Notion of State aid and transport infrastructure
Funding of Infrastructure: is it State aid? Need for specific clarifications; requested by Member States and many stakeholders Very high practical relevance Evolution: from "general measures of public policy" to measures subject to State aid control (Aéroports de Paris; Leipzig/Halle) Legal uncertainty in the wake of Leipzig/Halle 2
Infrastructure: State aid at which level? Aid to the developer/owner: Economic? Distortion of competition effect on trade? Advantage MEOP? Aid to the operator Advantage MEOP? Aid to the user 3 Advantage MEOP?
Infrastructure sectoral approach 4 State aid control typically applies to the construction of infrastructure in the following transport sectors: Airports, Ports -> sectors with typically economic activities State aid control typically does not apply to the construction of infrastructures in the following sectors: Railway, Roads/Bridges/Tunnels, Urban transport, Canals/Inland Waterways: Available for free: no economic activity Against fee (toll): construction typically fulfills conditions for no effect on competition/trade (as opposed to operation)
Infrastructure - economic activities 5 Economic exploitation => economic activity (Leipzig/Halle) No economic exploitation => no economic activity Exercise of public powers (public remit = police, military, customs, ) Not used for offering goods/services on a market (e.g. roads for free public use) Legitimate expectations for aid before Aéroport de Paris Mixed use: concept of ancillarity (up to 20% of overall capacity p.a.) "customary amenities" (restaurants/shops/ ): normally no effect on trade between MS
6 Infrastructure competition distortion of Local cases (Commission's "no effect on trade" decisionmaking practice) Conditions exluding any effect on trade/distortion of competition (cumulative criteria): Infrastructures do not face direct competition from other infrastructures (likely for comprehensive network infrastructures that are natural monopolies) Private financing insignificant in sector concerned on Member State level Not dedicated infrastructure
Infrastructure operators and users If operators or users of an infrastructure built with public financing pay a market price, they do not receive any 'indirect' State aid => no advantage passed on to them Clarifications: Competitive tender excludes aid to the operator Incremental cost coverage (if no other methodologies are possible) excludes aid to users 7
Roads - Rail 8
Main principles: Rail and road infrastructure are typical cases of natural monopolies -> comprehensive network infrastructures for which replication would be uneconomical => their construction does not affect trade /distort competition) Operation of infrastructure may be economic activity Clarifications: Financing of construction, maintenance and operation of railway, metro and local transport infrastructure ("rail infrastructure") [ 219 Notion of Aid] 9 Financing of construction, maintenance and operation of roads, bridges, tunnels and inland waterways ("road infrastructure") [ 220 Notion of Aid]
State aid is excluded - 1 Rail and road infrastructures are typically: natural monopoly as comprehensive network infrastructure for which replication would be uneconomical, for which effect on trade between MS or distortion of competition is normally excluded as regards the construction where: i. the infrastructure typically faces no direct competition; ii. iii. private financing is insignificant in sector/ms concerned; it is not "dedicated", but benefits society at large. 211 212 219 220 of NoA 10
State aid is excluded - 2 Construction and operation are often bundled Financing of bundled operations does NOT constitute SA if: A. Construction + Operation are tendered out together; or B. Construction refers to infrastructure which is natural monopoly + management and operation is subject to legal monopoly -> i.e. reserved service assigned by law to an exclusive inhouse provider) not only excluding competition in the market, but also for the market 11 See 219 220 188 of NoA; decision N 356/2002 - UK - Network Rail
State aid is excluded - 3 No economic activity: in case of infrastructure not commercially exploited, e.g. if used by the State in the exercise of its public powers (safety, security, police, customs) In case of (rail) infrastructure used for both economic and non-economic activities, prohibition to cross-subsidize (finance net costs, with clear separation of accounts). No potential effect on trade if the rail or road infrastructure has purely local impact, or under de minimis 12
State aid is excluded - 4 No economic advantage three level analysis for: Owner/developer: if MEIP (pari passu and/or ex ante sound business plan with IRR at market values) Operator/concessionaire if the operation is: a) assigned for a positive price on the basis of competitive, transparent, non-discriminatory and unconditional tender or at fees in line with MEOP on the basis of (i) benchmarking, or (ii) generally accepted standard assessment methodology; or b) entrusted as SGEI in line with Altmark criteria Users: only railway undertakings: access is charged in line with EU legislation see Railway Guidelines/ Directive 2012/34/EU 13
Compatible State aid: Compatible and exempted from notification, if e.g. under : 1. Article 56 GBER for "local infrastructures" a) MAX: Project 20 million or Aid 10 million (funding gap) b) Operators / users have access on open, non-transparent and non-discriminatory basis (with tender at market price) 2. Regulation 1370/2007 (covering the provision of inland passenger transport services, incl. infrastructure) a) Covering only the net costs for PSO (no overcompensation) Otherwise requires NOTIFICATION, to be assessed under Article 107(3)(c) TFEU or Art. 93 (e.g. intermodal platforms) 14
Ports infrastructure 15
Main principles: Port infrastructure -> commercially exploited => economic activity => Public funding of construction, replacement, upgrade in principle subject to State aid rules Operation of port infrastructure is an economic activity 16 => Public funding of operation in principle subject to State aid rules Clarifications: Financing of construction, maintenance and operation of port infrastructure [ 215 Notion of Aid]
State aid is excluded - 1 Port infrastructure not meant to be commercially exploited: Exercise of public powers: e.g. traffic control, protection and resilience against extreme weather conditions, flooding and coastal erosion, police, customs, antipollution surveillance, control and security of navigation, including lighthouses Not used for offering goods or services in a market No economic activity no State aid rules 17
State aid is excluded - 2 Access infrastructure to ports (e.g. public roads, rail, locks, dredging of rivers, access routes and channels, etc.): Available free of charge Available on equal and non-discriminatory to all users Its maintenance, replacement, upgrade or construction - > normally a general measure carried out by the State responsibility for planning and developing maritime transport system Access infrastructure outside the area of a port and accessible to the general public => benefits society at large unless specific features point to a different conclusion 18 Costs of investments and maintenance can be covered by public funds no State aid
But State aid may not be excluded: Access infrastructure within the area of a port: -> specifically benefits the economic exploitation of the port => State aid Unless: a. it is part of an access infrastructure crossing the port and b. serves also other destinations than the port itself Examples: 19 Construction of a road, rail connections and electric power supply lines located directly on the area of a terminal within a port and exclusively used in the context of the economic exploitation of the terminal
Infrastructure used for both economic and non economic activities State aid rules only for costs linked to economic activities Member States have to ensure that the public funding of non-economic activities cannot be used to cross subsidize the economic ones. Limitation of public funding to the net cost of noneconomic activities clear separation of accounts 20
State aid is excluded - 3 No potential effect on trade between Member States De minimis Purely local impact, e.g. 21 small ports predominantly serving local users and for which the impact on cross-border investment is marginal and unlike to affect trade between Member States small lake and river ports Data showing that there is only limited use of port infrastructure from outside the Member State and that the impact on cross-border investments of the measure is no more than marginal
State aid is excluded - 4 No economic advantage three level analysis for: Owner/developer: if MEIP (pari passu and/or ex ante sound business plan with IRR at market values) Operator/concessionaire if the operation is: a) assigned for a positive price on the basis of competitive, transparent, non-discriminatory and unconditional tender or at fees in line with MEOP on the basis of (i) benchmarking, or (ii) generally accepted standard assessment methodology; or b) entrusted as SGEI in line with Altmark criteria 22
State aid is excluded - 4 No economic advantage at user level: a) fees set through a competitive, transparent, nondiscriminatory and unconditional tender, or b) in line with MEOP on the basis of (i) benchmarking or (ii) generally accepted, standard assessment methodology An advantage can be excluded for public funding of open infrastructure not dedicated to any specific user, where the users incrementally contribute, from an ex ante view point, to the profitability of the project/operator. See 228 NoA 23
Compatible State aid: Compatible and exempted from notification, if an SGEI for ports with average annual traffic < 300 000 passengers Compatible aid following notification, to be assessed under: 1. Article 107(3)(c) TFEU 2. SGEI Framework if SGEI for ports with average annual traffic > 300 000 passengers 24
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