The Bundesverwaltungsgericht (Federal Administrative Court) (Germany) raises several questions relating to the interpretation of Article 92(1) of the EC Treaty (now, after amendment, Article 87(1) EC), Article 77 of the EC Treaty (now Article 73 EC) and Regulation (EEC) No 1191/69 of the Council of OJ, English Special Edition 1969 (I), p. 276.
First recital of Regulation No 1191/69.
Ibid., second recital.
Ibid., 10th and 13th recitals.
Member States may exclude from the scope of this Regulation any undertakings whose activities are confined exclusively to the operation of urban, suburban or regional services
On the one hand, the competent authorities may conclude public service contracts with an undertaking to ensure adequate transport services or offer particular fares to certain categories of passenger. In such cases, the public service contracts must comply with the procedures laid down in Section V of Regulation No 1191/69.
On the other hand, the competent authorities are authorised to maintain or impose public service obligations for urban, suburban and regional passenger transport services. In such cases, the administrative act must comply with the procedures laid down in Sections II to IV of Regulation No 1191/69.
These three categories of obligation are, in turn, defined til paragraphs 3 to 5 of Article 2 of Regulation No 1191/69.
Paragraphs 1(1) and 2(1) of the PBefG.
Order for reference, p. 10.
BGBl. I, 1992, p. 1442.
Paragraph 6(116) of the Eisenbahnneuordnungsgesetz of
First sentence of Paragraph 8(4) of the PBefG.
Second sentence of Paragraph 8(4) of the PBefG.
Licences for commercial transport services are governed by Paragraph 13 of the PBefG. That provision lays down a number of conditions governing the granting of licences, such as the applicant's financial status and reliability, and requires that the application be rejected where the service applied for would affect the interests of the public. If there are several applicants for the same service, the competent authority must make its choice having regard to the interests of the public and, in particular, taking into account cost-effectiveness.
Third sentence of Paragraph 8(4) of the PBefG.
Transport licences operated in accordance with the public service conditions are governed by Paragraph 13a of the PBefG. Under that provision, a licence is to be issued provided it is necessary for the operation of a transport service by virtue of an administrative act or a public service contract within the meaning of Regulation No 1191/69. Further, the option chosen should be that which entails the least cost to the public. For the purpose of establishing the lowest cost, German law provides for a public tendering procedure in accordance with public procurement rules.
The Oberverwaltungsgericht held that the German legislature had excluded the application of Regulation No 1191/69 to urban, suburban or regional transport only until
The Oberverwaltungsgericht concluded therefore that Altmark was no longer able to operate commercially the transport services in dispute. Inasmuch as those services were dependent on public grants, they had to be operated in accordance with public service rules and, for that reason, must fall within the scope of Regulation No 1191/69.
English translation (pp. 11 to 13).
On the other hand, the Bundesverwaltungsgericht expresses doubt as to the interpretation to be given to Community law. Having regard to Articles 77 and 92 of the Treaty, and to the provisions of Regulation No 1191/69, it is uncertain whether the fact that an undertaking needs subsidies in order to operate a local public passenger service means that it must necessarily be defined as a
English translation (p. 15).
May the answer to that question depend on the specific location and importance of the relevant local transport area? Does that freedom allowed to the national legislature stem in particular from the fact that under the second subparagraph of Article 1(1) of Regulation (EEC) No 1191/69, as amended in 1991, it has the right to exclude urban, suburban or regional public transport undertakings completely from the scope of the regulation?
First limb of the question for a preliminary ruling.
Second limb of the question for a preliminary ruling.
See the text of the question for a preliminary ruling and the third limb of that question.
It should be noted that under the second subparagraph of Article 1(1) of the Regulation
See, in particular, the reply of the German Government to the Court's written question. It should be noted that, with the exception of that reply, the German Government has not submitted any written or oral observations to the Court.
As from Cited above.
During the oral procedure, the Commission contended that Regulation No 1191/69 provided for
Further, Altmark refers to the Commission's reply to Mr Jarzembowski's written question. Written Question P-381/95 (
Sixth Council Directive 77/388/EEC of
Case
That provision, read in conjunction with point 16 of Annex F, enables Member States to continue to exempt from VAT, for a transitional period, the supply of buildings and building land under the conditions obtaining at the time of the adoption of the Sixth Directive.
At that time, property sales in the United Kingdom were exempt from VAT. Only the operations enumerated in Schedule 5 to the Finance Act 1972 were subject to VAT. Subsequent to the entry into force of the Sixth Directive, the United Kingdom amended its legislation so as to reduce the scope of the exemptions.
Norbury Developments Ltd considered that the contested amendment was contrary to the provisions of the Sixth Directive. It contended that the purpose of Article 28(3) was to Ibid., paragraphs 19 and 20.
It would be contrary to that objective to construe Article 28(3)(b) of the Sixth Directive narrowly, to the effect that a Member State may maintain an existing exemption but may not abolish it, even only partially, without thereby abolishing all the other exemptions. Moreover,... such an interpretation would have adverse effects for the uniform application of the Sixth Directive. A Member State might find itself compelled to maintain all the exemptions existing at the date of adoption of the Sixth Directive, even if it regarded it as possible, appropriate and desirable progressively to implement the system laid down in the directive in the sphere under consideration Accordingly, the Court upheld the reasoning proposed by Advocate General Gulmann m Case
Case
The French Government contended that its legislation complied with Article 17(6) of the Sixth Directive which provides that
In the present case, the national legislative amendment replaces a total exclusion of private cars from the right to deduct VAT with authorisation for partial deduction, that is to say in respect of vehicles and machines used exclusively for driving instruction. It follows that the amendment so made to the French legislation has the effect of reducing the scope of existing exemptions and bringing that legislation into line with the general regime of deduction set out in Article 17(2) of the Sixth Directive Ibid., paragraphs 22 to 24.
Case C-40/00 Commission v France [2001] I-4539, paragraph 17.
Ibid., paragraphs 18 and 19.
The second subparagraph of Article 1{1) of Regulation No 1191/69 entered into force on
We have seen that, until See paragraphs 16 to 19 of this Opinion.
Initially, it quite simply excluded local and regional transport from Regulation No 1191/69. The first version of the Regulation, adopted in 1969, provided that that Regulation Twentieth recital of Regulation No 1191/69. It was envisaged that the Council would determine, within a time-limit of three years, the action to he taken in respect of public service obligations for local and regional transport services.
Subsequently, in 1991, the Council introduced the principle whereby local and regional transport came within the scope of application of Regulation No 1191/69. However, that principle is not absolute since the second subparagraph of Article 1(1) of the Regulation permits Member States to continue to exclude urban, suburban or regional services. The second subparagraph of Article 1(1) was inserted into Regulation No 1191/69 by Regulation No 1893/91, which entered into force on
Lastly, on Proposal for a Regulation of the European Parliament and of the Council on action by Member States concerning public service requirements and the award of public service contracts in passenger transport by rail, road and inland waterway ( Ibid., Article 1.
First, that amendment enables distortions of competition in the German local passenger sector to be reduced. Since part of those transport services are subject to the provisions of the Regulation regarding the maintenance of public service obligations and the methods of compensation, the contested amendment brings the German system in line with the objectives pursued by Regulation No 1191/69.
Second, it would seem that the contested amendment constitutes the first step towards complete liberalisation of local passenger transport services in the Federal Republic of Germany. At the hearing, the representative of Altmark stated that the Bundestag was in the process of examining proposals seeking to reduce — or even abolish — public authority involvement in the operation of local transport. If that information is correct, it would mean that the German authorities, like the Community legislature, are gradually making progress in the process of liberalising local passenger services.
First limb of the question for a preliminary ruling.
the measure should confer a selective advantage on certain undertakings or the production of certain goods; the advantage should be granted directly or indirectly through State resources; the advantage should distort or threaten to distort competition; the measure should affect trade between Member States.
Ibid.
Case
On that point, the Sixth Chamber of the Court held that, where the value of the advantages granted by the public authorities does not exceed that of the costs incurred by the public service obligations, the contested measure cannot be regarded as aid within the meaning of Article 92(1). On the other hand, it ruled that, should the advantages exceed the cost of the public service obligations, those advantages do come within the scope of Article 92(1) of the Treaty in respect of the part which exceeds the stated cost of the public service obligations.
If the reasoning expounded in that judgment is followed, the national court must first determine whether the subsidies paid by the administrative district of Stendal exceed the cost of the public service obligations arising out of the contested transport operations. The question of the effect of those subsidies on trade between Member States will arise only if — and in so far as — the value of those subsidies exceeds the cost of the public service obligations.
See, in particular, Droit de la concurrence dans les Communautés européennes, Volume UB, Explication des règles applicables aux aides d'État, 1997, p. 7, http://www.europa.eu.int/comm/competition/state_aid/legislation/vol2b_fr.pdf. See also the references cited by Advocate General Tizzano in his Opinion in the Ferring case, paragraph 56.
Case
Paragraphs 167, 168 and 172.
Article 90(2) of the EC Treaty (now Article 86(2) EC). Paragraphs 170 to 194.
Case
The Court of First Instance held that Paragraph 84. Paragraph 83. Ibid.
The French system of distributing medicinal preparations to pharmacies consists of two distinct channels: the first is through
The Tribunal des affaires de sécurité sociale de Créteil (Social Security Court) (France) had requested the Court to rule whether the contested contribution constituted a State aid within the meaning of Article 92(1) and, if so, whether it was justified under the provisions of Article 90(2) of the Treaty.
Ferring judgment (paragraph 18).
In that respect, the Court held that the contested tax Ibid., paragraph 27. Ibid., paragraph 19. Ibid., paragraph 21.
Ibid., paragraph 23.
On that point, it held that, Ibid., paragraph 27.
Ibid., paragraph 32.
Accordingly, Article 90(2) of the Treaty cannot cover the contested tax in so far as the advantage it confers on wholesale distributors exceeds the cost of the public service obligations. Ibid., paragraph 33.
Article 92(1) lays down the principle of prohibiting State aid which is capable of distorting competition and affecting trade between Member States. However, the Treaty provides for several categories of exception to that principle. Only those exceptions relevant to the present case arc referred to here.
First, Article 77 of the Treaty provides, in the specific field of transport, that aid is to be compatible with the Treaty if it meets the needs of the coordination of transport or if it represents reimbursement for the discharge of certain obligations inherent in the concept of a public service.
Second, the provisions of Article 92(2) and (3) set out the categories of aid which shall be or may be considered to be compatible with the common market. Such is, in particular, the case of aid the purpose of which is cultural.
Finally, Article 90(2) of the Treaty establishes an exception in respect of undertakings entrusted with the operation of services of general economic interest. It provides that
See, inter alia, Case
See, in particular, Italy v Commission, cited above, paragraph 27; Case
See, in particular, Italy v Commission, cited above, paragraph 28.
See, in particular, Case C-241/94 France v Commission, cited above, paragraph 21 and Case
See, in particular, Deufil v Commission, cited above, paragraph 8.
It follows that the concept of aid is an objective one. As the Court of First Instance pointed out in Cited above, paragraph 83. Sec, in that sense, Lehman, H.,
Ferring (paragraphs 18 to 22).
Ibid., paragraphs 23 to 27.
See also the Opinion of Advocate General Tizzano in Ferring, who examined
Communication 2001/C 17/04 of the Commission on public interest service in Kurope (
See, in particular. Cases C-202/88 France v Commission [1991] HCR I-1223, paragraph 12 and C-67/96 Albany [1999] LCR I-5751, paragraph 103.
where an advantage granted by the authorities of a Member State is Ferring, paragraph 27. however, where the advantage granted by the authorities of a Member State is Ibid., paragraph 32.
See also, in that sense, Aussant, J, Fornasier, R., Louis, J.-V., Séché, J.-C, Van Raepenbusch, S., Commentaire J. Megret, Le droit de la CEE, volume 3, Libre circulation des personnes, des services et des capitaux, Transports, éditions de l'université de Bruxelles, Bruxelles, 1990, 2nd ed. (p. 226), and Communication 2001/C 17/04, cited above, paragraph 26.
Article 77 of the Treaty provides that
On OJ, English Special Edition 1970 (II), p. 360. Fifth recital of Regulation No 1107/70.
The same argument applies, mutatis mutandis, to the derogations provided for in Article 92(3) of the Treaty.
F ora more detailed description of the those conditions, see mv Opinion in Case C-309/99 Wouters ami Others [2002] KCR I-1577, KCR I-1582, paragraphs 157 to 166.
the undertaking concerned has actually been entrusted with the task of operating a service of general economic interest by an express act of the public authority; Cases 127/73 BRT and SABAM CURT IT) [1974] KCR 313, paragraph 20 and 66/86 Ahmed Saeed Flugreisen and Silver line Reiselmro [1989] LCR 801, paragraph 55. See also, on this point, Communication 2001/C 17/04, cited above, paragraph 22. the activities carried out by the undertaking in fact constitute a public service task in the sense that it is C-179/90 Alerei convenzionali portti di Genova [1991] KCR I-5889, paragraph 27; C-242/95 GT-Link [1997] KCR I-4449. paragraphs 52 and 53 and C-266/96 Corsica Terries Franc e[1998] KCR I-3949, paragraph 45. application of the Treaty rules frustrates the performance of the particular task of the undertaking; See my Opinion in Wouters and Others, cited above, paragraph 164. the specific task of the undertaking cannot be performed by measures which are less restrictive of competition; Cases the contested measure has no substantial effect on intra-Community trade. See, in that sense, the Opinion of Advocate General Rozès in Case
Ferring, paragraph 23.
Ibid., paragraph 27.
Case C-159/94 Commission v France, cited above, paragraph 68.
Ibid., paragraphs 69 and 70.
Moreover, it is not certain that the Paragraph 27. See, for example, Commission Decision 2001/892/EC of
Cases
Casc
In Casc Casc lbid., paragraphs 27 to 32.
It should also be recalled that, by virtue of Article 90(3) of the Treaty, the Commission must fulfil a Joined Cases The Joined Cases
Measures which offset the cost of public service obligations are no longer subject to the obligation of notification as provided for in Article 93(3) since they do not constitute aid within the meaning of Article 92(1). For the same reason, existing measures are no longer held under constant review by the Commission as provided for in Article 93(1) and (2). Further, those measures are not covered by the control established by Article 90(3) since they do not come within the scope of application of the Treaty rules in respect of competition. It is true that, by virtue of Ferring, measures which
See, for example, Commission Communication 96/C 281/03 on services of general interest in Europe (
According to the European Council, Report presented by the Commission to the Laeken European Council of
Ibid.
Ibid., paragraph 14.
Ibid., paragraph 15.
In addition, the Commission committed itself to exploring ways in which it could increase legal certainty in the sphere of services of public interest. Ibid., paragraph 27.
See, in particular, Cases
Cases
Written observations of NVGA.
Ibid.
Accordingly, the contested subsidies constitute an advantage which Altmark would not have obtained under normal market conditions and which mitigate the charges included in its budget. Moreover, the parties to the main proceedings considered that: See the written observations of the Regierungspräsidium (p. 3) and the written observations of Altmark (paragraph 35)
Further, the contested subsidies constitute a As regards that requirement, see in particular Case C-241/94 France v Commission, cited above, paragraph 24; Case
On the concept of
Case
The concept of the distortion of competition is given an extremely broad interpretation in Article 92(1). Keppcnne, J.-P., Cases Opinion of Advocate General Capotorti in Philip Morris Holland v Commission, cited above, p. 2698.
In the instant case, the subsidies granted by the administrative district of Stendal strengthen the competitive position of Altmark compared with other undertakings which wish to offer passenger services in the region of Stendal. The facts giving rise to the case in the main proceedings indicate that, without public subsidies, Altmark would probably not be able to continue to operate the contested services. Sec the order for reference {English translation pp. 4 and 5).
First sentence of the first limh of the question for a preliminary ruling
Second sentence of (lie fitst limb of the question foi a preliminary ruling.
Paragraphs 36 anil 37. 121 — Pp. 5 to 7.
Opinion of Advocate General Jacobs in Joined Cases
Phillip Morris Holland v Commission, cited above, paragraph 11.
In that respect, the fact that the recipient undertaking is not involved in exporting services does not preclude an effect on trade. Where a State grants aid to an undertaking, domestic production may for that reason be maintained or increased with the result that undertakings established in other Member States have less chance of exporting their products to the market in that Member State. Cases
Community trade if the prospect of such trade is foreseeable. Joined Cases
In its written observations, Paragraphs 4 to 9. That aspect is confirmed by the preamble to the proposal for a Regulation 2000/C 365 E/10, cited above. Paragraph 5 of the statement of reasons given for that document states:
First, it should be recalled that, since Case See also, inter alia, Joined Cases C-278/92 to C-280/92 Spain v Commission, cited above, paragraph 42 and Case Tubemeuse, cited above, paragraphs 42 and 43.
Second, it should be pointed out that Commission Notice 96/C 68/06 on the Ibid., fourth paragraph. Commission Regulation (EC) No 69/2001 of Ibid., paragraph 3 of the explanatory memorandum.
See paragraph 84 of the present Opinion.
Conversely, the parties to the main proceedings consider that Article 77 of the Treaty is too vague to be applied outside those cases referred to in the secondary legislation. In that respect, they base their argument on the majority opinion obtaining in German legal theory (see the written observations of the Regierungspräsidium and the written observations of Altmark, paragraph 54).
Council Regulation (EEC) No 1192/69 of
Fourth recital of Regulation No 1107/70.
It considered that Ibid., fifth recital.
Moreover, Article 3 of Regulation No 1107/70 provides that: Emphasis added.
tariff obligations not falling within the definition given in Article 2(5) of Regulation (EEC) No 1191/69; or transport undertakings or activities to which that Regulation does not apply.
Article 5 of Regulation No 1107/70 provides that Member States, in accordance with Article 93(3) of the Treaty, are required to inform the Commission of any plans to grant or alter aid and shall forward to the Commission
Moreover, the Court has held that Case
If that is not the case, the national court must, pursuant to the Court's case-law, Fédération nationale du commerce extérieur des produits alimentaires and Syndicat national des négociants et tranformateurs de saumon, cited above, paragraph 12 and SFEI and Others, cited above, paragraph 40. For a more detailed description of those inferences, see my Opinion delivered on
order the recovery of the contested aid; Fédération nationale du commerce extérieur des produits alimentaires and Syndicat national des négociants et tranformateurs de saumon, cited above, paragraphs 12 and 13 and SFEI and Others, cited above, paragraphs 40 and 43. declare unlawful the act instituting the contested aid and the measures implementing it; Ibid. order the competent public authorities to compensate for the damage that the payment of aid may possibly have caused See, in that sense, Keppenne, J.-P., cited above, paragraph 408, and Frignani, A., Commentaire J. Megret, Le droit de la CE, volume 4, Concurrence, éditions de l'université de Bruxelles, Bruxelles, 1997, 2nd ed., paragraph 319. See the Opinion of Advocate General Tesauro in Tubemeuse, cited above, ECR I-985. See the Opinion of Advocate General Jacobs in SFEI and Others, cited above, paragraph 77.