There is no doubt that undertakings entrusted with the provision of services of general economic interest (SGIEs) are subject to the rules in the Treaty on the Functioning of the European Union (TFEU), including its state aid rules.
However, compensation for providing such public services also benefits from a particular regime in the TFEU. Pursuant to Article 106(2) TFEU, in so far as the application of the treaty rules obstructs the performance, in law or in fact, of particular tasks assigned to such undertakings, derogation may be justified.
This rule has been partially absorbed in the assessment of a measure under Article 107(1) TFEU that determines whether or not a measure constitutes state aid. Indeed, pursuant to the seminal Altmark case,2 compensation for SGIEs is not state aid if a number of conditions are met to show absence of overcompensation. Thus, any advantage may be excluded. In the event that the conditions laid down in Altmark are not fulfilled, the European Commission has adopted, on the basis of Article 106(2) TFEU, a package of instruments determining whether the measure is de minimis or the aid is nevertheless compatible with the internal market.3
In April 2014, the Court of Justice of the European Union (ECJ) rendered its judgment4 opposing the French Republic and the European Commission. The case was an appeal of a General Court’s judgment5 dismissing France’s action against the Commission’s decision6 declaring the unlimited guarantee to La Poste incompatible with the internal market.
Before it became a public limited company in 2010, La Poste was a legal entity governed by public law, an establishment of an industrial and commercial character (établissement public à caractère industriel et commercial – EPIC) enjoying a specific status under French law. In particular, ordinary insolvency and bankruptcy procedures do not apply to EPICs. With its decision, the European Commission deemed that such specific status implied for La Poste an unlimited guarantee from the state.
To arrive at that conclusion, the Commission relied on a body of evidence that, in domestic law, a real obligation lies with the state to use its own resources to cover the losses of a defaulting EPIC; this constitutes a sufficiently concrete economic risk of burdens on the state budget. The Commission further observed that La Poste was not subject to the ordinary law on undertakings in difficulty, that creditors could be sure that their claims would be repaid by the state in case La Poste would no longer be able to meet its debts and that, even if they would not be repaid, these creditors would be guaranteed that their unpaid claims would not be cancelled.
The Commission concluded on that basis that La Poste enjoyed an unlimited state guarantee. According to the Commission, as confirmed by the European courts, there is a presumption that the grant of such a guarantee results in an improvement in La Poste’s financial position by reducing charges that would normally encumber its budget. Thus, La Poste benefited from more favourable credit terms, constituting a selective advantage. The implied unlimited guarantee constituted state aid which could not be declared compatible with the internal market.
The Commission’s decision, and its validation by the General Court, have already been criticised.7 The criticism holds that the Commission should have abided by higher legal standards towards a merely implied guarantee which is not linked to a financial transaction; (2) identified the failure to pay a market conform premium and calculated actual advantage; (3) considered counterfactual scenarios to evaluate whether the better ratios of La Poste were ever linked to the guarantee, (4) taken into account the fact that La Poste is entrusted with SGEIs and whether the total amount of state resources exceeded the additional costs of providing the SGEIs and (5) not presumed an advantage on the basis of its own interpretation of French law.
Despite these valid points, the ECJ followed the Commission and the General Court. The ECJ accepted reliance on two assumptions. First, state resources were involved because, although there was no explicit provision organising the intervention of the state as a guarantor, a body of evidence allowed the ECJ to conclude so. This assumption was presented as an application of the controversial France Telecom case (C-399/10 P Bouygues et Bouygues Télécom v Commission and Others and C-401/10 P Commission v France and Others), according to which the first condition to be fulfilled for a measure to amount to state aid – namely, the involvement of state resources – is fulfilled if there is a sufficiently concrete economic risk of future burdens on the state budget. Advocate General Niilo Jääskinen stressed that the proof of the contrary can be brought for instance by showing that the debts of a particular EPIC are actually not repaid by the state. Second, a selective advantage was granted to La Poste because such an implied guarantee is, as a rule, liable to confer an advantage. This assumption flowed from the first.
This judgment raises two questions. First, although the identified guarantee may function as the guarantee known under civil law, the question is whether it is appropriate to treat it in the same way. Arguably, La Poste is an entity that provides public services; its exclusion from the insolvency procedures may have been motivated by a concern for public service continuity, rather than to improve La Poste’s financial situation. If state aid law looks at the effects and not the objectives of a measure, it is striking that there has not been any evaluation (nor any recuperation of the aid ordered) of the amount of advantage, and it is true that it would be a difficult exercise, in the absence of premium paid and of a clear identification of the factors influencing La Poste’s “better” position. As earlier criticised, the standard of proof used to determine the existence of state aid seems particularly loose.
Second, one wonders whether the measure would nevertheless not be excluded from the qualification of state aid under the Altmark ruling or considered to be de minimis or compatible under the SGEI package.
Should France have raised the argument that La Poste was entrusted with public service obligations, the outcome of this case might have been different.
Indeed, the Altmark ruling and the SGEI package based on Article 106(2) TFEU constitute a specific body of rules compared to the general state aid rules. And, as the Latin expression states: “Lex specialis derogate generalis”.