A political and legal turning point. I've already said in this section that the Barcelona Summit "conclusions" represent in my opinion a turning point in the policy of the EU with the general interest service being a complex and controversial issue that has known many changes within the Union and a slow but steady development over the years. Government leaders have recognised the quality element these services represent in providing an element in the model for a European society, and the Commission has been requested to propose a framework for a directive defining the responsibilities for service providers, which would guarantee its quality and universal character (see this section on 18/19-25/26 March). Formerly, a Court of Justice judgement ruled, in overturning the previous case law of the Court of First Instance, that state subsidies for public services did not constitute State Aid as understood in the Treaty and consequently these subsidies were not only legal but didn't even have to be notified to the Commission. It is therefore a double turning point, legal because of the Court of Justice and political, because of the European Council.
Solidarity between citizens. Economic and financial concerns should always be a chief concern of the universal service. By applying the brutal rules of the market economy, notably that of prices finding their real value, countries are giving up a key element in their room for manoeuvre: that of solidarity between citizens. The railway companies will have no interest in providing a service in mountainous areas where the infrastructure is terribly expensive or to compensate they will demand a price per kilometre that is triple that of the same distance through lowland areas. The post office will not provide a service for isolated areas that are difficult to reach, where the amount of post sent is tiny, unless high cost stamps are introduced. Electricity produces will not provide a uniform kilowatt pricing system but rather, higher prices for outlying areas, small islands, the Alps and Pyrenees. A universal service and a single system for prices does have a cost, we need to be aware of it. But inequality between our citizens is at stake. This does not mean that service providers have to be in the red all the time but rather that they practise equalisation of prices in order to have the same prices for all citizens. What ever the kind of price system is chosen (tariffs that cover the totality of costs or else State subsidies that pay the charges for providing a universal service) the amounts of money that this involves is very high.
The Court of Justice against the Court of First Instance. The decision by the Court of Justice (22 November, the Ferring case) has overturned the jurisprudence of the Court of First Instance by laying down in law that "compensation for the charges of public services" that is limited to compensating for the surcharges linked to accomplishing the mission of the organisation and which receives the compensation, does not constitute a State Aid. In the two decisions of 1997 and 2000, the Court of First Instance considered these as State Aid but legal, nonetheless. Where is the difference? Any State Aid must be notified to the Commission, which will subsequently decide on whether it is legal or not. If there is no State Aid, no notification to the Commission of the subsidy is necessary. The Commission can intervene on an ex post basis if it deems that the compensation outstrips the charges incurred by providing a public service. The difference is very nuanced but not just on a procedural level. The Court also pointed out that if the compensation just covers the amounts for the charges incurred by the company receiving the compensation, then it is not benefiting from any advantage, the compensation simply establishes the conditions for a level competitive playing field (the Treaty explains that one of the conditions for receiving State Aid is that it provides an advantage for the company). Traditional case law of the Court had already established that an "advantage" (in the sense of Art.87.1) exists when a company receives resources from the State that results in reducing the charges that are normally incurred by it. In the Ferring judgement, the supplementary charges needed in providing a public service are not "normal" charges.
The Commission believes the judgement is political. The Ferring judgement in itself is not terribly important (it involved a tax of 2.5% claimed by the French social security system from the Ferring Laboratories), the Court press service had not released a press statement on it and nothing was mentioned about it in the Court's 2001 annual report. The Commission, however, was immediately confronted by concrete cases on which the judgement would have a direct influence. Its competition services concluded that subsidies to the post offices in Italy and Ireland were legal; the Commission decision could possibly indicate that it involved authorised aid (in compliance with the former jurisprudence f the Court of First Instance) or that no aid was involved and that not authorisation was necessary (as in the Ferring judgement). There was no generalised agreement at the Commission itself. The Legal service was cautious, believing that a judgement on a specific case did not constitute a doctrine. It considered that it was best to wait for other judgements from the Court on similar cases. President Prodi and Vice President Loyola de Palacio considered that the Commission should immediately draw the lessons of the Court decision and say clearly that compensation for the costs incurred in providing a public service did not constitute State Aid, except in case of over-compensation. It is true that other cases for the Court are pending but judgements are not expected straight away. Those who share this view, point out that the Commission has a number of precautions at the ready to ensure that there are no abuses of the system. In the specific case of the post offices, the "transparency" and "liberalisation" directives provide a sufficiently strict framework for the Member States in the matter. It is reasonable to assume that the attitude of the President and Vice President was in response to a number of political considerations, while taking account of the orientation of the Barcelona Summit (due to the take place the following week) and the majority of Commissioners who shared the same view. Nevertheless, in an effort to take on board the considerations of the legal service, the press services avoided using the words "Aid" or "authorised". In Italy, the subsidies were very high, almost EUR nine billion over the 1994-1999 period - the press statement spoke of "measures of support". In Ireland, limited to EUR 12.7 million, it mentioned capital support. And instead of referring to the authorisation of the Commission, the two communiqués used paraphrases. The Commission concluded that in Italy, the measures of support for the Italian post office did not give them an advantage that went beyond the supplementary costs incurred by providing a public service and consequently closed its investigation with a positive decision. In Ireland it concluded that the support did not go beyond that of providing for the necessary expenses for guaranteeing the maintaining of post offices throughout the country, which constituted a general economic interest, which it would not oppose. The Commission declared that it had been informed about the Irish measures with the Italian measures forming the object of a complaint.
Inexistant divergences. Some newspapers presented the affair as if the direction general for competition had been put upon by the European Commission. Up until 1997, the Commission had never considered that compensation for charges for providing public services constitute State Aid, and did not demand that it be informed about it. It began examining those cases following the decision of the Court of First Instance on 27 February 1997, whereby financial advantages covering the costs incurred constituted aid but authorised them as long as they did not go beyond the costs involved in compensation and that they were necessary for allowing the beneficiary company to meet its obligations on a level economic playing field. The competition directorate general had therefore simply applied former practices. Nothing had changed in competition terms: the fact that the compensation did not constitute aid, or that it was a legal aid is exactly the same thing from this point of view. The suppression of prior compulsory notification is exactly what Commissioner Monti had advocated in his project amending the "agreements and monopolies", freeing the Commission from the need to examine a huge number of minor cases (the general economic interest services are often of a local complexion), in order to concentrate on more important cases. Possible cases of over-compensation will be examined, given that they will be competitors to the beneficiary company and will possibly be those lodging complaints about abuse of the system.
Advocate-General against the stream? I think that the idea that divergences between Ms Loyola de Palacio, Professor Monti and possibly President Prodi is part of the search for a good news story, a well-known game, of course. It is possible that some civil servant or other felt a "loss of prerogatives with no longer having to authorise all subsidies for public services. But I do not thing that any backbiting can be found at a Commission level. What counts, is that the general economic interest services is consolidated into an element for a European model of society. It is true that on 19 March, the Advocate-General at the Court of Justice, Philippe Léger introduced a worryingly new factor into the case by calling on the Court to say whether the subsidies granted by Lankreis Standal (Germany) to the Altmark company were State Aid and should be notified to the Commission for its authorisation. This aid is compensation for Altmark's providing public services (reduced costs, imposed timetables) etc.). Is, therefore the Advocate-General going in the opposite direction to that of the Ferring judgement? It's too soon to say. The road transport sector is just one sector (it is the object of specific regulation going back to 1969) and it is unthinkable that the Court overturns its case law a few months after the Ferring report. I believe that the previous conclusion remains valid.
(F.R.)