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Andreas Bartosch lecture, 5 May 2005

This entry was added to on 13 May 2005.
Full blog table of contents available at Contents | viewpoint: Franck.

"The treatment of SGEI post Altmark"

Somewhat belatedly, some brief notes on a lecture given on 5 May 2005 at King's College London by Andreas Bartosch, a partner in the German law firm Haver & Mailänder, on the assessment of State aid to services of general economic interest after the Altmark judgment.

Dr Bartosch's central thesis was that the Altmark judgment had not been applied in practice, and was not likely to be applied in the future because it sets an excessively demanding "efficiency" test (the fourth condition in the judgment) for funding given to a public service provider (other than through a competitive tender) not to be classified as State aid under Article 87(1).

Translating this into the terminology of my earlier article Public services and competition law | viewpoint: Franck, he was therefore arguing that Governments rarely act as efficient market purchasers of public services in practice, and instead will need to rely on Article 86(2) as justification for State aid on the basis of "necessary" costs, as opposed to the "efficient" costs envisaged in the Altmark criteria.

He recalled the debate before the Altmark judgment as to whether Article 86(2) had any role to play in justifying State funding of public services. His preference would have been for the criteria to be used to assess whether there is aid under Article 87(1) to be the same as the Article 86(2) criteria, so that Article 86(2) would have become redundant. But the ECJ ruled otherwise.

He then highlighted the practical consequences of the distinction between a no-aid finding under Article 87(1) and a justification finding under Article 86(2). In the former case there was no notification requirement, whereas if there was aid, even if it was cleared, then there was an obligation (confirmed in case law) to notify it to the Commission. In theory, the consequences of failing to notify could be extremely adverse, since competitors would be entitled to apply to national courts to seek repayment of the aid, on the face of it even if the aid in question would have been found justified under Article 86(2). Thus the Altmark ruling could open the door to a lot of private litigation if there were many aid schemes that had not been notified as they were thought (pre-Altmark) not to be aid, but which do not in fact meet the Altmark criteria, in particular the "efficiency" test. He suggested that this might be the position in Germany.

He also argued that future decisions should take account of the ECJ judgment in Chronopost, where assistance given by the French State-owned Post Office to its parcels/courier business Chronopost was considered not to be State aid even though it was not on hypothetically competitive terms (see Chronopost for a review and links to the judgment). The ECJ's grounds for not imposing an Altmark-like test in the Chronopost case (the ruling was made three weeks before the final Altmark judgment) was that the Post Office has such a unique asset in the form of its national network that it was not sensible to imagine competition in the supply of the services that it was offering to Chronopost by granting access to this asset.

I was not completely convinced that the Chronopost precedent could be applied to the assessment of public funding to public services, and its relevance was subsequently questioned by someone else during the questions and answers session. Dr Bartosch argued that despite the differences in context, the Chronopost case showed that the efficiency test had his limits. But his reasoning seemed predicated on the idea that efficiency can only be assessed through comparisons with the outcome of a (hypothetical) competitive market, whereas my reading of Altmark is that the question is whether the funding is based on the costs of a (hypotehtical) reasonably efficient operator, a concept which, despite its obvious difficulties, is not meaningless and is routinely used in practice as the basis for setting price controls in utility sectors such as water or energy networks (where a hypothetical competitive market would not provide a meaningful or relevant benchmark).

There was also an inconclusive discussion on where the burden of proof for the efficiency test might rest, and whether the assessment of whether funding is a State aid according to the Altmark criteria might become as involved and complex a process as an old-style Competition Commission inquiry into the efficiency of public enterprises (under the now repealed Competition Act 1980) or a price control review.

Overall, it was an interesting lecture providing a somewhat different perspective on Altmark than the one I had developed — and which is reflected in Public services and competition law | viewpoint: Franck.


Entry added by Franck Latrémolière on 13 May 2005

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Last changed by Franck at 8:22 PM on Saturday 2 July 2005.

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Reckon Open "Andreas Bartosch lecture 5 May 2005 | viewpoint: Franck" 2005-07-02T20:22:39