A landmark judgment of the European Court of Justice (ECJ) in December 2012 clarified that public funding for the construction of infrastructure is, in principle, subject to EU State aid law if the infrastructure is commercially exploited. This is an important development for all companies owning, operating or using infrastructure in the European Union.
The judgement was given by the ECJ in relation to airport infrastructure. It is important to note, however, that the European Commission is of the opinion that the underlying legal principle extends beyond the airport sector. The European Commission has announced that it will apply EU State aid rules to public funding for the construction of infrastructure in all sectors in which infrastructure is commercially exploited, such as ports, railways or energy.
While there is certainly room for argumentation on the European Commission’s approach, it is also important to realise that the judgment is potentially relevant to all types of infrastructure financing where operation of the infrastructure can be considered to amount to an economic activity because the users have to pay for its use.
Only the construction of infrastructure that is not commercially exploited falls outside the scope of State aid rules. Non-commercial infrastructure includes, for example, public motorways that are not operated by a concessionaire and are open without payment to the general public.
This judgment is the final step in a gradual development in EU State aid law over the last decade with respect to the financing of the construction of infrastructure. For a long time, EU State aid rules were deemed not to be applicable per se to infrastructure projects, meaning that infrastructure could be funded by EU Member States without State aid law being applicable. In recent years, however, the financing of infrastructure has attracted the attention of the European Commission. This judgment confirms that, for the purpose of EU State aid law, the economic character of the operation of the infrastructure necessarily determines the character of the construction of the infrastructure itself.
The implications of this judgment for companies owning, operating or using infrastructure and for government authorities in the European Union are substantial, not only with respect to future projects, but also in relation to all projects that benefitted from public (co)funding within the last 10 years.
EU State aid law prohibits all funding in any form whatsoever that benefits a specific company or group of companies. These rules apply to both public and private companies. State aid may only be approved by the European Commission under certain circumstances, after notification by the EU Member State. If the State support that qualifies as State aid is handed out without approval by the European Commission, the European Commission and national courts can order the EU Member State to recover the aid from the companies that have benefitted.
It remains to be seen how the European Commission will in practice apply the principles developed by the ECJ. For the airport sector, the new guidelines on the financing of airports and airlines, which are expected to enter into force by the end of 2013, will offer some guidance on public funding for the construction of infrastructure. No specific guidelines exist for other sectors however, and it is clear that this is an area to watch for all companies owning, operating or using infrastructure in the European Union.