Services of General Economic Interest,State Aid,and Public Procurement

Services of general economic interest (SGEI) are of great importance in all the Member States of the European Union. Their significance has been established in Articles 16 and 86 of the EC Treaty. The Altmark judgement of the European Court of Justice (ECJ) of July 2003 marked a new stage in the issue of compensation for SGEI. The ECJ held that compensation does not constitute State aid if the following conditions are met: the recipient undertaking must actually have public service obligations to discharge and the obligations must be clearly defined; the parameters on the basis of which the compensation is calculated must be established in advance in an objective and transparent manner; the compensation does not exceed what is necessary to cover the costs incurred in the discharge of public service obligations; where the undertaking which is to discharge public service obligations is not chosen pursuant to a public procurement procedure, the level of compensation needed must be determined on the basis of an analysis of the costs which a typical undertaking, well run and adequately provided with means of transport so as to be able to meet the necessary public service requirements, would have incurred in discharging those obligations. These four conditions leave much room for interpretation by the Member States. With regard to the last condition it seems that the ECJ promotes the use of a public procurement procedure when discharging an undertaking with SGEI. It nevertheless leaves the option to use a calculation of the costs which a typical undertaking would have incurred in discharging the public service obligations. The problem here is that the ECJ does not explain what kind of undertaking should be regarded as a “typical one” and which parameters should be used in the analysis of the costs. Making use of a public procurement procedure will give the Member States more certainty that the compensation they have granted will not be regarded as State aid. By promoting the use of public procurement procedures when discharging an undertaking with the provision of SGEI, the ECJ limits the freedom of the Member States to organise their SGEI. On the other hand, the Altmark judgement gives more freedom to the Member States to define their SGEI. In the Enirisorse case and the Danske Busvognmaend case the Altmark conditions were applied.