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Infrastructure and State aid in light of the IPCEI Communication

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Abstract

This article discusses infrastructure and State aid in light of the Communication on the compatibility of State aid for the execution of important projects of common European interest (the IPCEI Communication), which has been adopted by the European Commission (Commission), with a view to have a standard approach to State aid cases involving large infrastructure projects. (Official Journal C 188 of 20.6.2014, p. 4; see also EC Press Release of 13 June 2014, available at: http://europa.eu/rapid/press-release_IP-14-673_en.htm.) While the provisions set out in the Communication do indeed bring about guidance, so far only two decisions have been adopted in light of the Communication and they do not seem to be consistent- neither with each other, nor with the preceding decision-making practise of the Commission on infrastructure. Furthermore, given that the IPCEI Communication addresses the compatibility of State aid, it will only be applicable in cases where infrastructure projects involve an economic activity in the first place. This is, however, a contentious issue which has not only been the subject of several court cases, but also has been addressed in the Commission’s recent Communication on the Notion of Aid. It is all the more important given that the Commission President Juncker’s European Fund for Strategic Investments allocates a good share of the funding to infrastructure projects which may, however, risk being caught up in lengthy State aid approval procedures, and suffer delays as a result.

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Notes

  1. Regulation 2015/1017 of 25 June 2015 on the European Fund for Strategic Investments, the European Investment Advisory Hub and the European Investment Project Portal and amending Regulations No. 1291/2013 and No. 1316/2013—the European Fund for Strategic Investments, OJ L 169 of 1 July 2015, pp. 1–38.

  2. Press Release: State aid: Commission adopts new rules to support important projects of common European interest, Brussels, 13 June 2014, available online at: http://europa.eu/rapid/press-release_IP-14-673_en.htm, last accessed on 12 May 2016.

  3. Commission Decision of 15 October 2014, State aids SA.36558 and SA.38371—Denmark, State aid SA.36662 (2014/NN)—Sweden—Aid granted to Øresundsbro Konsortium (‘Øresund decision’).

  4. Commission Decision of 23 July 2015 in SA.39078—Denmark—Financing of the Fehmarn Belt Fixed Link project (‘Fehmarn decision’).

  5. Commission Notice on the notion of State aid as referred to in Article 107(1) TFEU; see the Commission Press Release IP/16/1782 of 19 May 2016, available at: http://europa.eu/rapid/press-release_IP-16-1782_en.htm.

  6. See e.g. Joined Cases C-180/98 to C-184/98 Pavlov and Others, ECLI:EU:C:2000:428, para. 74, and the case law cited therein. The Court has also held that any activity consisting in offering goods and services on a given market is an economic activity; see Case 118/85 Commission v Italy [1987] ECR-2599, para. 7, and Case C-35/96 Commission v Italy [1998] ECR I-3851, para. 36.

  7. Case T-155/04 SELEX Sistemi Integrati v Commission [2006] ECR II-04797, ECLI:EU:T:2006:387, paras. 87 and 88; Case T-461/13 Spain v Commission, ECLI:EU:T:2015:891, para. 44.

  8. XXVth Report on Competition Policy—COM(96)126 final, para. 175.

  9. Community guidelines on the application of Articles 92 and 93 of the EC Treaty and Article 61 of the EEA Agreement to State aids in the aviation sector, OJ C 350 of 10 December 1994, pp. 5–20, para. 12. See also The Commission’s 1998 White Paper on fair payment for infrastructure use: A phased approach to a common transport infrastructure charging in the framework in the EU (COM (1998) 466 final of 22 July 1998, para. 43; Green Paper on Sea Ports and Maritime Infrastructure. COM (97) 678 final of 10 December 1997, para. 42; 2001 Communication on improving the quality of European ports (COM (2001) final of 13 February 2001, p. 11).

  10. Commission Decision of 24 October 2000, Case N 540/2000—France—Réforme du régime d’exploitation des concessions autoroutières; Commission Decision of 30 April 1996, Case N 234/1996—UK—The Channel Tunnel Rail Link; Commission’s decisions in cases N 208/2000—Netherlands—Subsidy Scheme for Public Inland Terminals (SOIT); Commission Decision of 17 July 1998 in Case N 649/2001; Ems Flood barrier at Gandersum, IP/98/539; N 511/1995 Jaguar Cars Ltd.

  11. Case T-128/89 Aéroports de Paris v Commission [2000] ECR II-3929, confirmed by Court of Justice in Case C-82/01 P [2002] ECR I-9297, para. 75 with further references.

  12. See e.g. Commission Decision of 30 April 2003, Case N 687/2002—UK—The Channel Tunnel Rail Link—Hedging Guarantees, para. 30; Commission Decision of 24 April 2002, Case N 706/2001—UK—The Channel Tunnel Rail Link, para. 60. See also Commission Decision of 22 February 2006, Case N 420/2005—France—Allongement de la durée des concessions des sociétés d’autoroutes du Tunnel du Mont-Blanc et du Tunnel Maurice Lemaire; Commission Decision of 20 June 2001, Case N 321/2001—France—Allongement de la durée de la concession autoroutière accordée à la Société Française du Tunnel Routier du Fréjus. Commission Decision of 20 October 2004, Case N520/2003—Belgium—Flemish ports, para. 34. In paragraph 39, the Commission however went on to conclude that the construction, maintenance and operation of maritime access routes were not an economic activity but rather a task in the public interest.

  13. Joined Cases T-443/08 and T-455/08 Freistaat Sachsen, Flughafen Leipzig/Halle et al. v Commission [2011] ECR II-1311, upheld on appeal in Case C-288/11 P Mitteldeutsche Flughafen AG and Flughafen Leipzig-Halle GmbH v Commission [2012] ECR I-0000.

  14. Ibid., in particular paras. 93 and 94.

  15. Ibid., paras. 108–116.

  16. See Joined Cases T-443/08, T-455/08 Mitteldeutsche Flughafen and Flughafen Leipzig/Halle v Commission [2011] ECR. II-1311, para. 109.

  17. See e.g. Commission Decision of 2 July 2013, Case SA.35418—Greece—Extension of Piraeus Port, paras. 21 and 22; Commission Decision of 19 December 2012, Case SA.34940—Italy—Port of Augusta, paras. 41–43; Commission Decision of 15 June 2011, Case N 44/2010—Latvia—Public financing of port infrastructure in Krievu Sala, paras. 58–68; Commission Decision of 11 March 2014, Case SA.35720—United Kingdom Liverpool City Council Cruise Liner Terminal, paras. 43–45; Commission Decision in SA.42538—Latvia—Dredging in the Port of Ventspils, para. 34.

  18. Commission Decision of 3 October 2012, Case C38/2008—Germany—Possible state aid involving Munich airport Terminal 2, para. 78.

  19. Case C-364/92 SAT Fluggesellschaft v Eurocontrol [1994] ECR I-43.

  20. For instance, in Chania Airport, the Commission accepted that funding for construction of the air traffic control tower did not constitute State aid as ensuring safety was a task of public remit, see Commission Decision State aid No. SA.34586 (2012/N) of 25 July 2012—Greece—Chania Airport Modernisation, para. 21. See also Commission Decision N309/2002 of 19 March 2003 on Aviation security—compensation for costs incurred following the attacks of 11 September 2001.

  21. The Commission verifies whether there is such a problem on a case by-case by determining whether the economic tasks are integrated with the commercial activities. Commission Decision of 19 December 2012 on State aid SA.34940—Italy—Port of Augusta, OJ C 77 of 15 March 2013, paras. 46–47.

  22. Such a distinction is however not drawn in the context of State aid and real estate although in such cases the aid may also benefit both construction and the user of the property.

  23. The Commission however notes in paragraph 220 that public funding for construction of infrastructures which can be intended for either public use or commercial use (such as toll-roads) falls outside of State aid rules, provided conditions in paragraph 212 are fulfilled.

  24. The wording is not entirely clear but it seems that there may be a mistake. While the first sentence of paragraph 211 describes the circumstances which are required for falling outside the State aid rules, the footnote seems to describe the examples where infrastructure competes with other types of competitors (such as a toll bridge/tunnel competing with commercial ferry operators) which fall inside the State aid rules.

  25. Commission Notice on the notion of State aid as referred to in Article 107(1) TFEU, para. 211.

  26. According to the European Courts, the barrier for finding that public funding distorts competition is very low. Case 730/79 Philip Morris v Commission [1980] ECR. 2671, para. 11, states that “[W]hen State financial aid strengthens the position of an undertaking compared with other undertakings competing in intra-Community trade, the latter must be regarded as affected by that aid.” The Court has tightened up the criteria since then by amongst others requiring the Commission to explain the circumstances of the distortion of competition; see Joined Cases 296/92 and 318/82 Netherlands and Leeuwarder Papierwarenfabriek v Commission [1994] ECR I-00809, para 24. See also Joined Cases C-15/98 and C-105/99 Italy and Sardegna Lines v Commission [2000] ECR I-08855, paras. 64–69; and Case T-34/02 Le Levant 001 and others v Commission [2006] II-00267, para. 123.

  27. The project may be a stand-alone project or consist of several integrated projects aimed at the same objective.

  28. IPCEI Communication, para. 24.

  29. Ibid., paras. 14–19.

  30. Footnote 1 of the IPCEI Communication, however, exempts “interconnected research infrastructures and TEN-T projects that are of fundamentally transnational importance because they are part of a physically connected cross-border network or are essential to enhance cross-border traffic management or interoperability.”

  31. Paragraph 20 of the IPCEI Communication sets out the following situations: the project has been designed so as to make it possible for all interested Member States to participate, having regard to the type of project, the objective pursued and its financing needs; the design of the project involves the Commission or any legal body to which the Commission has delegated its powers, such as the European Investment Bank; the selection of the project involves the Commission or any legal body to which the Commission has delegated its power, provided that this body is acting in that purpose as an implementing structure; the governance structure of the project involves the Commission—or any legal body to which the Commission has delegated its powers—and several Member States; the project involves important collaborative interactions in terms of number of partners, involvement of organisations of different sectors, or the involvement of undertakings of different sizes; the project involves co-financing by a Union fund.

  32. Paragraph 23 provides: “Environmental, energy or transport projects must either be of great importance for the environmental, energy, including security of energy supply, or transport strategy of the Union or contribute significantly to the internal market, including, but not limited to those specific sectors.”

  33. Para. 41.

  34. Ibid.

  35. Paras. 28–33.

  36. Para. 28.

  37. Para. 29.

  38. Para. 32.

  39. Para. 33.

  40. Para. 30.

  41. Ibid., the last sentence of para. 28.

  42. The Annex to the IPCEI Communication lists costs that are considered eligible. The funding gap refers to the difference between the positive and negative cash flows over the lifetime of the investment, discounted to their current value on the basis of an appropriate discount factor reflecting the rate of return necessary for the beneficiary to carry out the project notably in view of the risks involved.

  43. E.g., State loans or guarantees may address the lack of access to finance.

  44. Para. 40.

  45. Øresund decision, see fn. 3 above.

  46. Fehmarn decision, see fn. 4 above.

  47. Øresund decision, paras. 120–121; Fehmarn decision, para. 90.

  48. Fehmarn decision, para. 81.

  49. Fehmarn decision, para. 105; Øresund decision, para. 124.

  50. Fehmarn decision, para. 109; Øresund decision, paras. 129–137.

  51. Fehmarn decision, paras. 106–111.

  52. Fehmarn decision, paras. 113–119.

  53. Fehmarn decision, paras. 120–121, and Øresund decision, para. 114.

  54. Fehmarn decision, paras. 107–108.

  55. Such as by reference to the fact that the constructions works for the project were contracted following a public, open and non-discriminatory tender. See Commission Decision of 19 December 2012 in SA. 34940—Italy—Port of Augusta, para. 74.

  56. Fehmarn decision, paras. 104–105.

  57. Fehmarn decision, paras. 101–105.

  58. Øresund decision, para. 124.

  59. Øresund decision, para. 125. Inclusion under TEN-T thereby endorsed not only the contribution to a project of common European interest (as discussed above), but also the necessity of aid.

  60. Øresund decision, para. 133.

  61. Øresund decision, para. 128.

  62. Øresund decision, para. 129.

  63. Ibid.

  64. Fehmarn decision, paras. 75–79.

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    Lena Sandberg

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Correspondence to Lena Sandberg.

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Lena Sandberg is an Of Counsel in the Brussels office of Gibson, Dunn & Crutcher LLP. The views expressed are personal and do not necessarily reflect the position of Gibson, Dunn & Crutcher LLP. The author acts on behalf of the applicant (H/H Ferries) in Case T-68/15 and the applicants (Scandlines and Stena) in Cases T-630 and 631/15.

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Sandberg, L. Infrastructure and State aid in light of the IPCEI Communication. ERA Forum 17, 57–72 (2016). https://doi.org/10.1007/s12027-016-0421-8

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