On 8 September 2022, the Court of Justice handed down its judgment in Case C‑614/20, Lux Express Estonia AS v Majandus- ja Kommunikatsiooniministeerium, on the interpretation of Article 108 of the Treaty on the Functioning of the European Union (TFEU), Article 2(e), Article 3(2) and (3) and Article 4(1)(b)(i) of Regulation (EC) No 1370/2007. The request has been made in proceedings between Lux Express Estonia AS (“Lux”) and Majandus- ja Kommunikatsiooniministeerium (Estonian Ministry of the Economy and Communications) concerning the latter’s refusal to remedy the harm which that company claimed to have suffered as a result of discharging the obligation, laid down by Estonian law, to carry certain categories of passenger free of charge and without compensation from the Estonian State.

On 5 June 2019, Eesti Buss OÜ (“Eesti”) and Lux applied to the Minister for Economic Affairs and Infrastructure for compensation for the loss of revenue they claimed to have suffered in 2018 as a result of the obligation, laid down in Article 34 of the ühistrandiseadus (Law on public transport; “ÜTS”), to carry certain categories of passenger free of charge, without compensation from the State, in the context of the provision of regular commercial transport services in Estonian territory. Since, however, the Minister for Economic Affairs and Infrastructure rejected that application, Lux brought an action before the Tallinna Halduskohus (Tallin Administrative Court; the “referring court”) which, in light of the night to interpret the relevant European legislation, decided to stay the proceedings and to refer to the Court of Justice three questions for a preliminary ruling.

By its first question, the referring court asked whether Article 2(e) of Regulation No 1370/2007 must be interpreted as meaning that the concept of “public service obligation”, referred to in that provision, covers the one for undertakings providing in the territory of the Member State concerned a regular transport service by land, inland waterway and rail, laid down in Article 34 of the ÜTS, to carry free of charge and without receiving compensation from the State certain categories of passenger, in particular, children of pre-school age and certain categories of persons with disabilities.

According to the Court, in so far as it imposes on any undertaking providing in the national territory a regular transport service by road and by rail to carry certain categories of passenger free of charge, inter alia, children of pre-school age and certain categories of persons with disabilities, Article 34 of the ÜTS lays down a “public service obligation” within the meaning of Article 2(b) of Regulation No 1370/2007.

By its second question, the referring court asked, in the event of an affirmative answer to the first question, i) whether Article 4(1)(b)(i) of Regulation No 1370/2007 must be interpreted as allowing the competent authorities to exclude the granting of compensation for the costs incurred in discharging a public service obligation to undertakings providing in the territory of the Member State concerned a public transport service by road and by rail, and ii) in the event that those authorities may exclude the granting of such compensation, what are the conditions under which they may have recourse to that option.

According to the Court, the competent authorities are required to compensate undertakings providing in the territory of the Member State concerned a public transport service by road and by rail for the net financial effect, positive or negative, on costs incurred and revenues generated in complying with the obligation for those undertakings, established through a general rule, to carry certain categories of traveller free of charge, in particular, children of pre-school age and certain categories of persons with disabilities.

By its third question, the referring court asked i) whether Article 3(3) of Regulation No 1370/2007 must be interpreted as allowing Member States to exclude from the scope of that regulation general rules designed to fix maximum tariffs for categories of passenger other than those referred to in that provision, and ii) if the answer is in the affirmative, whether the obligation to notify laid down in that provision and in Article 108 TFEU also applies to the general rules excluded from the scope of that regulation which do not provide for the granting of any public service compensation.

According to the Court, compensation for the net financial effect, positive or negative, on costs incurred and revenues generated in complying with the tariff obligations established through general rules, which aim at establishing maximum tariffs for certain categories of passenger, must be granted in accordance with the principles set out in Article 4 and Article 6 of Regulation No 1370/2007and in the annex thereto, in a way that prevents overcompensation. The compensation may not exceed an amount corresponding to the net financial effect equivalent to the total of the effects, positive or negative, of compliance with the public service obligation on the costs and revenue of the public service operator, which are assessed by comparing the situation where the public service obligation is met with the situation which would have existed if the obligation had not been met.