Rules relating to Services of General Economic Interest in the postal sector : high evidential threshold for contesting actions of Member States and lack of objections raised by European Commission

Judgment
Joined cases T-282/16 and T-283/16
19.03.2019
PartiesCourtChamberJudge-RapporteurAdvocate GeneralSubject-matter
AppealInpost Paczkomaty and Inpost v European CommissionGeneral Court3rd Chamber (Extended Composition) E. Perillo/State aid – SGEI – Compensation – Universal postal service
KeywordsState aid – Postal sector – Compensation for the net cost resulting from universal service obligations – Decision declaring the aid compatible with the internal market – Action for annulment – Interest in bringing proceedings – Obligation to state reasons – Equal treatment – Proportionality – Right to property – Freedom of enterprise
SummaryThe source of this dispute is a Commission decision not to raise objections to the measure notified by Polish authorities concerning the aid granted to Poczta Polska ("PP") in the form of compensation for the net cost of fulfilling its universal postal service obligations for the period between 1 January 2013 and 31 December 2015 (Case SA.38869). The aid scheme concerned, on the one hand, a mechanism for sharing the net cost of universal service obligations and, on the other hand, a compensation fund which was partly financed by contributions from certain postal operators, a system open to Member States under the Postal Directive 97/67/EC, amended in particular by Directive 2008/6/EC (the "Postal Directive"). The Commission considered that the operating principles of the compensation fund were compatible with Article 106(2) TFEU. Two competing companies on the postal services market, which were subject to this contribution to the compensation fund, challenged the decision.

In the case at hand, the applicants' request was only considered admissible for the year in which the device was activated.

On the merits, the applicants raised seven pleas in law alleging, in substance, an infringement of Article 106(2) TFEU, in particular the Commission communication on Services of General Economic Interest (the “SGEI Framework”) and Articles 7 and 8 Postal Directive, as well as an infringement of Articles 16 and 17 Charter of Fundamental Rights and the obligation to state reasons.

By their first plea, the applicants contested the method of allocating the universal postal services to PP. The General Court (the “GC”) pointed out in this regard that neither Article 7(2) of the Postal Directive nor the SGEI Framework obliges the Member State concerned to use a public procurement procedure. This is only one option among others (para. 35). The essential condition remains that the principles of transparency, equal treatment and non-discrimination are duly respected (para. 35). In this respect, a direct and exclusive designation by legislative means is, of itself, compatible with these principles (para. 39). This is an important point for Member States contemplating an appropriate method for choosing their future universal service obligation providers. However, the GC was careful to point out in advance that the designation of PP as a universal postal service provider for a given period had already been considered during the public consultation in September 2010, which took place precisely in the context of the relevant national legislative process (para. 38). Moreover, the GC highlighted that the fact that PP's capital is wholly owned by the State has no impact on the outcome (para. 40).

The second plea concerned the transparency required by the SGEI Framework. According to the applicants, the public consultation requirements in the allocation of the universal postal service were not respected. The GC stated that the organisation of a public consultation is not compulsory if other appropriate means exist for users and service providers to make their comments known, as mentioned in point 14 of the SGEI Framework (para. 45-46). In this case, a public consultation was held (para. 47).

The central element in the Court's reasoning on this plea concerned the terms of the fund for compensating the net cost of the universal postal service obligations entrusted to PP (para. 56 et seq.). The legal problem at stake was mainly based on the contribution of the taxable companies. First, regarding the principle of non-discrimination, the GC note that the Commission could consider that Polish authorities had correctly defined taxable persons in an equivalent situation, as well as interchangeable services, and considered that express courier services did not fulfil these conditions (para. 90-97). Secondly, the applicants contested the maximum amount of the contribution and the income threshold set for being subject to it. As a preliminary remark, the Court referred to the limit of its review of proportionality in the context of SGEIs (para. 115), which is limited to verifying the necessity of the measure for the performance of the task or, conversely, its manifestly inappropriate nature. Thus, in its analysis of the proportionality of the percentage determining the maximum amount of the contribution, the GC allows some leeway. It referred in this instance to a number of economic findings made by the Commission and considered that the arguments put forward by the applicants were not sufficient to call into question the plausibility of those findings.

Thirdly, the GC discussed at length the definition of unfair financial burden (para. 147 et seq.) and the case law of the Court of Justice of the European Union (the “CJEU”) on the matter. According to the latter, "the assessment of the unfair nature of the burden associated with the provision of universal service requires a specific examination both of the net cost which provision of that service represents for each operator concerned and of all the characteristics particular to each operator, such as the quality of its equipment, its economic and financial situation and its market share" (CJEU, 6 October 2010, Commission v Belgium, C-222/08, EU:C:2010:583, para. 59 and Base and others, C-389/08, EU:C:2010:584, para. 51).

The GC concluded that, under the Postal Directive, it is for the Member States to determine what constitutes an unfair burden in the context of universal service obligations (para. 153) but that any net cost does not automatically fulfil that criterion (para. 155). In the present case, PP will only receive compensation for ex-post accounting losses resulting from the provision of universal service. This method is stricter than the SGEI Framework, which allows full compensation for the total net cost of these obligations (para. 156). Efficiency adjustments are also provided for and PP is required to submit a corrective action plan each year to eliminate or, at least, limit losses resulting from its universal service provision in order to avoid encouraging any mismanagement of the service.

The GC deals much more rapidly with the fourth, fifth and sixth pleas because of the lack of precision in the applicants' arguments.

Finally, the GC did not deal with the obligation to state reasons. It justified this approach by the fact that the applicants confused, in substance, the validity of the factual and legal elements underlying the contested decision with the insufficient statement of reasons for that act. It therefore found that the applicants’ complaints must be considered ineffective (para. 184).

At the end of its analysis, the GC dismissed the actions and confirmed the Commission's decision not to raise objections, considering that the system, although constituting State aid, is compatible with the internal market under Article 106(2) TFEU.
CommentaryFirst, this judgment is of interest in that it deals with the combined application of the horizontal SGEI Framework, which concerns the SGEIs that are potentially most restrictive of competition, particularly in view of the amount of compensation paid to their operator (more than €15 million per year), and the postal sector rules. Admittedly, its interpretation is difficult, considering the specificities of the case and what seems to constitute certain limits of the appeal lodged. However, it provides guidance on the conditions to be met by the award procedure (public consultation or other appropriate means of taking into account the interests of users and service providers, transparency, equal treatment and non-discrimination). This judgment also provides insights into the extent to which competitors of the SGEI operator can be called upon to finance the fulfilment of its public service obligations, as well as into the significant room for manoeuvre that States retain on these points.

In this respect, the judgment also reveals that competitors must, in addition to solid legal arguments, develop a well-founded and convincing economic analysis in order to have a chance of their arguments being accepted by the Commission or by the EU courts. Admittedly, the concept of unfair financial burden for a universal service operator and the criteria for determining which competitors are subject to the financing of the compensation fund require an approach that closely combines law, economics and finance. In the case at hand, it seems that the applicants were not in a position to produce arguments capable of undermining the presumption of legality enjoyed by the Commission's decision not to raise objections to the aid scheme in question.