At the beginning of June, the European Commission launched a public consultation on the application of the package adopted in 2005 on the Services of General Economic Interest (SGEI). The package provides guidelines on the conditions in which the state financing for these services is compatible with the European Union norms on state aids. The package was adopted in July 2005 following the reference decision in the Altmark case by the European Court of Justice.
By launching the public consultation, the EC aims to evaluate the application of the SGEI package from 2005. The package is aimed at clarifying the conditions under which the state aid for the SGEI can be considered compatible.
The competition policy will not apply to all general interest services, but only to economic services, more specifically to services of general economic interest. The EU legislation defines the economic activity as an activity which consists in providing goods and/or services on a given market, for example in the radio-transmission, energy, transport and post services.
In its judgment in the Altmark case, the European Court of Justice held that public service compensation does not constitute State aid within the meaning of Article 107(1) of the Treaty, being thus subject to the Commission’s control except for those situations when four cumulative conditions are met. The Commission resumes the four cumulative conditions: the first, the beneficiary has to be entrusted with a clearly established task on the provision of a public service, the second condition, the parameters for the calculation of compensations must be established prior, objectively and transparently. The third condition refers to the compensation which must not exceed the costs of public service provision, from which incomes resulted following this provision of services are deducted (however, the compensation may include a reasonable profit). The fourth condition stipulates that the beneficiary has to be selected through public tender or the compensation has to be calculated based on the well-managed costs of an undertaking which disposes of proper means that ensure the provision of the public service.
What does the “SGEI Package” include?
In fact, the “SGEI Package” includes a Commission Decision [based on Article 106 (3) of the EU Treaty] which specifies the conditions under which compensation to companies for the provision of public service obligations is considered compatible with State aid rules and is exempted from notification to the Commission. The Decision exempts from notification compensation of less than EUR 30 Million per year when the beneficiaries have an annual turnover of less than EUR 100 Million. Air and sea transport to EU islands, as well as ports and airports for which the number of passengers are below specific thresholds are also included in the Decision. The package also includes a framework that defines the conditions under which compensation not covered by the Decision may be declared compatible with the norms on state aids after being notified and examined by the Commission. The compensation which exceeds the costs of the public services is not justified and is incompatible with the norms on state aid included in the Treaty. Through this package, the Commission approved a number of state subsidies as compensations for public service obligations in different EU member states.
Both the decision and the framework stipulate the elaboration of an evaluation report by the Commission based on the information on the package implementation, as well as on the outcome of the Commission’s consultations, especially based on the data supplied by the member states in their reports concerning the progress with the decision implementation. The Commission published reports from member states on the application of norms, as well as a questionnaire for public service providers, public service beneficiaries, citizens and other interested parties. The outcome of this public consultation will serve as basis in the evaluation of Package 2005 and for future improvements. For interested parties, the consultation is available at http://ec.europa.eu/competition/consultations/open.html .
“Our task consists in ensuring the fact that service providers are not entitled to use their public service obligations as a means of maintaining a historic dominating position on a rival market”, declared Joaquin Almunia, Vice President of the European Commission, responsible for competition policy.
by Elena Ilie
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