The interpretation of the concept of services of general economic interest in the health care sector

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Master Thesis

The interpretation of the concept of services of general economic interest in the health care sector

Name: Tereza Látová

Email: tereza.latova@sap.com

Master Track: European Competition Law and Regulation Name of the Supervisor: Cees Dekker

Word Count: 12 890

Abstract:

Article 107 TFEU prevents Member States from providing state aid to undertakings, which could distort competition. Yet, in some areas Member States must ensure the functionality of a sector. Hence, it would be legitimate to ask how does the European Commission strike a fair balance between protecting competition and allowing Member States to adopt financial measures they deem necessary in order to increase public health. It is assumed that if a sector is heavily regulated by the EU, then there is less room for manoeuvre for Member States, it is therefore to be determined, weather this applies also to the SGEI concept.

This paper intends to answer the following question: To what extent does the interpretation of the concept of SGEI in the health care sector differ from other sectors. Or in other words, what are the particularities of the use of the concept of general economic interest in the health care sector.

SGEI in health care is compared to two other sectors, energy and telecommunications. To answer the question the paper firstly provides an assessment of the SGEI itself in order to establish what is actually prohibited under State aid by Article 107 TFEU, with the focus on the exception of SGEI, which is seen under the rules as compatible with the internal market. The second Chapter then analyses the individual definitions in the situation of the health care sector with an in-depth assessment of the concept of undertaking in the health - care sector. The third Chapter then adds an analysis of the energy and telecommunication sector in order to allow a comparison between those.

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Table of Contents

Introduction: ... 3

Chapter 1. The Interplay Between the Concepts of State Aid and SGEI ... 5

1.1 State aid as a concept ... 5

1.2 SGEI as a concept ... 6

1.3 The concept of undertaking in EU law ... 8

1.4 Altmark package ... 9

Chapter 2. The SGEI and the health care sector... 13

2.1 Competences of the EU in the health care sector ... 13

2.2 Effect on trade and competition in the internal market ... 15

2.3 Health care services and the concept of undertaking ... 16

2.4 National health care systems ... 18

2.5 Health care and the Altmark conditions as administered by the Member States .... 19

Chapter 3. The Concept of SGEI in other sectors as interpreted by the Court ... 19

3.1 SGEI concept applied to energy sector ... 19

3.2 SGEI concept applied to the telecommunication sector ... 23

3.3 Comparison of the SGEI in the different sectors ... 24

Conclusion: ... 25

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Introduction:

It is now becoming clear that the year 2020 marked by the coronavirus crisis will be characterized by an increase in the provision of state aid in many fields, including but not limited to health care services. As an example of aid the Commission itself has recently approved EUR 8 billion financial support for small and medium sized businesses.1 Pursuant to Article 168(7) of the Treaty of Functioning of the European Union (`TFEU`) Member States have the ultimate responsibility to organize and allocate resources related to health care in their States. It might follow that the Member States choose to ensure the availability of health care by providing subsidies or supporting the health care system.2 Yet, EU law prohibits Member States from providing state aid to undertakings, which could distort competition on the internal market.3 Hence, it would be legitimate to ask how the European Commission strikes a fair balance between protecting competition and allowing Member States to adopt financial measures they deem necessary in order to increase public health. The concept of services of general economic interest (`SGEI`) seems to be intended exactly to balance the two interests. The aim of SGEI is to ensure that a State can support services which are not per se economically advantageous, but are crucial for the functioning of the society.4

There are several sectors in which this concept could be used and not all of them are the same. Could this mean that the concept of SGEI adapts along? In a judgment by the Court related to the energy sector it was expressly provided that Member States are entitled to adjust the public service obligations to national policy objectives and circumstances.5 However, the manner in which Member States regulate their utility sectors are now increasingly controlled by the Court.6 Telecommunication is a sector in which the EU arguably already legislated a lot.7 It is also a sector in which de-centralization is on a very high level and there are hardly any purely national telecommunication providers as such.8 It is often

1 European Commission, ` Coronavirus: Commission and European Investment Fund unlock €8 billion in finance

for 100,000 small and medium-sized businesses` (2020) Retrieved from:

https://ec.europa.eu/commission/presscorner/detail/en/mex_20_608.

2 J.W Gronden, `Financing Health Care in EU Law: Do the European State Aid Rules Write Out an Effective

Prescription for Integrating Competition Law with Health Care?` Competition Law Review, 2009, Vol.6. p.1.

3 Article 107(1) TFEU. 4 Article 106(2) TFEU

5Judgment of 20 April 2010, Case C-265/08, ECR I- 3377, Federutility and Others v Autorità per l'energia elettrica e il gas.

6 C. Barnard and S. Peers, `European Union Law`, Oxford University Press (2017) p.563. or Wolf Sauter, `Public

Services and the International Market: Building Blocks or Persistent Irritant?` European Law Journal,Vol.21 (2015).

7 Directive 2009/140/EC of the European Parliament and of the Council of 25 November 2009 OJ (2009); Directive

2009/136/EC of the European Parliament and of the Council of 25 November 2009 amending Directive 2002/22/EC on universal service and users’ rights relating to electronic communications networks and services; Directive 2002/58/EC concerning the processing of personal data and the protection of privacy in the electronic communications sector and Regulation (EC) No 2006/2004 on cooperation between national authorities responsible for the enforcement of consumer protection laws, OJ (2009); Regulation (EU) No 531/2012 on roaming on public mobile communications networks OJ (2012).

8 W. Sauter, `Public Services and the International Market: Building Blocks or Persistent Irritant?` European Law

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assumed that if a sector is heavily regulated by the EU, then there is less room for manoeuvre for Member States, it is therefore to be determined, weather this applies also to the SGEI concept.9 This paper intends to answer the following question: To what extent does the interpretation of the concept of SGEI in the health care sector differ from that in other sectors. Or, in other words, what are the particularities of the use of the concept of general economic interest in the health care sector. For the sake of the length of the paper and proper assessment SGEI application in health care is compared to two other sectors, energy and telecommunications. Therefore, for the purposes of this paper, the use of `other` generally refers to the two other sectors compared.

The method used to answer the question is analytical and comparative. Secondary legislation, legal decisions, soft law and judgments of the Court are analysed and compared. Differences in the outcome of the judgments of the Court are also assessed. The paper is divided into four sections. Since the SGEI is a derogation from the normally applicable State Aid rules, those are introduced first. Second, the concept of SGEI itself is introduced with the main cumulative criteria for its fulfilment. Third, the importance of the concept of undertaking is set out. Forth, the approach of the Court to cases of SGEI in different forms of health care is assessed. The conclusion then summarizes the individual findings and also the question to which extent the interpretation of the concept of services of general economic interest in the health care sector differs from other sectors is answered.

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Chapter 1. The Interplay Between the Concepts of State Aid and SGEI

1.1 State aid as a concept

Private services are generally paid by the end consumer. Public services on the other hand might be either paid by the State or provided for trough a scheme that combines the two options. An example might be an energy company which is partly nationalised and in part it is able to support itself through sales. State aid rules, however, prevent Member States from providing any kind of help to undertakings unless the help fulfils several conditions.10 This help could be a in a form of a directly assigned grant, a tax advantage and even benefits in kind.11 It could also be arranged by the Member State as not charging the market price to the undertaking for a good or granting directly a license or a special exclusive right. Conditions that a measure will be seen as State Aid are that the help must be provided for from State resources, the aid is not applied to all undertakings equally and therefore constitutes an unfair advantage for one undertaking, which in turn creates distortions to the internal market.12

Article 107(2) TFEU itself provides for certain measures that will be compatible with internal market. Aid of social character provided to individual consumers, for example, will be exempted.13 This could be something one could see more likely to happen in health care services rather than in the sector of energy or telecommunication. Yet even the Energy Package of 2011 lays down provisions intending to increase the protection of vulnerable consumer against energy poverty.14Articles 107 and 108 TFEU seek to ensure that within the internal market there is no distortion of competition by public authorities which support some undertakings but not others.15 The often crucial notion in state aid (and for the scope of this paper) is the notion of undertaking since as is apparent from the provisions, state aid only prohibits Member States from introducing advantages to undertakings. This notion will be explored in section 1.3. Other exemptions from this general rule exist, a Member State can apply for them to the Commission in line with Article 106(2) TFEU. Pursuant to the Article the Commission has exclusive competence to exempt the aid from the scope of the application of competition laws. In addition, for the sake of making certain forms of aid more accessible to the Member States there is also a block exemption for certain forms of aid which will be automatically exempted16

10European Commission, `State Aid Control`, Overview, Retrieved from:

https://ec.europa.eu/competition/state_aid/overview/index_en.html.

11 Communication from the Commission on the application of the European Union State aid rules to compensation

granted for the provision of services of general economic interest Text with EEA relevance OJ C 8 (2012) para 32.

12 Judgment of the Court of 15 July 2004, Pearle BV, Case C-345/02, ECLI:EU:C:2004:448, Hans Prijs Optiek Franchise BV and Rinck Opticiëns BV v Hoofdbedrijfschap Ambachten.

13 Article 107(2)(a) TFEU

14 Directive 2009/72/EC on electricity and 2009/73/EC on natural gas.

15 European Commission, `Commission Notice on the notion of State aid as referred to in Article 107(1) of the

Treaty on the Functioning of the European Union`,(2016/C 262/01) Official Journal of the European Union.

16 Commission Regulation (EU) N°651/2014 of 17 June 2014 declaring certain categories of aid compatible with

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As to the enforcement of State Aid on national levels, it is notable to say that even though a national court can find a violation of Article 108(3) TFEU, which is a violation of the obligation to notify any state aid measure as imposed by Article 107(1). Only the Commission can find that there is an exception, such as the SGEI that is applicable.17 Even though the SGEI concept is mainly focused on the specific needs of the Member States, State Aid as such is still a very centralized control on the EU level. State Aid gives tools to the Commission to examine also ex ante measures which could potentially disturb the internal market. It remains to be analysed in the next section how this is aligned with the SGEI concept in which, arguably, Member States shall have a wide margin of discretion to accommodate individual policy concerns.18

To conclude, if a subsidy given to an undertaking fulfils all the criteria of the concept of state aid, it will be considered as such. This, however, does not mean that the aid is automatically violating EU rules. The determining factor with regard to the legality of the aid will be if the aid is compatible with the internal market. As will be assessed below one possibility of aid being compatible with the internal market is if the aid is considered as an SGEI.

1.2 SGEI as a concept

SGEI is an exception from the otherwise applicable competition laws. Article 106(1) prevents Member States from granting special exclusive rights to undertakings which would be against the provisions of the Treaty. Article 106(2) then provides for a derogation from this prohibition in certain situations in so far as the application of SGEI rules does not obstruct the performance of the undertaking. Undertakings granted special rights can be exempted from the otherwise applicable rules of competition under two conditions. First, the exclusive right cannot obstruct the performance of the tasks granted to the undertaking. Second, it cannot affect the trade development to such an extent to be contrary to the interests of the Union.19 This provision is then intended to provide a form of balancing of interests, between the necessity of a Member State to provide a support to an undertaking and the EU ensuring that internal market does not suffer as a consequence.20 It follows that a proportionality test will be an important part of the compatibility assessment, and as explained in the Federutility case, the scope rationale personae of the beneficiaries will be of special importance.21

17 W. Sauter, `Public Services and the Rules on Competition and State Aid` Cambridge University Press (2015)

p.7.

18 Article 1 Protocol (No 26) on services of general interest, Official Journal 115, P. 0308 - 0308 (2008). 19 This interpretation is confirmed by case law such as: Judgment of the Court (Grand Chamber) of 20 April 2010,

C-265/08, ECLI:EU:C:2010:205 Federutility and Others v Autorità per l'energia elettrica e il gas. para 27.

20 Judgment of the Court 21 September 1999 (1) Case C-67/96, ECLI:EU:C:1999:430, Albany International BV and Stichting Bedrijfspensioenfonds Textielindustrie, para 103.

21 Judgment of the Court (Grand Chamber) of 20 April 2010, C-265/08, ECLI:EU:C:2010:205 Federutility and Others v Autorità per l'energia elettrica e il gas.

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The challenge in defining what SGEI is comes from the fact that even though services as such are defined on the EU level public services are not.22 At the same time defining those services might lead to limiting their scope and therefore, often certain main characteristics are looked at to asses if the undertaking at stake is an SGEI. Those are the continuity of service, the affordability and quality and consumer protection.23 SGEI services are different from other, ordinary services, by the fact that the State considers them to be necessary in the society even though they do not necessarily create revenue for undertakings.24 At the same time, however, the State acknowledges that the market still might be the best placed to provide those services.25 Therefore, it might be necessary to provide some support to the undertaking responsible for those services.26

This support could be in the form of special or exclusive rights or by a funding from the State. In the first situation Articles 101 and 102 TFEU of competition would otherwise come into play. In the second situation the funding by the State could be considered as state aid, which is prohibited by article 107 TFEU. In both situations the application of competition law is prevented if the claim of a true SGEI is successful pursuant to article 106(2). The undertaking will then receive a so-called public service obligation. Services falling under this heading, other than the three discussed in this paper might also be transport, postal services or employment services.27 However, what is considered to fall under this heading can change, the individual sub-categories are not provided for in the legislation. An example can be the case of the telephone services. Originally, they were mostly provided for by the Member States by one dominant undertaking. This has now mostly disappeared due to the push to liberalization and now there are several competitors in the field.28

The functioning of the concept between the Member States and the firms could be described as two-sided. On one hand firms do receive some special treatment, yet it is generally assumed that it is possible that they operate at loss and therefore they deserve adequate compensation.29 The State therefore can use the SGEI to achieve internal policy goals such as equity and solidarity and ensure prevention of exclusion of a group of citizens.30 Article 14 TFEU underlines that Member States must primarily take into account economic and financial conditions in order to achieve their goals in promoting the social cohesion. It follows that the concept is a purely EU concept, subject to limitations and control of the

22 Article 57 TFEU defines services as being provided for remuneration and not covered by the EU provisions on

goods, capital or persons.

23 European Commission, `Green Paper on Services of General Economic Interest`(2003).

24 P. Herrmann, `Politics and Policies of the Social in the European Union: Looking at the Hidden Agendas` Nova

Publishers (2006) p19.

25 Ibid.

26 European Commission, `Services of General Economic Interest Opinion Prepared by the State Aid Group of

EAGCP`(2006) p.1.

27 C. Barnard and S. Peers, `European Union Law`, Oxford University Press (2017). 28 Ibid.p545

29 European Commission, `Services of General Economic Interest Opinion Prepared by the State Aid Group of

EAGCP`(2006) p.1.

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Commission. At the same time, the determination of what is considered as SGEI in each every Member State varies and depends on the choice of the States.31

There is no defined limited list of sectors which could fall in or out of the category and the classification will depend on individual assessment, even though there are some sectors where it can be more presumed than in others. Yet the current crisis underlined how versatile the SGEI can be and that the Commission is prepared to accommodate in order to help the Member States to be able to grant the aid.

1.3 The concept of undertaking in EU law

For EU competition rules to be applicable at all a crucial condition is the defined personal scope, in fact EU competition rules are only applicable to undertakings, as is stated in the relevant Articles. In the case Hoffman the Court decided that: for the purposes of EU law and its own notion of undertaking, an undertaking is every undertaking engaged in an economic activity.32 It follows that the notion of undertaking is specific to EU law and the concept is functional. It does not matter how an undertaking is defined on the national level. There will always be the one and only concept of undertaking.33 The legal status and the way in which the undertaking is financed are not relevant.34 In Pavlov the Court also specified that an economic activity is any activity consisting of offering goods or services on a market and it follows that the undertaking assumes responsibility to provide remuneration.35 Purely social services, therefore, are not to be considered as undertakings as they have no economic objectives.36 From this line of case law it is apparent that the decisive factor is the economic intentions of an undertaking and it will not matter whether the undertaking is public or private or even non-profit because even non-profit entities can offer goods or services on the market.37 It could be then presumed that health care services could be less likely to fulfil the condition of undertaking whereas providing utilities such as electricity or telecommunication will most likely result in qualifying the entity as an undertaking. This hypothesis is to be verified in the following Chapters.

Lastly, not only is the concept of undertaking unique for competition law but also the notion of economic activity as defined in competition law is particular and differs from the notion in free movement rules.38 In free movement rules the notion revolves around remuneration for a service or good whereas in competition law the distinction between purchasing and selling will be of particular importance. This is

31 Article 36 of the Charter of Fundamental Rights of the European Union

32 Judgment of the Court of 13 February 1979,C- 85/76 Hoffmann-La Roche & Co. AG v Commission of the European Communities.

p.7.

34 Ibid.

35 Judgment of the Court of 12 September 2000, Joined cases C-180/98 to C-184/98, ECLI:EU:C:2000:428, Pavel Pavlov and Others v Stichting Pensioenfonds Medische Specialisten.

36 Judgment of the Court of 19 January 1994, C-364/92, ECLI:EU:C:1994:7, SAT Fluggesellschaft mbH v

Eurocontrol.

37 Communication from the Commission on the application of the European Union state aid rules to compensation

granted for the provision of services of general economic interest, OJ 2012, C8/4, para 9.

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also acknowledged in the Commission Communication of 2012 by noting that the case law of the Court uses different interpretation in different areas of law.39 To conclude, the Commission is aware of the fact that often, economic and non-economic objectives can both be important within the same sector or entity. The Commission has therefore tried to outline the applicable rules regarding undertakings more in detail in its Green Paper on SGEI.40 As will be seen in the sections below, this is especially often the case in the healthcare sector.

1.4 Altmark package

In the Altmark case the Court established conditions under which state aid rules will not apply because the aid provided to the undertaking does not constitute an economic advantage.41 Those four conditions

can be summarized as follows: first, the undertaking is required to carry out a public service and the obligations of it have been clearly defined. The `carrying out` of public service is done by the entrustment by the State of a specific obligation to one or more undertakings.42 Secondly, the compensation has been established beforehand and must be objective and transparent. Thirdly, the compensation cannot exceed what is necessary to cover all or part of the costs incurred. To specify, what this criterion means, the Commission indicates the IRR over the cash flows factor. This indicates that the Internal Rate of Return which describes what the undertaking makes on its invested capital over a duration of the project, has to be similar to a typical company. Fourthly, if the undertaking has not been chosen on the basis of a tender procedure the compensation has to be established on the basis of a typical well run undertaking.43 To further explain the last criterion, the Altmark conditions require that if the undertaking has not been chosen for the SGEI trough a competitive tender its compensation must be comparable to an undertaking which is `well run`. Understandably in the aftermath of this judgment tender procedures have become the preferred way by Member States to grant public service obligations and prevent violating State aid laws as this is an easy way to ensure the compliance with competition rules.44 Otherwise, it would be necessary to provide compensation which is similar to the generally accepted market remuneration. The Altmark criteria must be applied ex tunc, since the Court decided in a subsequent BUPA judgment 45 that the effect shall be retroactive.46

39 Communication from the Commission on the application of the European Union state aid rules to compensation

granted for the provision of services of general economic interest, OJ 2012, C8/4, para 15.

40 European Commission, `Green Paper on Services of General Economic Interest`(2003).

41 Judgment of the Court of 24 July 2003, C-280/00,ECLI:EU:C:2003:415, Altmark Trans and Regierungspräsidium Magdeburg v Nahverkehrsgesellschaft Altmark GmbH.

42 Judgment of the Court of 27 March 1974, Case 127-73, ECLI:EU:C:1974:25, Belgische Radio en Televisie and

société belge des auteurs, compositeurs et éditeurs v SV SABAM and NV Fonior.

43 Ibid para 29.

44 C. Barnard and S. Peers, `European Union Law`, Oxford University Press (2017) p.564.

45 Judgment of the Court of 12 February 2008, C-T-289/03, ECLI:EU:T:2008:29, BUPA Insurance Ltd and BUPA Ireland Ltd v Commission of the European Communities.

46 E. Szyszczak and J. W. van de Gronden,`Financing Services of General Economic Interest: Reform and

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The Altmark conditions are now the paramount criteria for determining the compatibility of the measure with State Aid rules, this is confirmed by the subsequent legislation relying on the principles defined in the case. The case did not only bring about more precise criteria but also documents were issued on its basis, in 2005 and then updated in 2011, which were successful in creating more legal certainty in the application of the SGEI.47 Those are commonly referred to as the post-Altmark package.48 In its 2011 Commission Decision the Commission confers an important ex-ante exemption to certain forms of SGEI in this way it could be seen as a block exemption.49 As long as certain conditions are fulfilled Article 3 of the Decision exempts Member States from the obligation to notify the SGEI to the Commission. One of the most important conditions is the amount of the aid and the annual turnover of the undertaking.50 If SGEI regards airports or maritime services below certain annual turnover, they can be exempted in line with Article 106(2) TFEU. Another crucial condition is the fact that the undertaking must be an SGEI on which the public service function was conferred by public authorities. It seems that what is particularly important is the definition of calculation of compensation for an SGEI which is also economically active. It can be understood that the prevention of overcompensation of undertakings operating as SGEI is intended, yet it seems a complicated task. Besides the general threshold amounts also certain situations were exempted, among those are hospitals or social help.51

The Framework introduced by the package then introduces a simplified assessment of aid normally covered by the Decision and a more elaborate analysis of the proper compensation of the SGEI. As seen in the Decision already, the determination of overcompensation is given a big importance.52 In any case, however, the aid will need to be notified to the Commission which will determine if it is compatible with state aid rules. The Altmark package also introduced a special de minimis Regulation for SGEI which introduces a higher limit than the one provided for State Aid de minimis Regulation. This shows how the Commission tries to make an effort to accommodate more of public services. In case the aid falls below the threshold it does not even need to be notified to the Commission and State aid rules are not applicable.

To conclude the Altmark package and its update has brought more complex rules than the ones applicable before. Indicating the exact measures the Member States need to comply with in order to

47 European Commission, `Commission moves towards reform of State aid rules on Services of general economic

interest` (2011)

48 Ibid.

49 Decision of 20 December 2011 on the application of Article 106(2) of the Treaty on the Functioning of the

European Union to State aid in the form of public service compensation granted to certain undertakings entrusted with the operation of services of general economic interest (2011)

Modernization`, Springer Science & Business Media (2014).

51 Ibid, Article 2(b).

52 European Commission, `European Union framework for State aid in the form of public service compensation

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assign SGEI correctly and not violate State aid rules. The overall framework of the interconnection of State aid and SGEI shows that there are at least three possible outcomes to a situation if there is an entity which is considered to be an undertaking. First of all, the easiest and most favourable for the Member State and the undertaking could be the case that an aid does not constitute State aid at all. Secondly, the aid could constitute State and be exempted by the concept of SGEI because it is compatible with the internal market. In this case depending on the amount of the aid it would either need to be notified to the Commission or not. And lastly, it could also be that the aid is not compatible with the internal market and therefore a State cannot legally provide it.

1.5 Current State aid measures

The 2020 crisis, as any crisis, made Member States resort to forms of State aid in an attempt to alleviate the burden which is now on all the sectors and especially on small and medium sized enterprises.53 The Commission being aware of this issued and regularly updates the new temporary possibilities Member States can use.54 Since March 2020 Member States have started submitting individual reports on how they intend to support local economy in various sectors, from airlines to agriculture and small enterprises.55 There are however, some limits even to this type of aid in those exceptional times. Currently, the aid cannot exceed the duration of 18 months and shall not be higher than EUR 10 million.56In the past months the Commission has approved a number of national State Aid measures. For illustration, the Czech government was approved state aid in the amount of EUR 37 million for the support of national small and medium sized businesses which are producing products relevant for the coronavirus crisis.57 The measure was approved under the 2020 Temporary Framework which will apply from 19 March 2020 to 31 March 2020.58 The Framework provides for different types of aid that will be currently allowed, more specific 10 types of contributions were identified as now being available to the Member States. The individually mentioned possibilities include direct grants, repayable advances

53 European Commission, `COVID-19: Commission sets out European coordinated response to counter the

economic impact of the Coronavirus` , Press Release of 13 March 2020.

54 European Commission, `Communication from the Commission Temporary Framework for State aid measures

to support the economy in the current COVID-19 outbreak 2020/C 91 I/01`(2020) Retrieved from: https://ec.europa.eu/competition/state_aid/what_is_new/covid_19.html

55European Commission, `Communication from the Commission Temporary Framework for State aid measures

to support the economy in the current COVID-19 outbreak 2020/C 91 I/01`(2020) Retrieved from: https://ec.europa.eu/competition/state_aid/what_is_new/covid_19.html An example can be how France intends to

support local companies retrieved from:

https://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=3_SA_56709.

57 European Commission, ` State aid: Commission approves Czech scheme of up to €37 million to support

investments in the production of coronavirus-relevant products`, Press release. Retrieved from: https://ec.europa.eu/commission/presscorner/detail/en/IP_20_654.

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or tax advantages, guarantees on loans, and subsidised interest rates for loans. The Czech measure was assessed as compatible with the Framework because it is temporary in nature, the investments shall be finalized in the next six months and the aid only aims at covering parts of the costs incurred by the undertakings in the production of the relevant products.

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Chapter 2. The SGEI and the health care sector

2.1 Competences of the EU in the health care sector

The EU is vocal about the importance of universal health coverage being a common universal value in all Member States.59 The right to access to health care is even enshrined in Article 35 of the Charter.60 Yet, it is clear that the provision of a universal service comes at a certain cost, which to some extent will be carried by the Member State. This cost could be compensated by funding or subsidizing which could eventually interfere with Article 107 TFEU.61 It will be established in this section what exactly is the competence of the EU in health care systems of Member States.

Health care systems in the EU vary considerably. Nevertheless, all Member States do provide an almost universal coverage of citizens, showing the acknowledgement of the importance that is attached to health in the EU in line with the concept of welfare state.62 In as much as the health care used to be a purely national matter now not only the EU has a say but at the same time cross-border provision of health-care services has become more prominent.63 Health care enjoys a special treatment under the Treaties, Title XIV of the TFEU consists of the sole Article 168 dealing with public health. This provision does not specifically relate to State aid but it does mention that it is the responsibility of Member States to organise and provide adequate health care. Pursuant to the Commission Decision the compensation for the provision SGEI in hospitals providing medical care and the pursuit of ancillary activities can be accorded and under normal circumstances the compensation will not need to be notified to the Commission due to the social dimension of the support.64

It could be expected that the involvement of the Commission in the control of Member States policy is in line with the division of as provided for by the Treaty.65 The health care sector has been and is still the core sector of a state which, even in States which try to avoid being the providential state and prefer

59 European Commission, `White Paper, ‘Together for Health: A Strategic Approach for the EU 2008-2013’ (2007)

p 3. and The Council, `Conclusions on Common values and principles in European Union Health Systems C156/1` OJ (2006).

60 Charter of Fundamental Rights of the European Union.

61 E. Szyszczak and J.W. van de Gronden,`Financing Services of General Economic Interest: Reform and

Modernization`, Springer Science & Business Media (2014) p.20.

62 E. Szyszczak and J.W. van de Gronden,`Financing Services of General Economic Interest: Reform and

Modernization`, Springer Science & Business Media (2014) p.20.

64 Decision of the Commission of 22 December 2005 on the introduction of a risk equalisation system in the Dutch

Health Insurance, N541/2004 and N542/2004 – C (2005) 1329 fin.

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to remain only the regulatory, is to some extent funded by public means.66 However, as established in the first Chapter, unless exempted subsidies by the state to an undertaking is not allowed if this would result in distorting the trade between Member States. It is to be seen in this Chapter how the funding of a national health care provider could affect trade between member states and what are the conditions for the application and exemption of state aid rules in this sector. The extent to which the EU has competence in health care is crucial for defining which powers are exclusive to the Member State and in which it has to act in line with the EU legislation.67 Pursuant to Article 168(7) TFEU the EU shall respect the responsibilities of the Member States for the definition of their health policy and the allocation of resources. In the case of health care therefore the Treaty gives an explicit mention to the fact that the allocation of resources in this field is a competence for the Member State. The need for special support in the area of health care services has been also underlined by the Commission, which would even go as far as using the words `fundamental role providing an essential safety net for citizens`.68 The ground breaking decision of the Commission regarding SGEI was the IRIS-H Decision, in which the Commission established, that there was indeed state aid to the Belgian hospitals, which however, could be exempted from the notification because they were compatible with Article 108(3) and the requirements of the SGEI Decision.69 Other Belgian measures, which were implemented before and were not notified were also held to be compatible, this time based on Article 106(2).70In the Decision the Commission already set out the standard of considering the `social` services carried out by the body. In BUPA v. Commission the Court confirmed that the Member States enjoy a wide margin of discretion when legislating in the field of health care and that the national measures could only be reviewed by the Court if they are manifestly wrong.71 It then follows that this reasoning would put at risk the use of the two last conditions of the Altmark judgment. To repeat, the third criterion requires the compensation to be only limited to what is necessary and the fourth requires that (unless the undertaking is chosen by a tender procedure) the level of compensation is established on the basis of an analysis of the costs of a typical undertaking which is well run. Those conditions however do require a thorough assessment of the economic conditions. This is different from a review which only looks at manifestly wrong implementation of the SGEI. From this it could be concluded that the Commission will in each case make a financial analysis of how the undertaking is operated, which will be in-depth in order to be able

66 G. Majone, ‘The rise of the regulatory state in Europe’, West European Politics 17 (1994) p. 77; F. McGowan

and H. Wallace, ‘Towards a European regulatory state’, Journal of European Policy 3 (1996), p.56.

67 Department of Health, `Review of the Balance of Competences: Health` Assets Publishing (2012).

68 European Commission, `Communication from the Commission to the European Parliament, The Council, The

European Economic and Social Committee and the Committee of the Regions: a quality Framework of general interest in Europe`, OJ (2011).

69 European Commission, `State aid: Commission approves public compensation for Brussels IRIS hospitals`,

Press release (2016), Retrieved from: https://ec.europa.eu/commission/presscorner/detail/en/IP_16_2414.

70 Ibid.

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to provide answers to the questions if the undertaking is well run. Therefore, even if the stated standard of discretion is `wide` the assessment is in no way superficial.

In the case of subsidies to Belgian hospitals the Commission decided not to investigate a complaint by a competitor deeper. The Commission ruled that the health care aid provided by the authorities was compatible with internal market.72 The General Court, however, decided that the Commission should have investigated the case further. The General Court held that there is a `consistent body of evidence` raising doubts about the compatibility of the aid with the concept of SGEI in the internal market for three main reasons.73 Firstly, the public service relating to the hospital was not defined clearly enough. Secondly, the parameters of financial compensation were not clearly defined. Thirdly, there were no procedures in place in order to avoid overcompensation. The Commission subsequently started a formal investigation of the issue where they analysed those three aspects further. In their contribution to the investigation the Belgian authority further explained the concept of `perenité`, which according to them is enshrined directly in Belgian law and covers all forms of aid including socio-medical assistance. As long as the authorities can prove a `genuine need` in line with the Belgian law.74 The Belgian authorities argued that the primary objective of the subsidy was to ensure the continuity of service. The provision of services, they argue, goes beyond merely ensuring that a hospital is viable. In fact Belgium intends to provide the widest possible range of services in order to ensure access to everyone, regardless of their ability to pay.

2.2 Effect on trade and competition in the internal market

The effect on trade between member states is one of the requirements of Article 107 TFEU. A potential effect on the competition is sufficient, there is no need to economically prove the actual harm to the inter-state trade.75 Consequently, some scholars express the opinion that the non-effect of State aid due to the fulfilment of this condition is very rare.76 No-effect was in the past recognized in markets that were entirely public.77 As the Commission puts it this `presupposes a market open to competition`.78 Pursuant to Altmark there is no set de minimis amount of aid below which it could be assumed that the internal market is not affected. It will be therefore always up to case by case assessment.79As an example,

72 Judgment of 7 November 2012, `Coordination bruxelloise d’institutions sociales et de santé (CBI) v European

Commission`,Case T‑137/10, ECLI:EU:T:2012:584.

73Commission decision in case SA.19864 (ex NN 54/2009) OJ C 74 (2010). Para 308.

74

https://eur-lex.europa.eu/legal-content/en/TXT/?uri=CELEX:32016D2327#ntc71-L_2016351EN.01006801-E0071

76 Ch. Koenig, and R. Haratsch,`The Logic of Infrastructure Funding Under EC State Aid Control` European State

Aid Law Quarterly 3 (2004).

77 Ibid.

79Judgment of the Court of 24 July 2003, C-280/00,ECLI:EU:C:2003:415, Altmark Trans and Regierungspräsidium Magdeburg v Nahverkehrsgesellschaft Altmark GmbH. Para 81.

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the criterion was assessed with regards to Czech Republic in 2015, when the State funded a public hospital in the region.80 It was established in that case assessment by the Commission that since the hospital operated in that particular region in Czech Republic it was not able to affect trade between Member States.81 This is because not only there were no relevant cross-border elements but in addition the hospital was intended for the patients of that very region only. This could be put into perspective with the Altmark judgment, where it was established that even potential impact on interstate trade could trigger state aid rules.82 In the PICFIC decision the Commission as well pointed out that if an aid is liable to improve an undertakings position compared to other competitors on the market, it is also affecting the intra-community trade.83It then seems that the assessment of impact on the intra-community trade will be made on a case by case basis. An undertaking cannot per se assume that there will be no impact on the inter-state trade even though they operate only on a regional basis.

2.3 Health care services and the concept of undertaking

Two main concepts of health care system exist in the EU the scheme. The `Beveridge system` which consists of services that are national and solidarity based.84 The other system `Bismarck` is not based on solidarity and tax returns but on the insurance scheme.85 Both of these systems could be operated by private or public operators. The first category is the `solidarity scheme` category, which is mainly based on taxes and is free at any point of use. In the FENIN case for instance the Court established that the Spanish health care bodies were not undertakings because they were funded by social security contributions and provided services free of charge.86 Health care providers in this category would then not be seen as an undertaking and would consequently not fall under the competition law rules. The Court established that even when a health care provider would engage in purchasing activities they would not be seen as an undertaking because it is assumed by the Court that they do so for a purpose that is non-economic in nature.87 As a result the difference between a health care provider which will fall under competition rules and the one which will not lays in the way the undertaking is financed. It can be understood from the case law that if the activity consists of purchasing only or also selling on the relevant market will be of a particular importance. In case there is the economic aim competition law is

80 European Commission, `State Aid: Commission gives guidance on local public support measures that can be

granted without prior Commission approval ` Press Corner (2015) Retrieved from: https://ec.europa.eu/commission/presscorner/detail/en/IP_15_4889.

81 Ibid.

82 Judgment of the Court of 24 July 2003, C-280/00,ECLI:EU:C:2003:415, Altmark Trans and Regierungspräsidium Magdeburg v Nahverkehrsgesellschaft Altmark GmbH. Para 81.

83 European Commission, SA.39426 Rescue aid to PICFIC in AS, health care services operator in the region of

Lazio, Official Journal (06.02.2015)para 29.

84 C. Barnard and S. Peers, `European Union Law`, Oxford University Press (2017) p.565. 85 Ibid

86 Judgment of the Court of 11 July 2006, C-205/03, ECLI:EU:C:2006:453, Federación Española de Empresas de Tecnología Sanitaria (FENIN) v Commission of the European Communities.

87 Judgment of the Court of 11 July 2006, C-205/03, ECLI:EU:C:2006:453, Federación Española de Empresas de Tecnología Sanitaria (FENIN) v Commission of the European Communities.

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applied and it is assumed that selling is an economic activity. This would also be true for the providers of health care insurance, which is the way in which most health care systems are financed in Europe.88 Protocol No 26 also acknowledges this difference between economic and non-economic services.89 In some Member States the health care provider does act as an undertaking with considerable economic goals.90 In those situations, even if the state is the provider of this health care system, it would be possible to qualify the operator as an undertaking. It does not matter for the application of competition rules weather or not the health care is public or private but rather weather or not the health care providers are in competition with each other. Additionally, also individual health care providers could be considered as an undertaking if they fulfil the conditions.91 In the Kattner case the Court further established the requirements for an undertaking in health services.92 The Court held in this case that since there was no link between what is paid and the benefits received there is no undertaking. However, even though there is no undertaking and therefore competition rules do not apply, the other provisions of the Treaty will be applicable. More recently then the Commission investigated the compulsory health care insurance in Slovakia, after a competitor made a complaint.93 The Commission concluded that the obligatory insurance provided for by publicly owned insurers which however, created a certain limited amount of profits. Additionally, there was certain competition between health insurance competitors on the market. Nevertheless, the Commission found no violation of State aid rules as the character of the system was mainly social and collective. This shows that it is sufficient that solidarity objectives are predominant and other, even economic, considerations can play a role as well. Several other factors which could help to indicate whether or not the participation in a health care scheme makes the health care provider an undertaking stem from the case law, those factors are, among others, mainly: the social objective pursued, the compulsory nature of participation, contributions paid being related to the income of the insured person, not to the nature of the risk covered, benefits accruing to insured persons not being directly linked to contributions paid by them, overall state control, (g) funds collected being redistributed, and also cross-subsidization between different schemes.94

As to the assessment of the concept of undertaking for private health care providers the Court in Pavlov has stated that since it could be normally assumed that health care is provided for economic benefit.95

89 Protocol (No 26) on Services of General Economic Interest,

Official Journal 115 (2008).

90 TK Hervey and JV McHale, ‘Health Law and the European Union’, Cambridge 2004, p 21. or C. Barnard and

S. Peers, `European Union Law`, Oxford University Press (2017) p.645

92 Judgment of the Court of 5 March 2009, C‑350/07, ECLI:EU:C:2009:127, Kattner Stahlbau GmbH v Maschinenbau und Metall Berufsgenossenschaft.

93 European Commission, `State aid: Commission finds Slovak system of compulsory health insurance involves

no state aid`, Press release (2014).

94 V. Hatzopoulos, `The concept of economic activity in the EU Treaty: from ideological dead-ends to work able

judicial concepts` Department of European Legal Studies College of Europe (2011) p.11.

95 Joined Cases C-180-184/98,ECR I-6451, Pavlov (2000) and case C-475/99,ECR I-8089 Ambulanz Glöckner

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The provision of health care for a private doctor is usually the source of income. Therefore, individual health care providers could also be considered as undertakings. It seems apparent from those judgments that the Court does not asses the actual rules applicable to the entities at stake, such as a legal form and rather looks in abstracto at the concept of economic profit. It could be concluded that the Court showed willingness to exempt health care providers from the application of the notion of an undertaking in most cases. The importance of the scheme is extreme and the funding could make a big difference in otherwise same undertakings. In the PICFIC decision the Commission was dealing with an assessment of ecclesiastical, non-profit bodies providing health care with high specialisation. The Commission established that in as far as the bodies are acting in private scope and for profit they shall be considered as an undertaking.96 The aid was imputable to the State and was putting the undertaking at a comparative advantage compared to other institutions.97 However, the aid was deemed compatible as it complied with the Guidelines and was therefore compatible with the internal market.

2.4 National health care systems

Two main types of healthcare systems, first, the National Health Services system and second, the Social Insurance System.98An example of a system entirely based on the principle of solidarity can be Spain.99 As the Court confirmed in the FENIN case this does then not represent an undertaking.100 This means that in Spanish health care system even activities that are carried out and could eventually be seen as economic in nature will be excluded if the purpose is non-economic. It could be that a hospital buys large quantities of goods in order to receive patients. Since in Spain receiving patients is non-economic the purchasing will also be seen as such. On the other side of the sliding scale could be the example of the Netherlands, where the health care insurance is mainly competition based.101 This is because health insurance bodies are allowed to intentionally seek profit.

96 European Commission, SA.39426 Rescue aid to PICFIC in AS, health care services operator in the region of

Lazio, Official Journal (06.02.2015).

97 Ibid para 30.

98 TK Hervey and JV McHale, ‘Health Law and the European Union’, Cambridge 2004, p 21. or C. Barnard and

S. Peers, `European Union Law`, Oxford University Press (2017).

100 Judgment of the Court of 11 July 2006, C-205/03, ECLI:EU:C:2006:453, Federación Española de Empresas de Tecnología Sanitaria (FENIN) v Commission of the European Communities para 39.

101 Decision of the Commission of 22 December 2005 on the introduction of a risk equalisation system in the

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2.5 Health care and the Altmark conditions as administered by the Member States Since the Altmark ruling Member States are themselves creating assessment reports, which the Commission in turn publishes, on the application of the decision.102 The report includes an analysis on how the Member State comply with all the State aid and SGEI conditions, including in particular transparency. The report also includes an assessment on how aids below 15 million (which are normally not notified to the Commission) have been administered and if there were any potential complaints. As an example the report of the French government from 2018 in detail especially describes the SGEI use in hospitals and social service. With regards to the issues in administering the compatibility of the aid with EU rules the French authorities mention the need of the requirements to remain proportional in order not to induce an exaggerated burden and costs on the administration.103

Chapter 3. The Concept of SGEI in other sectors as interpreted by the Court

3.1 SGEI concept applied to energy sector

Originally the SGEI were perceived as being limited to the so-called `infrastructure networks` and included only three core sectors: energy, transport and communication.104 The Commission itself admits that the concept of the SGEI is not defined in order to be dynamic and adapt to each individual concept in differing situations.105 This chapter assess the energy and telecommunication in more detail in order to identify the crucial areas for determining the compatibility of aid in those sectors with Article 107 TFEU. The areas of telecommunication and energy in particular can be characterized by the progressive shift in the 1990s from reserved national services to a liberalized economy.106 With this clearly came new obligations imposed on the Member States and new restrictions on the financing of the services. The EU wanting to prevent uncoordinated State subsidies has progressively narrowed and specified conditions for the valid provision of State aid as an SGEI.107

102 European Commission, `State aid rules on services of general economic interest (SGEI)`(2009-2011). Retrieved

from: https://ec.europa.eu/competition/state_aid/public_services/reports_2009_2011_en.html.

103 Ibid. Part 5: Miscellaneous questions.

104 C. Barnard and S. Peers, `European Union Law`, Oxford University Press (2017). And P. Larouche and L.

Hancher, `The Coming of Age of EU Regulation of Network Industries and Services of General Economic Interest`, Tilburg Law School Research Paper No. 014/2010; Tilburg Law and Economics Center (2010).

105 European Commission, `Green paper on services of general interest` COM(2003). p 14.

106 P. Larouche and L. Hancher, `The Coming of Age of EU Regulation of Network Industries and Services of

General Economic Interest`, Tilburg Law School Research Paper No. 014/2010; Tilburg Law and Economics Center (2010) p.3.

107 The European Parliament and the Council of the European Union, `Regulation (EU) 2019/943 of the European

Parliament and of the Council of 5 June 2019 on the internal market for elektricity` (Text with EEA relevance.) preambule 6.

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The energy sector was originally a sensitive national competence, as most of the energy was nationalized.108 In a nationalized setting it could be expected that the energy sector serves the so-called public interest.109 It was only in the 1980s that the nationalized sectors started to shift their focus in order to become more market oriented.110 With new Member States in the Union, new institutions and new powers the first energy package came to exist, laying down the basic rules. Those were mainly conceptual and were not practically organising the rules until the Third Energy Package.111 The Third Energy package already addressed network codes, unbundling and ACERs. This was in 2009 when the Treaty of Lisbon also introduced specific legal basis for energy the Article 194(1). Already then this was a possibility for the EU to highlight the importance of sustainability and how energy can make contribution to this goal.112 Article 194 TFEU, however, still leaves competence to the Member States to determine the general structure of supply of energy.113 Since then new packages have been introduced every five to six years and the Commission monitors national implementation.114 In 2014 the energy sector was already considered as crucial for the internal market and was placed as one of the main objectives of the Commission.115 This is not to say that energy has been harmonized completely, certainly, differences between Member States still exist to a large extent. Currently there is a so-called `regulated competition` system in the current market.116 The Electricity Directive in its Article 3 explicitly provides for the possibility of the Member States to make use of the SGEI exception.117 This Article imposes on Member State the duty to operate SGEI in a way as to ensure that electricity is provided in a manner which is: competitive but secure and environmentally sustainable.118 As was seen in Chapter 1 there is no individual definition of SGEI but this Article 3 seems to have defined what SGEI means in the energy sector specifically. Therefore, energy is one of the few sectors where the SGEI not only operates by virtue of the TFEU but it is also enshrined as an independent concept as well. In the past the Court has established that energy supply is an essential service and that therefore, Member

108 K. Talus, `Development of EU Energy Law and Policy in Introduction to EU Energy Law`, Oxford University

Press (2016) p.2.

109 R. Karova, `Liberalization of Electricity Markets and the Public Service Obligation in the Energy Community`,

Kluwer Law International B.V. (2012) Ch.2.

110 A. Belyi and K. Talus, `States and Markets in Hydrocarbon Sectors`, Palgrave (2015).

111European Commission, `Third Energy Package`(2019). Retrieved from:

https://ec.europa.eu/energy/topics/markets-and-consumers/market-legislation/third-energy-package_en.

Modernization`, Springer Science & Business Media (2014).

113 K. Talus, `Introduction to EU Energy Law`, Oxford University Press (2016) p. 8. 114 A. Belyi and K. Talus, `States and Markets in Hydrocarbon Sectors`, Palgrave (2015). 115 European Commission, `Priorities`, Website of the European Commission (2014).

116 M. Iakovenko, `Article 106(2) or Article 107(3) TFEU? The Compatibility of State Aid for Security of Supply

Projects with the EU’s acquis: A Vision from Energy Community Contracting Party`, Journal of European Competition Law & Practice (2019).

117 Directive 2003/54/EC of the European Parliament and of the Council of 26 June 2003 concerning common

rules for the internal market in electricity and repealing Directive 96/92/EC - Statements made with regard to decommissioning and waste management activities.

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States will be allowed to grant exclusive rights in order to guarantee the service to the citizens.119 Even though the harmonisation by Directives has been considerable, it is still widely accepted that Member States will entrust certain energy companies with exclusive rights and can subsidize them as long as the compensation complies with the Framework.

Even though the SGEI can play an important role, it was demonstrated in the past that Member States can also rely on the more specific provisions in the State aid Article 107 TFEU.120 As an example could be the case of the UK which wanted to rely on Article 106(2) TFEU in order to construct a nuclear reactor.121 Instead of relying on 106(2)TFEU the Commission decided to allow the aid, based on Article 107(3)(c), which allows `aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest`. The subsequent case brought against this decision by two Member States resulted in the Court providing a deep explanation of the compatibility of aid with Article 107(3)(c), which is currently being widely used by many Member States to justify the aid if the SGEI is not available.122

3.2 SGEI and the criterion of security of supply in the energy sector

In different sector areas different considerations play a role in determining the legality of the SGEI.123 In the Almelo case regarding the energy sector the Court established that an aid granted to an undertaking falls within the scope of SGEI as it fulfils specific conditions.124 It was analysed weather the undertaking was operating with the aim of supplying energy in sufficient quantities that would meet the demand in a specific area at uniform tariff.125 Therefore, the Court does make an assessment of the actual aim of the State aid measure and whether or not the aim will meet the need in the country to a sufficient extent. The Court has been also seen to acknowledge the valid use of SGEI for the energy services in order to safeguard the provision of energy at the rate which is as low as possible.126 This shows that Member States will have a wide margin of discretion of providing aid to energy companies as long as the aim of the aid is to provide energy that is accessible and meets the actual need of the population.

120 Ibid. p.563

121 Commission Decision (EU) 2015/658 of 8 October 2014 on the aid measure SA.34947 (2013/C) (ex 2013/N)

which the United Kingdom is planning to implement for support to the Hinkley Point C nuclear power station (notified under document C(2014) 7142) (Text with EEA relevance)

122 Judgment of the General Court of 12 July 2018, Case T-356/15, ECLI:EU:T:2018:439, Austria v Commission. 123 R. Karova, `Liberalization of Electricity Markets and the Public Service Obligation in the Energy Community`,

Kluwer Law International B.V. (2012) Ch.2.

124 Judgment of the Court of 27 April 1994, Case C-393/92, ECLI:EU:C:1994:171, Municipality of Almelo and others v NV Energiebedrijf Ijsselmij. para 47-50.

125 Ibid.

126 Judgment of the Court of 23 October 1997, Case C-157/94, ECLI:EU:C:1997:499, Commission of the European Communities v Kingdom of the Netherlands. para 55.

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In Commission v Italy case it was also established that ensuring the stable development of the country will in itself also be a legitimate reason, the price and cost of the supply of energy, however, have to be appropriate.127 In the Castelnou v. Commission case Spain also argued that it was necessary to subsidize their energy companies in order to ensure the security of supply.128 Spain has notified the aid to the Commission, which has held that the aid provided to 10 power plants constitutes State aid, which is in line with the SGEI exception.129 After a subsequent complaint the General Court upheld the position of the Commission, ruling that the SGEI is in line with the current energy rules.130

127 Judgment of the Court of 23 October 1997, Case C-158/94, ECLI:EU:C:1997:500, Commission of the European Communities v Italian Republic. para 50-60.

128 Judgment of the General Court, 3 December 2014, Case T‑57/11,ECLI:EU:T:2014:1021, Castelnou Energía, SL v European Commission. para 288.

129 M. Iakovenko, `Article 106(2) or Article 107(3) TFEU? The Compatibility of State Aid for Security of Supply

Projects with the EU’s acquis: A Vision from Energy Community Contracting Party`, Journal of European Competition Law & Practice (2019).

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3.2 SGEI concept applied to the telecommunication sector

Similarly to the energy sector, the telecommunications used to be a nationally integrated domain before the European de-regulation shift towards liberalized sectors.131Liberalization in this sector was progressive, first Directive touching upon satellite communications and TV networks and then with the Directive 96/19 all remaining monopolies in the sector.132 It was established by the Court in the British Telecom ruling that those national undertakings providing telecommunication services were to be considered as undertakings.133 This alone would already seem to make the telecommunications sector much easier to navigate than health care, where the ambiguity starts already on establishing weather or not the competition rules apply at all. The Commission however, legislating on the basis of article 106(3) took it a step further by abolishing the nationalization on telecommunication services. This led to the liberalization of the sector of the telecommunications sector to a much greater extent than what is seen in health care. Since the telecommunications and the Information Communication Sector (ICT) have been liberalized and are now mostly provided for by the market itself, without the interference of the State the sector where State aid would be the most used nowadays are the broadband services.134 The Commission established the so called Broadband Guidelines in which the SGEI is described.135

Broadband services have been the main area where the Member States have been invoking the SGEI since.136 On this topic the Commission has elaborated its further guidelines used for determining the appropriate compensation for PSO.137 This Guideline limits the provision of SGEI to a considerable extent by completely prohibiting the State from doing so in case where there are two and more competitive providers on the market already. In the telecommunication and media sector the compatibility of State aid is also assessed trough the criterion of cultural heritage and cultural development objectives.138 Especially for broadband services then, the specific provision of Article 107(3)(d) could be used instead of relying on the SGEI exception. This shows that in telecommunication and broadcasting services the assessment of State aid goes beyond the mere assessment of undertakings and provision of services. In those cases also the general context of the necessity to satisfy cultural,

p.7.

132 Commission Directive (EC) 96/19 amending Directive 90/388/EEC with regard to the implementation of full

competition in telecommunications markets [1996] OJ L 74/13.

133 Judgment of 1985, C- 41/83, ECR 873 Italy v Commission (British Telecom).

135 Communication from the Commission, ` EU Guidelines for the application of State aid rules in relation to the

rapid deployment of broadband networks` OJ C 25 (2013)

p.7.

137 European Commission, ‘Communication from the Commission, Community Guidelines for the application of

State aid rules in relation to rapid deployment of broadband networks’, OJ C 235, of 30.09.2009, pp. 7-25. Cf. A. Kliemann and O. Stehmann,’ ‘EU State Aid Control in the Broadband Sector—The 2013 Broadband Guidelines and Recent Case Practice’, (2013) 12 European State Aid law Quarterly 493–515.

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democratic, informative needs of the society through which the citizens can develop their values. This possibility of using a different provisions could, however, be seen as a way to compensate for the rules of Altmark, which would be very strict in most of telecommunication cases as they would not allow for the SGEI because the conditions of the test would not be fulfilled.139 The Commission itself admits that so far the Member States have not been successful at defending the SGEI in broadband services.140 In addition, since the marker itself is fully liberalized an SGEI cannot be granted as an exclusive right to a single provider in line with Article 106(1), this makes the situation in telecommunications different from the one in energy, where, as discussed above, it is still generally accepted that energy companies can be granted exclusive rights pursuant to Article 3(2) of the 2009 Directive.141

3.3 Comparison of the SGEI in the different sectors

To conclude, the telecommunication sector is not assessed in a different manner per se, but the individual steps of the Altmark judgment reveal different sensibilities in fulfilling the test. As was seen in Chapter II health care services will already stumble upon the definition of undertaking, whereas for the energy sector the crucial step will be the security to supply. The health care sector has the advantage that in that sector it could be the easiest for Member States to claim, that the measure does not have any impact on the internal market, since most hospitals are intended for local, regional use. The need to prevent market failure would then be the preferred argument of the Member States to justify the State aid in energy sector.142 The specificity of telecommunications is in the need to protect cultural heritage and the issue of how much compensation should be provided for this and to whom.

139 Ibid.

140 European Commission, ` Public service broadcasting and state aid – frequently asked questions`(2005).

Retrieved from: https://ec.europa.eu/commission/presscorner/detail/en/MEMO_05_73.

141 Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of the

use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC (Text with EEA relevance)