Today we are examining a very common situation in Italian ports.

This is the case of two or more terminal operators in the same port asking the Port Authority to perform extraordinary maintenance works or to carry out modernization works in the areas granted to each of them by means of a concession.

Yet, the Port Authority usually does not have sufficient funds to implement all the interventions requested by the various operators and so has to make a choice as to which works to fund and – consequently – as to which operator or operators will be favoured by the improvement of the relevant areas granted by concession to the same.

First of all, we wonder whether such a choice is completely free and subject only to the discretion of the Authority, or whether it is in any way subject to legal restrictions.

The answer requires a brief premises.

As is known, pursuant to law no. 84/94, Port Authorities are entrusted with the management and organization of goods and services in their respective port areas. The functions of such Authorities include «the granting of state-owned areas and docks within the port areas to the companies listed in article 16, paragraph 3, in order to perform port operations».

According to Italian and European case-law[1], said function of granting state-owned areas is now considered an activity characterized by private nature and economic profiles. As a result, the Port Authority shall be regarded as a real company, subject to domestic and European provisions concerning, in particular, the protection of competition (the so-called antitrust law).

It should be reminded that the activity carried out by the Port Authority is to be regarded as an economic activity, also because it consists of a bilateral relationship. Indeed, the grantor (i.e. the Port Authority) obtains, from the services performed by the concessionaire, through the spaces and structures granted to the same, an economic consideration, which constitutes a «commercial exploitation» of the state-owned areas under concession[2].

As a logical consequence, thanks to modernizations and improvements of state-owned areas through the use of funds paid by the Port Authority, the areas under concession are transformed and produce more profit both in favour of the concessionaire and in favour of the Port Authority[3].

In addition, Port Authorities are not merely undertakings managing the granting of port areas and docks, but, being the only subjects able to carry out said activity and hence to operate in the so-called «upstream market» (that is the market relating to the availability and modernization of port infrastructures, they are companies holding a dominant position[4] in such market.

It goes without saying that the dominant position held by Port Authorities in the so-called «upstream» market necessarily affects the so-called «downstream» market (that is to say the market relating to the carrying out of port activities by competing terminal operators).

The fact that Port Authorities hold a dominant position, requires them to behave in such a way as to not jeopardize competition in the so-called «downstream» market in which terminal operators perform port operations and act like competitors.

On this point case-law acknowledges the «special responsibility» that apparently burdens every company holding a dominant position; such responsibility requires that such companies «refrain from any behaviour that may distort competition as a result of said dominant position»[5].

So, going back to our question, one may intuitively guess the answer: indeed, we have clarified that the Port Authority, being a company holding a dominant position, is subject to domestic and European antitrust law and must allow the different operators to access port infrastructures on equal conditions[6].

In this regard, Italian and European legislations have carefully regulated the activity of concession of state-owned areas on the basis, first of all, of the principles of transparency and non-discrimination.

In the light of above, the application of the aforesaid principles, which characterizes the issue of concessions, cannot but be extended also to the subsequent relationship that is established with the various concessionaires (all competitors and all interested in modernization and improvements in the areas granted in concession). This is not only logic but a direct consequence of a clear rule of law.

More precisely, we are talking about Article 12 of law no. 241/90 pursuant to which «the grant of subsidies, contributions, subventions and financial aids and the assignment of any kind of economic benefits to persons and public or private entities are subject to the predetermination, by the relevant authorities (…), of the criteria and methods to be complied with by said authorities».

So, this is the answer to our initial question: the Port Authorities’ decision as to which activities to fund (and therefore, de facto, of which concessionaires to favour) is not in the sole discretion of the Authority, being, on the contrary, bound to specific legal obligations.

Indeed, based on the rule quoted above, Port Authorities must pre-determine and make public in advance the objective criteria that they are going to adopt for the allocation of available funds, as well as define a «minimum level» of the activities to be financed that will be the parameter for a possible comparison between requests coming from different entities and exceeding the budgeted amount[7].

In such perspective, it is clear that the abovementioned rules represents the reflection of that «special responsibility» incumbent on Port Authorities because of their dominant position.

So, should the Port Authority fail to observe the legal parameters defined above and resolve its financings solely on the basis of its discretionary power, thus applying dissimilar conditions to different competitors of the «downstream» market, it may commit an unlawful competition act and hence abuse its dominant position.

In our opinion, in this scenario the terminal operator disadvantaged by the Port Authority’s choices may take legal action against the Authority in order to obtain compensation for damages suffered.

In our next newsletter, we will discuss the probation and quantification of such damages, as well as another essential issue for the purposes of this analysis, i.e. the Port Authorities’ duty to give notice of their financing projects (to be chosen according to the aforementioned procedure established by law) to the EU Commission as provided for by Articles 107 and 108 TFEU.

Indeed, the Commission must be notified of all public financing projects in favour of private entities, in order to be able to assess in advance whether such projects are to be considered or not as State aids compatible with the internal market.

The many issues on the table are all worth attention, therefore we will resume the discussion in the next issue of our newsletter.