1. State Aid and public funding of infrastructure - a challenge for Governments and public Authorities
Preben Sandberg Pettersson, Head of State Aid Division, Danish Ministry of Industry, Business and Financial affairs
Jan-19

2. Assumptions on state aid and public financing of infrastructure
Is has been generally assumed in Jurisprudence that public financing of infrastructure – including fixed links as bridges and tunnels - is not an economic activity involving state aid
The preconditions was that the use of such infrastructure were free to the public, based on equal access on objective terms
1994 guidelines on Airport aid: states that an infrastructure is a common good and a general service
Aéroports de Paris vs. Commission T-128/98: Differentiate between establishing airport infrastructure and operation the airport services
Infrastructure > different from < operating an Airport = economic activity
Could involve state aid
state aid and infrastructure

3. legal certainty Common good or Economic activity
After the Leipzig Halle Ruling (T-443/08 and T-455/08) it cannot be denied anymore that the public financing of any type of infrastructure (excluding e.g. infrastructure related to security and safety) that is later commercially exploited is part of an economic activity and state aid relevant!!!
This also means on the contrary that only the public financing of infrastructure that is later not commercially exploited and built in the interest of the general public based on public powers is in principle excluded from the application of the state aid rules.
The latter should include for instance public roads, motorways and bridges that are not operated by a concessionaire, and open to the general public on objective terms; or public, non dedicated parks, playgrounds etc. open to the general public
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4. Commission practice - The NoA July 2016
“The guidance regarding the notion of State aid as set out in this Notice applies to the public funding of infrastructure having an economic use, …an economic activity. However, given the strategic importance of public funding of infrastructure, …it is appropriate to provide specific guidance on when public funding of infrastructure favours an undertaking, grants an advantage and has an effect on competition and on trade between Member States. ”NOA point 199.
Therefore 5 points concerning public financing of infrastructure should be analyzed:
Is the infrastructure involving an undertaking /economic activity?
Is the public financing / aid distorting competition – affecting trade or
Is the aid of only local nature and impact?
Is the aid granting advantages to developer / OWNER – OPERATOR. USER?
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5. Infrastructure as an undertaking – an Economic Acitivity - NoA 201 - 2009
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6. Infrastructures are Not always economic activity
The notions “undertaking” and economic activity is not particular relevant to all when financing of public infrastructure as fixed links - bridges and tunnels - because:
Fixed links - as infrastructure by their nature, their aim and the rules to which they are subject, are connected with general exercise of powers and services ….typically those of a public authority. They are not of an economic nature justifying the application of the Treaty rules of competition
Such activities are part of Public Authority and public general common services
No private part exercises such activity as an economic activity
The services are offered as a public common good – and not as an economic activity service offered on the market in order to obtain revenue
Solidarity principle > capitalization principle
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7. Distortion of Competition and effect trade between Member States
Legal test: does the measure strengthen the position of an undertaking involved in intra EU trade?
Test easily met in most sectors – but Infrastructure is particular
Hence NOA clarification concerning legal monopolies and natural monopolies
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8. Legal and natural monopolies NOA 182 – 189 / 210 – 212
No distortion of Competition if assigned an in house provider:
The service is subject to a legal monopoly
Competition on the market and for the market is excluded
The service is not in competition with other services and
No link to service provider active in another market open to competition – cross subsidization has to be excluded – separation
No distortion of competition and effect on trade regarding the construction of the infrastructure if Natural Monopoly
Typically no direct competition
Insignificant private financing in the sector or in the Member State
Not selectively favoring specific undertaking or sector – benefits for society at large.
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9. Aid to the Operator and users– NOA 222-224
Aid to operators economic activity if operator payment for utilizing and operating facilities are below market price
No aid if operator pays the market price
The Commission considers that an economic advantage to the operator can in particular be excluded if the concession to operate the infrastructure is assigned for at positive price through a tender that meets all the relevant conditions.
No aid to users of infrastructure if users pay market price
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10. The Øresund fixed link case
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11. Does the public financing involve state aid?
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12. The Fehmarn belt link – Tunnel - DK and D
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13. State aid involved the in public financing of the Fehmarn link?
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14. The Commission Analytical Grids test criteria of the State Aid in public Financing of Infrastructure projects
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15. Pending court cases – possible unified Ruling 2018?
3 Cases pending concerning annullation - all refered to department 6 of EU-court
1. Øresund: T68/15 HH Ferries against the Commission
Written Court procedure terminated – awaiting oral proceedings
Intervention by DK and S
2. T630/15 Scandlines Denmark APS and Scandlines Deutschland GmbH against the Commission
Intervention by Svensk Sjöfart, Naturschutzbund Deutschland and DK
Waiting for interventions and replies – and oral proceedings
3. T631/15 Stena Line Scandinavia AB against the Commission
Intervention by Svensk Sjöfart and DK
Waiting for intervention from Svensk Sjöfart, reply and oral proceedings
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16. Possible extra questions and court cases concerning Fehmarn Belt link
Railway fees and overcompensation of Fehmarn Consortia (20/80)
Fehmarn use of seabed – tunnel access to use sea bed without fee and without state aid notification and part of Cion decision.
Possible court case claiming Commission passivity as some of complainant questions not dealt with by Commission and part of decision.
Unified Court Ruling in 2018?
Outcome – annulation or confirmation of Commission decision
Awaiting German Environmental approval – possible court procedure in Leipzig
Consequences for establishment of Fehmarn belt link in 2018 – 2020
Very critical to important public financing of important infrastructures in common EU interest
Next step
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17. State aid impact on types of infrastructures in Member states
Public transport and public utilities / essential services, Ports and Airports
Energy supply, electricity, gas, heat, waste handling, water and waste water
Depending on market development and competition – economic activity
Transformation from natural and legal monopolies and part of public sector - to become economic activities
How to apply the State Aid rules and compatibility assessment ?
Impact on trade and cross boarder operations?
Limited jurisprudence and Commission practice
need more refined criteria for the state aid test of specific infrastructure facilities and compatibility rules - as the new GBER provisions on ports and airports on the way?
We need clearer ground and direction – we are a bit in limbo land as the state aid rules are expanding like the Universe.
How do we create legal certainty for future public financing of infrastructure?
Jan-19

18. Conclusion – key learning points
Public authorities need legal certainty when financing infrastructure
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