On 1 March 2017 the EU General Court (GC) confirmed1 the European Commission’s 2013 decision that France must recover €220 million of illegal State aid that was provided to the Société Nationale Corse-Méditerranée (SNCM) and the Compagnie Méridionale de Navigation (CMN). The aid relates to certain maritime transport services that were provided between Marseille and Corsica from 2007 to 2013, and the Commission only found this aid to be incompatible for some of the transport services provided.

As the services were provided under a public services agreement, the Commission decision had undertaken a detailed analysis of whether the ‘Altmark’ criteria – which apply in the context of services of general economic interest (SGEI) – were met, in order to determine whether the compensation provided to the beneficiaries amounted to aid at all.

The Altmark criteria

SGEI are services that public authorities recognise as being of particular importance to citizens, and which require State support and resources to continue (or to continue under the same conditions). The provision of transport services can fall under this category.

State aid problems can arise where a State compensates a public service provider or operator so generously that it can use the excess to cross-subsidise its other commercial activities, therefore providing an unfair advantage and distorting competition. In order for public service compensation not to confer a selective economic advantage and therefore not be aid, it must satisfy four cumulative ‘Altmark’ criteria2 :

(i) The recipient of the compensation must have clearly defined public service obligations;

(ii) The parameters for calculating the compensation must be objective, transparent and established in advance; 1

(iii) The compensation cannot exceed what is needed to cover the costs incurred in providing the service; and

(iv) If the recipient of the compensation is not selected to provide the service through a public procurement procedure (which would establish the market price for the services in question) the level of compensation must be determined on the basis of the costs of a typical well-run company.

The Commission decision

In its decision of 2 May 2013 the Commission held that the financial compensation granted to SNCM and CMN amounted to State aid, as the first and fourth conditions mentioned above were not satisfied. Further, such compensation amounted to illegal State aid as it was granted without prior notification to the Commission. However, only the financial compensation paid to SNCM for the services provided during peak seasonal periods (the additional service) was considered incompatible and therefore as needing to be recovered, whereas the compensation for the services provided all year round (the basic service) was considered compatible with the internal market.

In relation to the first Altmark condition, Member States are generally given a wide discretion to determine whether an activity needs to be provided as an SGEI. However, in this case the Commission noted that maritime transport services fall under the scope of an EU regulation.3 Therefore, for a maritime transport service provider to be entrusted with carrying out a public service obligation, (i) there must be a real public need for the service, and (ii) the scope of the service must be necessary and proportionate to that need. The Commission considered this to be the case for the basic service, but not for the additional service. The additional service was not necessary and proportionate to the real public service need, due to the substitutability of the additional service with other services and insufficient evidence of a shortage of private initiative.

In relation to the fourth condition, the Commission had found that the tendering process carried out in relation to SNCM had failed to ensure that the chosen candidate would provide the relevant services at the least cost to the community.

The Commission accordingly ordered France to recover €220 million of aid, in relation to the additional service, from SNCM by 3 September 2013. In summer 2013 both SNCM and CMN brought an action before the GC for the annulment of this decision.

The General Court decision

The GC has confirmed the Commission’s analysis in relation to the satisfaction of the Altmark conditions and has also upheld the Commission’s decision to assess the basic and additional services separately, concluding that this distinction was apparent from both the wording and the implementation of the public services agreement. The GC has also confirmed that the amount of aid the Commission had ordered France to recover was correctly calculated.

SNCM or France could appeal the decision to the European Court of Justice (ECJ).

Interestingly, in a separate parallel action brought by the Commission, the ECJ held in a decision of 9 July 2015 that France had failed to fulfil its obligation to recover the money from SNCM and CMN within the prescribed period. However, that decision did not substantively assess the merits of the dispute.