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FFSA and others v Commission of the European Communities
Court of First Instance, case T-106/95
Judgment of 27 February 1997

State aid; Article 87(1) with Article 86(2)
Article numbers refer to the 1997 consolidated version of the EC Treaty.

The case was brought by a number of insurers' associations as a challenge against a finding by the Commission that some tax concessions given by the French State to La Poste, a postal operator and financial services provider, were justified under (what is now) Article 86(2).

The Court's judgment was, overall, in favour of the Commission.

The Court rejected the Commission's theory that payments that are justified by a public service purpose under Article 86(2) do not constitute State aid under Article 87(1) (see paragraphs 172 and 199). This issue was revisited in 2003 in Altmark.

The basis for the Commission's finding that Article 86(2) gave a justification for the aid is an examination of the overall financial position of La Poste. The Commission had concluded that the aid was lower than the losses incurred by La Poste, and presumed that these losses were attributable to public service obligations such as providing a universal postal service in rural areas. The Court considered such an approach to be a reasonable exercise of discretion by the Commission, given that no better data were available (or were required to be available).

The judgment includes at paragraph 173 the following wording taken from the Port of Genoa ECJ ruling:

173. Because Article 86(2) of the Treaty lays down a derogating rule, it must be interpreted restrictively. So, in order that the derogation from the application of the rules of the Treaty provided for by that provision may apply, it is not sufficient that the undertaking in question has been entrusted by the public authorities with the operation of a service of general economic interest: the application of the rules of the Treaty, specifically those of Article 87, must also obstruct the performance of the particular tasks assigned to the undertaking and the interests of the Community must not be affected.

Taken at face value, this would appear to set a test for the overall applicability of Article 86(2) to particular undertakings. However, the reasoning in the judgment is clear that public service responsibilities entrusted to undertakings as envisaged by Article 86(2) act as a justification for specific conduct (here, State aid), and not a basis for any blanket disapplication of the Treaty rules (here, Article 87) in particular cases. The dangers associated with the above wording, if taken out of the context of the judgment, are noted in more detail on the Port of Genoa page.

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Last changed by Franck at 9:51 PM on Monday 14 November 2005.

Reference for this page:
Reckon Open "FFSA" 2005-11-14T21:51:30
Link within Reckon Open: [[FFSA]]