konkurrenten lodged a complaint with ESA, claiming that the Norwegian authorities had granted State aid to Oslo Sporveier and its subsidiary Sporveisbussene. 13. In the subsequent investigation, ESA invited the Norwegian authorities to comment and requested further information from them in letters dated 7 September 2006, 29 November 2006, 19 June 2007 and 2 April 2008. The Norwegian authorities replied to these requests by letters dated 11 October 2006, 11 January 2007, 16 August 2007 and 29 April 2008. The applicant, Konkurrenten, submitted comments by letter on 20 October 2006 and further information by emails dated 25 February 2008, 25 May 2008, 4 June 2008, 15 August 2008, 1 September 2008 and 20 January 2009. 14. At the beginning of 2010, ESA and the Norwegian authorities had informal contact via both telephone and email regarding the case. The information received in this context was, according to the decision, consolidated in a letter submitted electronically on 21 April 2010 by the Norwegian authorities. 15. On 21 June 2010, ESA adopted the contested decision, closing the case on the grounds that the complaint concerned existing aid incompatible with the EEA Agreement, and that there was no need for further measures. 1 The parties disagree on whether the national legislation merely establishes a competence of the counties to provide additional compensation, or whether it involves an obligation for counties to cover losses incurred by concession holders in the discharge of their public service obligations. - 5 - 16. By application registered at the EFTA Court on 2 September 2010, Konkurrenten requested the EFTA Court to annul the contested decision. IV The contested decision 17. The contested decision describes the recipients of the aid as follows: AS Oslo Sporveier has since its establishment been active bus transport, metro (“T-banen”), tram (“Trikk”) and ferry transport [in Oslo]. […] As of 1934, Oslo Municipality became practically the sole owner (with 98.8% ownership) until a reorganization in July 2006. Following this reorganization, a new company, Kollektivtransportproduksjon, which is wholly owned by Oslo Municipality, became the 100% owner of AS Oslo Sporveier. According to the Norwegian authorities Oslo Municipality was involved in all issues of commercial importance relating to the carrying out if collective bus transport by AS Oslo Sporveier, including financial aspects of agreements/contracts with subsidiaries (such as AS Sporveisbussene) or other third parties. AS Oslo Sporveier operated an in-house department which carried out most collective bus transport in Oslo.2 On 23 April 1997 the bus transport was separated from AS Oslo Sporveier and transferred to a newly established company, AS Sporveisbussene.