We are dealing again with the issue of State aid, since Italy has recently been sentenced for the State aid it granted to the Port System Authority (“PSA”) of the Central Tyrrhenian Sea and to a concessionaire operating in the port of Naples (“Concessionaire”) [1].
In the decision at hand, the Commission considered that public subsidies for approximately EUR 44 million provided to the PSA to restructure the port of Naples dry docks, which today are managed by the Concessionaire, were granted in breach of the European state aid rules.
As known, article 107(1) TFEU provides that "any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the provision of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market".
So, in order for a measure to qualify as aid within the EU law it is necessary:
The recent decision by the Commission is of particular interest not because it assesses the aid granted, but because it highlights the problems arising from Italy’s interpretation of the nature of PSAs that does not comply with European law [2].
In the proceedings in question, Italy defended itself by stating that, according to Italian port law, PSAs are non-economic public entities with national relevance and special status that have administrative, organizational, regulatory, budgetary and financial autonomy (see Article 6, paragraph 5 of Law No. 84 of 28 January 1994).
Indeed, the Italian State has given PSAs the institutional mandate of carrying out, on its behalf and solely in the public interest, the functions of administration, regulation and control of Italian ports. Article 6 of Italian port law (Law No. 84/1994) prevents PSAs from directly or indirectly performing port activities. Moreover, the administration of Italian ports is reserved by law to the port authority competent for the territory concerned.
Therefore, according to Italy, PSAs do not act on a market open to competition while performing their institutional mandate of administering Italian ports since (i) no other entity can carry out said activity and (ii) they are prohibited from performing economic activities in sectors open to competition.
But said interpretation is not quite in line with the settled case law of the Court of Justice of the European Union (“CJEU”), according to which “the concept of an undertaking encompasses every entity engaged in an economic activity regardless of its legal status and the way in which it is financed” [3], [4].
So, according to the CJEU, an entity that is formally part of the public administration may be regarded as an undertaking within the meaning of Article 107(1) TFEU, since the only relevant criterion in such respect is whether it carries out an economic activity or not[5]. Indeed, an entity carrying out both economic and non-economic activities is to be regarded as an undertaking with regard to its economic activities.
Taking into account that the various activities of PSAs include the granting of state concessions against the payment of a fee, the European Commission decided to classify PSAs as undertakings within the meaning of Article 107(1) TFEU.
In the case at hand, due to procedural reasons which will not be addressed herein, the Commission, while considering the aid contrary to EU legislation, did not condemn the Italian State to recover the unlawfully granted aid. However, the Commission clarified in its decision that neither the PSA nor the Concessionaire could defend themselves by stating that the PSA was a non-economic public body.
This decision is particularly important for the actual determination of the nature of the PSAs, a determination that the latter and the Italian State will obviously have to take in consideration in the future.
This article is for information purposes only and is not intended as a professional opinion. For further information, please contact Ekaterina Aksenova.
[1] See European Commission Decision of 20.9.2018 on the State Aid SA 36112 (2016/C) implemented by Italy for the Port Authority of Naples (now Port System Authority of the Central Tyrrhenian Sea) and Cantieri del Mediterraneo S.p.A.
[2] See Shipping Bulletin of June-July 2018 for a further analysis of the issue.
[3] ECJ Case No. C-41/90 Höfner/Macroton GmbH, paragraph 21.
[4] See also: joined Cases No. T-455/08 and T-443/08, Flughhafen Leipzig-Halle GmbH and others/Commission and Mitteldeutsche Flughhafen AG and others/Commission; Case No. T-128/89 Aéroports de Paris/Commission, confirmed by the ECJ, Case No. C-82/01P.
[5] The ECJ deems “economic activity” any activity of offering goods or services on a given market.
