(1)

On 6 August 1999, the Commission decided to initiate the procedure laid down in Article 108(2) of the Treaty on the Functioning of the European Union (‘TFEU’) in respect of aid paid on the basis of the initial public service contracts (‘the initial Conventions’) to the six companies that formed the Tirrenia Group at the time (2).

(2)

During the investigation phase, the Italian authorities requested the Tirrenia Group case to be split up, so that priority could be given to reaching a final decision concerning only Tirrenia di Navigazione (‘Tirrenia’). This request was motivated by the Italian authorities’ plan to privatise the Group, beginning with Tirrenia, and their intention to speed up the process in relation to that company.

(3)

The Commission acceded to the Italian authorities’ request, and by Commission Decision 2001/851/EC (3) it closed the procedure initiated in respect of the aid awarded to Tirrenia (‘the 2001 Decision’). The aid was declared compatible subject to certain commitments by the Italian authorities.

(4)

By Commission Decision 2005/163/EC (4) (‘the 2004 Decision’), the Commission declared the compensation granted to the Tirrenia Group companies other than Tirrenia (5) to be partially compatible with the internal market, partially compatible conditional upon the respect of certain commitments by the Italian authorities, and partially incompatible with the internal market. The decision was based on accounting data spanning from 1992 to 2001 and included conditions to ensure the compatibility of the compensation throughout the entire duration of the initial Conventions (i.e. until 2008).

(5)

By Judgment of 4 March 2009 in cases T-265/04, T-292/04 and T-504/04 (6) (‘the 2009 Judgment’) the General Court annulled the 2004 Decision.

(6)

On 5 October 2011, the Commission opened a new formal investigation procedure in respect of various additional measures adopted by Italy in favour of the companies of the former Tirrenia Group (‘the 2011 Decision’). The investigation concerned, inter alia, the compensations granted to Siremar – Sicilia Regionale Marittima (‘Siremar’) for the operation of a number of maritime routes as of 1 January 2009, and the privatisation process of the Siremar business branch (see Section 2.3.3).

(7)

The 2011 Decision was published in the Official Journal of the European Union (7). The Commission invited interested parties to submit their comments on the measures under investigation.

(8)

Italy submitted its reply to the 2011 Decision by letter of 15 November 2011. As concerns the measures subject to this Decision, the Commission also received comments from Società Navigazione Siciliana SpA (‘SNS’), Pan Med Lines S.r.l. (‘Pan Med’), and Grandi Navi Veloci SpA (‘GNV’) (see Section 5). It forwarded them to Italy, which had the opportunity to react.

(9)

On 10 January 2012, the Italian authorities formally notified to the Commission, allegedly for reasons of legal certainty, the draft public service contracts (‘Conventions’) that any future acquirer of the Tirrenia and Siremar business branches was required to sign and on the basis of which compensation for the provision of public service would be paid.

(10)

On 7 November 2012, the Commission extended the investigation procedure, inter alia, in respect of (i) the illegal prolongation of rescue aid granted to Siremar, (ii) potential aid to Compagnia delle Isole (‘CdI’), the first acquirer of Siremar’s branch, in the context of the privatisation of the latter and (iii) public service compensations to be paid to CdI under the new Convention concluded with the Italian State. On 19 December 2012, the Commission adopted an amended version (8) of that Decision (the ‘2012 Decision’, when referred to together with the 2011 Decision, the ‘2011 and 2012 Decisions’).

(11)

The 2012 Decision was published in the Official Journal of the European Union (9). The Commission invited interested parties to submit their comments on the measures under investigation.

(12)

Italy submitted its reply to the 2012 Decision by letters of 7 and 13 December 2012. As concerns the measures subject to this Decision, the Commission received comments from Pan Med Lines S.r.l. (‘Pan Med’), Siremar, SNS and CdI (see Sections 5 and 6). It forwarded them to Italy, which had the opportunity to react.

(13)

On 5 October 2012, the Commission contracted Ecorys Netherlands BV (‘Ecorys’) to provide it with an estimation, based on two alternative scenarios, of the market value of the relevant assets of Siremar put up for sale (see Section 2.3.3.7). On 4 September 2013, Ecorys submitted its final report (‘the First Ecorys Report’). On 27 September 2013, the Commission forwarded this report to Italy. On 18 November 2013, upon request of the Italian authorities, the Commission provided an Italian translation of the Ecorys Report. On 17 December 2013, Italy submitted its comments, including a counter-valuation by its own independent expert, Banca Profilo SpA.

(14)

On 24 June 2013, the Commission sent a letter to several companies operating in the maritime sector, asking on a voluntary basis for detailed information on routes operated by Siremar in the period 2009-2012 and the conditions of its privatisation. Only CdI, which was operating the new Convention at the time, replied.

(15)

By Commission Decision (EU) 2018/261 of 22 January 2014 (10) (‘the 2014 Decision’), the Commission closed the formal investigation procedure as concerns certain measures adopted by the Region of Sardinia in favour of Saremar (see recital (36)).

(16)

On 15 October 2014, the Commission’s services met with representatives of Siremar and the Italian authorities. In addition, on 23 October 2014 the Commission services also met with representatives of CdI and the Italian authorities. As a follow up to the latter meeting, on 30 October 2014 CdI provided additional information to the Commission.

(17)

Concerning Siremar, the Commission requested additional information from Italy by letters of 30 January 2012, 16 March 2012, 1 August 2012, 22 November 2012, 12 April 2013, 12 June 2013, 27 June 2013, 11 July 2013, 29 July 2014, 6 November 2014, 16 October 2015, 25 January 2018, 29 March 2018, 31 August 2018, 18 March 2019, 16 October 2019, 31 July 2020 and 29 October 2020.

(18)

Concerning Siremar, Italy submitted additional information by letters of 28 March 2012, 5 October 2012, 23 October 2012, 13 May 2013, 8 August 2013, 19 September 2014, 20 November 2014, 12 December 2014, 12 February 2015, 13 November 2015, 18 April 2016, 2 August 2017, 26 April 2018, 31 May 2018, 29 May 2019, 26 July 2019, 3 January 2020, 24 January 2020, 8 February 2021 and 11 March 2021 (11).

(19)

By Commission Decision (EU) 2020/1411 of 2 March 2020 (12), the Commission concluded the investigation on the Tirrenia Group companies other than Tirrenia, including Siremar, for the period 1992-2008 (the ‘2020 Tirrenia Group decision’). The Commission concluded that the aid granted for the provision of maritime cabotage transport services constituted existing aid, while the aid granted for the provision of international maritime transport services was compatible with the 2011 services of general economic interest (‘SGEI’) Framework (the ‘2011 SGEI Framework’) (13).

(20)

By Commission Decision (EU) 2020/1412 of 2 March 2020 (14), the Commission closed the formal investigation procedure as concerns the measures granted to Tirrenia and its acquirer CIN, for the period 2009-2020 (the ‘2020 Tirrenia/CIN decision’).

(21)

This Decision concerns all the possible aid measures to Siremar, CdI, and SNS as specified in recitals (36) and (37) and as identified in the 2011 and 2012 Decisions, as well as the possible aid granted to Unicredit through the counter-guarantee (see Sections 2.3.3.5 and 3.3.2). The Commission will address all the remaining measures subject to those Decisions, under the case numbers SA.32014, SA.32015 and SA.32016 in separate Decisions. In particular, those remaining measures all concern other companies of the former Tirrenia Group (i.e. Caremar, Laziomar, Saremar and Toremar).

(22)

The Tirrenia Group was originally owned by the Italian State through the company Finanziaria per i Settori Industriale e dei Servizi SpA (‘Fintecna’) (15) and included six companies, namely Tirrenia, Adriatica, Caremar, Saremar, Siremar and Toremar. These companies provided maritime transport services under separate public service contracts concluded in 1991 with the Italian State, in force for 20 years between January 1989 and December 2008 (the initial Conventions). Fintecna held 100 % of Tirrenia’s share capital. Tirrenia wholly owned Adriatica, Caremar, Siremar, Saremar and Toremar (together, ‘the regional companies’). Adriatica, which used to operate a number of routes between Italy and Albania, Croatia, Greece and Montenegro, merged with Tirrenia in 2004.

(23)

The purpose of these public service contracts was to guarantee the regularity and reliability of a large number of maritime transport services, chiefly connecting mainland Italy with Sicily, Sardinia and other smaller Italian islands. To that effect, the Italian State granted financial support in the form of subsidies paid directly to each of the companies of the Tirrenia Group.

(24)

Siremar, fully owned by Tirrenia, operated a series of maritime cabotage routes, both between Sicily and several smaller neighbouring islands and between Milazzo and Naples. The exact routes concerned are described in recital (41).

(25)

The initial Conventions, including the one applicable to Siremar, were prolonged three times.

(26)

Firstly, Article 26 of Decree Law No 207 of 30 December 2008 (‘Decree Law 207/2008’), converted into Law No 14 of 27 February 2009, laid down the prolongation of the initial Conventions, which were initially due to expire on 31 December 2008, until 31 December 2009.

(27)

Secondly, Article 19ter of Decree Law No 135 of 25 September 2009 (‘Decree Law 135/2009’), converted into Law No 166 of 20 November 2009 (‘the 2009 Law’), laid down that, in view of the privatisation of the Tirrenia Group companies, the shareholding of the regional companies, excluding Siremar, would be transferred from the parent company Tirrenia as follows:

(28)

The 2009 Law also specified that new ‘Conventions’ would be agreed between the Italian State and Tirrenia and Siremar by 31 December 2009. Likewise, the regional services would be enshrined in new ‘Public Service Contracts’, to be agreed between Saremar, Toremar, and Caremar and the respective regional authorities by 31 December 2009 (Sardinia and Tuscany) and 28 February 2010 (Campania and Lazio). The new Conventions or Public Service Contracts would be put up for tender jointly with the companies themselves. The new owners of each of these companies would then sign the respective Convention or Public Service Contract (17).

(29)

To that end, the 2009 Law further prolonged the initial Conventions, including the one applicable to Siremar, from 1 January 2010 until 30 September 2010.

(30)

The 2009 Law also laid down fixed annual compensation ceilings for the operation of the services as of 2010 (under the prolongation of the initial Conventions as well as under the new Conventions and Public Service Contracts), at a total amount of EUR 184 942 251, as follows:

Table 1 – Compensation ceilings as of 2010

(31)

Finally, Law No 163 of 1 October 2010 (‘the 2010 Law’), converting Decree Law No 125 of 5 August 2010 (‘Decree Law 125/2010’), laid down the further prolongation of the initial Conventions, including the one applicable to Siremar, from 1 October 2010 until the completion of the privatisation processes of Tirrenia and Siremar.

(32)

In October 2010, a tender procedure was launched to find a buyer for the Siremar business branch (see Section 2.3.3). In this context, reference is made to the Siremar business branch, instead of Siremar, since the tender procedure concerned only those assets and contracts necessary to perform the public service obligations (19) specified in a new Convention to be concluded with the acquirer. Therefore, reference is made to ‘the Siremar business branch’ instead of simply ‘Siremar’. Siremar’s remaining assets such as the fast ship Guizzo, which were used for other purposes, were to be sold via separate procedures. Furthermore, the sale did not result in the transfer to the purchaser of the debts accrued by Siremar until the date of sale. To this date, Siremar in Extraordinary Administration (‘Siremar in EA’) continues to exist as a separate entity albeit with the primary purpose of being liquidated after having reimbursed its creditors.

(33)

Following its successful offer in the tender procedure, on 20 October 2011 CdI signed the contract to acquire the Siremar business branch. Then, on 30 July 2012, the new Convention for the provision of maritime services was signed by Italy and CdI. On this basis, the ownership of the Siremar business branch was transferred from the Italian State to CdI on 31 July 2012.

(34)

However, SNS – the other company that had submitted a bid for the Siremar business branch – challenged the transfer before the Italian administrative tribunals, which ultimately ruled that the tender procedure had to be partially redone, excluding CdI from submitting new bids (see recitals (93) to (100)). Following a confirmation of its earlier bid, SNS thus won the renewed tender procedure, taking over the Siremar business branch and signing the new Convention with Italy on 11 April 2016.

(35)

Since that date, SNS has been operating the routes under the new Convention while Siremar in EA and CdI are both being liquidated.

(36)

The following measures have been subject to assessment in the formal investigation procedure opened by the 2011 and 2012 Decisions (see also Section 3):

(37)

This Decision only deals with measures 1 to 6 as listed in recital (36), as far as they involve Siremar, CdI or SNS. These measures are described in more detail in the following sections.

(38)

Article 1 of the initial Convention with Siremar provided for 5-year plans to detail the ports to be served, the type of vessels to be used and the required frequency of the service. The initial convention with Siremar was amended in 1994 and 1995.

(39)

The first 5-year plan (1990-1994) was approved by Ministerial Decree of 29 May 1990, and applied retroactively as of 1 January 1990. The second plan, covering the period 1995-1999 and approved by Ministerial Decree of 14 May 1996, left the routes and frequencies largely unchanged.

(40)

As for the 2000 – 2004 and 2005 – 2008 periods, no 5-year plans were formally adopted concerning Siremar. Instead, the network of routes and frequencies remained largely the same between 1999 and 2008. Indeed, the Inter-Ministerial Decree of 9 March 2004 (‘the 2004 Decree’) set out limited changes for Siremar, concerning the replacement of old ships and a capacity increase under the same frequencies (22).

(41)

Based on the initial Convention, as prolonged and modified (for selected routes), Siremar operated five bundles of routes all year round between 1 January 2009 and 30 July 2012, with varying frequencies and timings depending on the individual route, type of service (ferry or high-speed), and season of the year, as follows:

(42)

The table below shows the annual compensation paid to Siremar in the period 2009 – July 2012:

Table 2 – Compensation 2009-2012 (EUR)

(43)

The initial Convention (as modified in 1994) provides for the annual public service compensation to be paid as follows: by 1 March of each year, an initial advance payment equivalent to 70 % of the compensation paid the previous year; by 30 June, a second payment covering another 20 %; by 30 November, a final payment covering the balance of the compensation for the relevant year, based on an estimate of future revenues and losses (26). The final results are then verified when the company prepares the yearly statement of accounts. If it turned out that Siremar had received a sum greater than the net cost of the services provided (revenue minus losses), it was required to reimburse the difference within 15 days of the approval of the statement of accounts. After 25 November 2010, by decision of the Interdepartmental Conference on the establishment of the annual subsidy set up under Article 11 of Law No 856/1986 between the Ministry of Infrastructure and Transport (the ‘Ministry of Transport’), the Ministry of Economy, and the Ministry of Economic Development (the ‘Interdepartmental Conference’), any amount of overcompensation is deducted from future advance subsidy payments.

(44)

The compensation was calculated differently in 2009, when compared to 2010, 2011 and 2012 as described below.

(45)

Presidential Decree No 501 of 1 June 1979 (‘Presidential Decree 501/79’) specifies the various elements (revenues and costs) which enter into the calculation of the subsidy paid to maritime public service operators. Furthermore, Law No 856 of 5 December 1986 (‘Law 856/86’) provided for certain alterations to the system of maritime public service obligations in Italy. Regarding the connections with major and minor islands, Article 11 thereof amended the criteria for the calculation of the public service compensation. Indeed, the subsidy had to be calculated based on the difference between the revenues and the costs of the service as determined with reference to average and objective parameters, and had to include a reasonable return on capital. The same Article also lays down that the public service contracts had to include the list of the subsidised routes, the frequency and the types of ships to be used. The subsidies were to be approved by the responsible Ministers. The principles laid down in Presidential Decree 501/79 and Law 856/86 were reflected in the initial Conventions.

(46)

Indeed, for 2009, the compensation for the discharge of SGEI was calculated in accordance with the methodology laid down by the initial Conventions in force since 1991 and prolonged after their initial expiry date of 31 December 2008. In particular, the compensation corresponded to the accumulated net loss on the services operated under the public service regime, to which a variable amount was added, corresponding to the return on capital.

(47)

The various cost elements taken into consideration in order to calculate the compensation defined by the public authorities were the following: acquisition, advertising and accommodation costs, loading, unloading and manoeuvring costs, personnel costs, ship maintenance costs, administrative costs, insurance costs, rent and leasing costs, fuel, taxes and depreciation costs.

(48)

As from 2010, the compensation for the operation of the SGEI has been determined through a new methodology laid down in the CIPE (27) Directive of 9 November 2007 titled ‘Criteria for the definition of the public service obligations and the fare dynamics in the sector of maritime cabotage of public interest’ (‘the CIPE Directive’) (28). According to its Preamble, the CIPE Directive was issued in view of the upcoming privatisation of the public companies operating maritime services under a public service regime (29). The provisions of the CIPE Directive were applied in respect of the services provided by the companies of the Tirrenia Group as of 2010.

(49)

The method laid down in the CIPE Directive allows the companies operating the maritime public service to make an appropriate return. The rate of return on capital (‘return on capital’ or ‘ROIC’) would be calculated on the basis of the weighted average cost of capital (‘WACC’). The required return to equity (30) is to be calculated using the Capital Asset Pricing Model.

(50)

On the basis of that model, the cost of equity is derived as a function of (i) the risk-free rate, (ii) the Beta (an estimate of risk profile of the company relative to equity market) and (iii) the equity risk premium assigned to the equity market.

(51)

In particular, the cost of equity would be calculated by applying a premium for bearing extra risk to the rate of return on risk-free activities. This premium is to be calculated as the risk premium of the market multiplied by its Beta, which measures how risky a specific activity is relative to the market.

(52)

According to the CIPE Directive, the rate of return on risk-free activities corresponds to the average gross yield on benchmark 10-year bonds over the previous 12 months, for which data is available.

(53)

The CIPE Directive sets a 4 % market risk premium. Moreover, in case of a service, which is operated on non-exclusive basis, the presumably greater risk borne by the operator is remunerated with the addition of an extra 2,5 % to the market risk premium.

(54)

However, the amount of compensation paid to Siremar as laid down by the 2009 Law cannot in practice exceed EUR 55 694 895 per year (see recital (30)). Although the 2009 Law caps the annual compensation paid to all Tirrenia companies for the operation of their public service obligations, the CIPE Directive includes certain safeguards to guarantee that those operators are ensured sufficient coverage of operating costs.

(55)

In particular, according to the CIPE Directive, the scope of the services, the maximum fares and the compensation must be defined to grant the service provider full coverage of all the admissible costs, according to the following equation:

VA(RSP) + VA(AI(X)) = VA(CA)

where:

(56)

In case the above equation does not hold, the scope of the subsidised activities could be reduced, alternatively the service organisation (e.g. type of ships) could be reviewed, or the fare ceilings could be modified.

(57)

Furthermore, the fare ceiling applicable to each service, net of taxes and port dues, is adjusted every year on the basis of a price-cap formula as follows:

ΔΤ = ΔΡ – Χ

where:

(58)

The CIPE Directive also specifies that the fare ceiling may be adjusted to reflect variations in fuel costs, taking standard publicly available prices as reference.

(59)

On 16 November 2010, the Commission approved rescue aid to Tirrenia and Siremar (‘the 2010 Decision’) (31). The aid consisted of a guarantee on credit lines provided by private banks for an amount of up to EUR 95 000 000. Italy undertook to communicate to the Commission, no later than 6 months after the authorisation of the rescue aid measure, a restructuring plan or proof that the loan had been reimbursed in full and/or that the guarantee had been terminated.

(60)

Subsequently, the private banks, Banca Infrastrutture Innovazione e Sviluppo (‘BIIS’) and Unicredit, authorised a credit line of EUR 40 000 000 to Tirrenia and Siremar (i.e. EUR 25 000 000 for Tirrenia and EUR 15 000 000 for Siremar), with the maturity date set at 30 June 2011. The State guaranteed that credit line on 15 February 2011.

(61)

The financing was then disbursed as follows:

(62)

Italy informed the Commission that, as the first instalment of the guaranteed loan was disbursed only on 28 February 2011, the 6-month period for its reimbursement according to paragraph 25(a) of the Community guidelines on State aid for rescuing and restructuring firms in difficulty (‘the 2004 Rescue and Restructuring Guidelines’) (32) and to recitals (32) and (47) of the 2010 Decision, would elapse on 28 August 2011.

(63)

Before that date, Tirrenia and Siremar defaulted on the loan and, as a result, on 11 July 2011 BIIS called the State guarantee. On this date, therefore, Siremar held a debt towards the State of EUR 15 121 838,33. This includes both the principal amount of the respective loans and outstanding interest owed to the bank.

(64)

The Bankruptcy Court authorised the inclusion of the Ministry of Economy amongst the preferential (‘prededucibili’) creditors of Tirrenia and Siremar. According to the Italian authorities, the Extraordinary Commissioner entrusted with the management of the company considered at that time that Siremar could reimburse the financing by 28 August 2011, drawing from the proceeds of the planned privatisation of the Tirrenia and Siremar business branches.

(65)

On 25 July 2011, the contract for the sale of the Tirrenia business branch to CIN was signed. However, the transfer of the assets and hence also the payment was delayed, mostly due to difficulties to obtain the necessary merger authorisations (first from the Commission, then by the Italian competition authority, the Autorità Garante della Concorrenza e del Mercato (‘AGCM’). The AGCM, eventually approved the Tirrenia – CIN transaction on 21 June 2012, and the sale was finalised on 19 July 2012. On 20 October 2011, the contract for the sale of Siremar business branch to CdI was signed. However, the transfer of those assets was also delayed, in this case until 1 August 2012 (see recitals (93) to (95)). On 18 September 2012, Siremar repaid its debt to the State, including interest, for a total amount of EUR 15 511 529,35.

(66)

On 23 December 2009, Fintecna published the first call for tenders for the sale of the entire share capital of Tirrenia, including its subsidiary Siremar. On 19 February 2010, 16 expressions of interests had been received from 19 entities. On 4 August 2010, after the failure of the negotiations with the only bidder having submitted a binding offer, Fintecna declared the procedure closed. According to Italy, the negotiations failed due to concerns related to the financial elements of the offer.

(67)

After the failure of the first privatisation attempt, Tirrenia and Siremar, facing severe financial difficulties, were both admitted into the collective insolvency procedure provided for under Italian law for large companies, the so-called extraordinary administration procedure (‘amministrazione straordinaria’) and were soon thereafter declared insolvent. More specifically, Siremar was admitted to the extraordinary administration procedure on 17 September 2010. On 5 October 2010, the Court of Rome delivered judgment No 381/2010 by which it declared Siremar insolvent.

(68)

Unlike the normal bankruptcy procedure, whose primary aim is to liquidate the insolvent company in order to satisfy claims of the creditors, the extraordinary administration procedure, laid down by Decree Law No 270 of 8 July 1999 (‘Decree Law 270/1999’), is a specific insolvency procedure for large companies, which aims to safeguard the assets and ensure the continuation of the business.

(69)

Under this procedure, the management of the insolvent company is transferred to an Extraordinary Commissioner who is appointed by the responsible Ministry. The Extraordinary Commissioner proposes a recovery plan of the business in question, either by its restructuring or by the sale of its assets. The plan is subject to previous authorisation by the responsible Ministry, whilst considering the opinion of a Supervisory Board (whose members are experts appointed by the Ministry).

(70)

The Decree Law No 347 of 23 December 2003 laying down urgent measures for the restructuring of large insolvent companies (‘Decree Law 347/2003’), converted with amendments into Law No 39 of 18 February 2004 (the ‘Marzano law’), regulates the extraordinary administration procedure applicable to large insolvent companies, which intend to undergo this restructuring procedure. These companies also need to satisfy cumulatively certain criteria concerning the number of employees in the preceding year and the level of indebtedness.

(71)

The procedure requires that the insolvent company file both an application to the Italian Minister for Economic Development and a petition to the competent bankruptcy Court. The Ministry then decides on the admission of the insolvent company to the procedure and appoints the Extraordinary Commissioner under the supervision of the Supervisory Board, while the bankruptcy Court ascertains the state of insolvency of the company.

(72)

Within 180 days of his appointment, the Extraordinary Commissioner must submit a restructuring plan to the Ministry. The ordinary bankruptcy procedure is only triggered in case the Ministry does not approve such restructuring plan and the alternative asset sale procedure is not viable.

(73)

Article 4 (4-quater) of Decree Law No 134 of 28 August 2008 (‘Decree Law 134/2008’), converted into Law No 166 of 27 October 2008, concerning urgent measures for the restructuring of large insolvent companies (‘Disposizioni urgenti in materia di ristrutturazione di grandi imprese in crisi’), introduced several amendments to the Marzano law. These amendments are applicable to companies providing essential public services, and concern, inter alia, the possibility for the Extraordinary Commissioner to identify a buyer of the insolvent company’s assets through a negotiation procedure with parties that guarantee both continuity of the public service on the medium term and an expeditious intervention. Decree Law 134/2008 specifies that the sale price cannot be lower than the market value of the assets as set by an independent expert appointed by Ministerial decree.

(74)

Decree Law 134/2008 also introduced the possibility to pursue an asset disposal plan immediately, as compared to the previous regime, which required that the company first submit a restructuring plan to the Ministry. Finally, Decree Law 134/2008 lays down that, in case neither an asset disposal plan nor a restructuring plan can be implemented or approved by the Ministry, the company will undergo the ordinary bankruptcy procedure.

(75)

On 4 October 2010, the call for tenders for the sale of the Siremar business branch (33) bundled together with the new 12-year Convention was published. The aim of this call was to check whether there were any potential national or international entities interested in acquiring the Siremar business branch that were able to guarantee the continuity of the transport services. It was published on Siremar’s website, several newspapers (34) and on selected specialist websites (35). The deadline for submitting expressions of interest in the purchase of the Siremar business branch was 20 October 2010.

(76)

On expiry of the deadline, six parties (two of which jointly) had submitted five expressions of interest to participate in the Siremar tender. All of these parties demonstrated that they met the requirement set out in the tender notice. Therefore, the Extraordinary Commissioner invited them to perform an in-depth due diligence check on the Siremar business branch. Access to the relevant documentation was granted on the condition that the interested parties signed confidentiality agreements.

(77)

One of the six parties decided to not take part in the due diligence phase (36). During that phase, the remaining five parties (two of which jointly bidding) accessed the virtual data rooms containing the following:

(78)

By Ministerial Decree of 4 February 2011, the Minister for Economic Development appointed Banca Profilo SpA as the independent expert tasked with performing a valuation of both the Tirrenia and the Siremar business branches under Article 4(4-quater) of Decree Law 347/2003. On 8 March 2011, Banca Profilo SpA estimated the value of the Siremar business branch as equal to EUR 55 million. This information was uploaded to the data room for all potential bidders before expiry of the deadline for the submission of binding offers.

(79)

On 15 March 2011, at the expiry of the initial deadline for submission of binding offers, the Extraordinary Commissioner of Siremar noted that it had not received any offer consistent with the provisions of the tender regulations. The procedure was therefore reopened, with a new deadline of 5 April 2011. At that date, CdI issued an offer of EUR 60,1 million, while Ustica Lines asked for a prolongation of the deadline, to secure the necessary financing to issue its own offer. The extraordinary commissioner uploaded CdI’s offer to the data room and invited the other participants to improve it by 23 May 2011. The following offers were received by that date:

(80)

CdI was set up for the purpose of bidding in the procedure by Mediterranea Holding di Navigazione SpA (‘Mediterranea’), Davimar Eolia Navigazione S.r.l. (‘Davimar’), Navigazione Generale Italiana SpA (37) (‘NGI’), Lauro.it SpA, Isolemar S.r.l. and Riccardo Sanges & C. S.r.l. (38) Mediterranea held a 60 % equity stake in CdI (39). The other shareholders who held the remaining 40 % of CdI’s equity were privately owned. Mediterranea had participated in the procedure for the first privatisation attempt of Tirrenia (see recital (66)) and was owned by the Region of Sicily (‘Sicily’) (43,02 %), by Lauro.it SpA (34,36 %), by Isolemar S.r.l. (14,61 %) and by Acies S.r.l. (8,11 %).

(81)

SNS was set up for the purpose of bidding in the procedure by Ustica Lines SpA (40) and Caronte & Tourist SpA (41) (50 % share each).

(82)

On 26 July 2011, following further requests for information to the two bidders, with deadline of 18 July 2011, the financial advisor to the procedure made the following remarks:

(83)

On 3 August 2011, Sicily issued an unconditional and irrevocable counter-guarantee to Unicredit, against no remuneration, for EUR 40 million. That counter-guarantee notes that Unicredit had conditioned the granting of a guarantee to CdI for EUR 39 million on the granting of a counter-guarantee for EUR 40 million by Sicily.

(84)

On 5 August 2011, CdI forwarded to the Extraordinary Commissioner a comfort letter, issued on the same day by Unicredit, by which the bank undertook to guarantee the deferred instalments of the sale price offered by CdI up to EUR 39 million (42). Unicredit’s comfort letter spells out that the guarantee was conditional on: 1) the signing by CdI of the sale contract of the Siremar business branch before the deadline of 31 December 2011, and 2) the verification of the powers of the General Accountant of Sicily to issue the counter-guarantee.

(85)

The financial advisor and other consultants involved in the procedure confirmed that the documents had been submitted by CdI after the deadline of 18 July 2011 for the submission of additional clarifications and documentary evidence and could not therefore be taken into account. Consequently, on 29 August 2011, the Supervisory Board to Siremar in EA approved the awarding of the business branch to SNS and on 1 September 2011, the Extraordinary Commissioner asked the responsible Ministry to authorise that awarding.

(86)

On 2, 6 and 7 September 2011 Sicily sent letters to the same Ministry, stressing that CdI had offered the highest price and was partly owned by Sicily, which should be considered a sufficient guarantee as to its financial stability. Sicily also sent directly to the Ministry: Unicredit’s comfort letter, its own counter-guarantee, and legal advice testifying to the powers of the General Accountant to issue that counter-guarantee. On 8 September 2011, the Ministry asked the Extraordinary Commissioner to provide further information and clarifications on CdI’s submission, without prejudice to the lateness of submission of the documents concerned. On 22 September 2011, the financial advisor communicated to the Extraordinary Commissioner that, notwithstanding non-observance by CdI of the procedural deadlines, the new documentation reduced CdI’s risk profile considerably, which meant that the present value of SNS’s offer could no longer be considered more advantageous than that of CdI.

(87)

On 26 September 2011, the Ministry inquired with the Presidenza del Consiglio on whether the counter-guarantee of CdI’s financial obligations by Sicily could raise any State aid concerns. The Presidenza del Consiglio confirmed that, since Unicredit had conditioned its decision to provide a guarantee on a counter-guarantee by Sicily, the counter-guarantee needed to be assessed under the Commission Notice on the application of Articles 87 and 88 of the EC Treaty to State aid in the form of guarantees (‘the Guarantee Notice’) (43).

(88)

On 27 September 2011, the Extraordinary Commissioner requested authorisation from the Ministry to launch an additional phase of the procedure. After receiving such authorisation, on 29 September 2011 the financial advisor invited CdI and SNS to submit new and improved binding offers by 13 October 2011.

(89)

CdI submitted a new and improved offer, structured as follows:

(90)

SNS confirmed the offer it had submitted on 23 May 2011.

(91)

On 13 October 2011, the extraordinary administration and its consultants noted that the bid by CdI was consistent with the value of the business branch as estimated by Banca Profilo and was financially more advantageous than the offer made by SNS. Furthermore, the business plan attached to CdI’s offer was compliant with the requirements and there was adequate evidence to prove that CDI could ensure the continuity of the maritime public service. Therefore, the Extraordinary Commissioner asked the Ministry to award the tender to CdI.

(92)

On 14 October 2011, the Supervisory Board delivered its favourable opinion and the Ministry authorised the award of the tender to CdI.

(93)

On 20 October 2011, Siremar’s Extraordinary Commissioner and CdI signed the contract for the sale of the Siremar business branch. However, on 22 November 2011, SNS appealed the Extraordinary Commissioner’s decision to award the business branch to CdI before the Tribunale Amministrativo Regionale of Lazio (‘TAR’).

(94)

On 7 June 2012, the TAR of Lazio ruled that the counter-guarantee by Sicily to Unicredit of part of the sale price offered by CdI constituted State aid, irrespective of whether it had been ultimately executed or withdrawn (‘decision 5172/2012’). The TAR declared the sale procedure of the Siremar business branch partially void (44).

(95)

Mediterranea appealed that decision at the Consiglio di Stato (the ‘CdS’). By interim order of 18 July 2012, the latter suspended the execution of decision 5172/2012 (without ruling on the substance of the appeal). Therefore, on 30 July 2012, CdI signed the new Convention for the operation of the public service, and on 1 August 2012, the Extraordinary Commissioner transferred the Siremar business branch to CdI.

(96)

On 7 February 2014, the CdS ruled on the substance of the appeal lodged by Mediterranea and concluded that the counter-guarantee provided by Sicily had not observed the transparency and non-discrimination principles laid down by the national legislation (‘decision 592/14’). In its decision, the CdS ruled that the counter-guarantee had jeopardised the full effectiveness of the non-discrimination principle between the two participants to the tender and declared, therefore, the sale procedure of the Siremar business branch partially void (by annulling the act of award of the tender to CdI). In particular, the guarantee by Unicredit was de facto conditional on the issuing of the counter-guarantee by Sicily, even if the former did not explicitly mention the latter (see Section 2.3.3.5).

(97)

The sale contract signed by CdI with the Italian State following the tender was not annulled by the judgment of the CdS. Indeed, the latter only annulled the award, as it was an administrative act, but neither annulled the sale contract nor the new Convention, which were civil law contracts. Therefore, CdI continued operating the public service as laid down in the new Convention (45).

(98)

On 9 February 2015, upon request from the Italian authorities and SNS, the TAR of Lazio ruled on the interpretation of its earlier decision of June 2012 and the decision of February 2014 by the CdS (‘decision 2351/15’). In its decision, the TAR of Lazio ruled that the last phase of the Siremar sale procedure needed to be re-launched from 29 September 2011 onwards (46). The TAR of Lazio confirmed that CdI should be excluded from this new phase of the procedure. The TAR of Lazio also ruled that the Ministry of Economy had to take the necessary measures to allow the re-launch of the procedure within 120 days from the date of the judgment.

(99)

In order to implement the judgment of the TAR of Lazio, Siremar in EA:

(100)

On the same date, SNS and the Ministry of Transport signed the new convention.

(101)

The sale contract between Siremar in EA and SNS defines the Siremar business branch transferred as the branch of the company dedicated to the provision of maritime transport services under the ongoing public service obligations (48). In particular, Article 4 spells out that the assets of the business branch are listed in an annex, and cover all intangible (49) and tangible assets (50) used by the company in the discharge of its public service obligations.

(102)

Under Article 5 of the sale contract, the EUR 55,1 million sale price is payable as follows:

(103)

Article 7(6)(d) of the sale contract lays down that the buyer is capable, in compliance with Article 4, paragraph 4-quarter of Decree Law 347/2003, to guarantee continuity of service in the medium term.

(104)

Article 7(9) of the sale contract spells out that the buyer will make new job offers to all the administrative and crew personnel occupied in the operation of the public service obligations, taking into account the qualifications acquired and/or the equivalence of the job descriptions, as well as possible agreements with the trade unions. That article also spells out that, as required by Article 63(2) of Decree Law 270/1999, the buyer has to refrain from any non-disciplinary dismissals for a 2-year period (the ‘workforce condition’). Under Article 7(11) and (12) of the sale contract, the buyer is obliged to regularly inform the seller on the observance of these obligations, with significant penalties to be paid in case of breaches.

(105)

Article 8(12) of the sale contract spells out that, in accordance with Article 63(5) of Decree Law 270/1999, the new owner will not be liable to repay any of the debts incurred by Siremar before the transfer of the business branch.

(106)

On 13 October 2011, CdI’s shareholders committed to increase its capital up to EUR 21 480 236. On 3 February 2012, Mediterranea, the majority shareholder with over 60 % of CdI’s shares, undertook a capital increase itself, which resulted in Sicily no longer being a majority shareholder, with its share being reduced to approximately 43 %.

(107)

CdI’s capital increase happened while Sicily was the majority shareholder of Mediterranea, which in turn was (and still is) the majority shareholder of CdI. The objective of the capital increase was to acquire the Siremar business branch and operate the new convention.

(108)

In the course of the privatisation, Sicily issued a counter-guarantee in favour of Unicredit.

(109)

Firstly, on 3 August 2011, as described in recital (83), Sicily issued a counter-guarantee in favour of Unicredit, which allowed the latter to issue 2 days later a first comfort letter undertaking to guarantee the deferred instalments of the sale price offered by CdI (i.e. EUR 39 million). That letter explicitly conditioned the validity of its guarantee to the validity of the counter-guarantee by Sicily.

(110)

Secondly, on 7 October 2011, in a later stage of the procedure, Sicily confirmed its availability to counter-guarantee the deferred payments of the new sale price up to an amount of EUR 34,6 million. On 12 October 2011, Sicily modified the counter-guarantee of 3 August 2011, guaranteeing payments up to EUR 36 million. On the same day, Unicredit issued the second comfort letter that was included in the successful offer by CdI described in recital (89), without mentioning that the counter-guarantee by Sicily was still standing, as amended.

(111)

On 20 November 2011, Sicily’s counter-guarantee was replaced by a counter-guarantee by all of CdI’s shareholders. On 31 January 2012, Sicily sent a letter to Siremar in EA stating that the counter-guarantee of 12 October 2011 is to be considered recalled. On 3 February 2012, Unicredit issued a note confirming that its guarantee of the deferred instalments of the sale price was not conditional on a counter-guarantee by Sicily.

(112)

As described above (see recital (78)), Banca Profilo was appointed by the Minister for Economic Development as the independent expert tasked with performing a valuation of the Siremar business branch under Article 4(4-quater) of the Marzano law. On 8 March 2011, Banca Profilo issued a report in which it described the valuation methodologies and data it had used, which included Siremar’s own business plan for the period 2011-2022. This report included an estimated range of values for the Siremar business branch.

(113)

Banca Profilo’s valuations are based on several assumptions including, most notably, that the new public service contract would apply until its expiry and that as a result the Siremar business branch would receive public service compensation for operating the maritime transport connections laid down in that contract. In its valuation report, Banca Profilo uses the Discounted Cash Flow (‘DCF’) and the Economic Added Value (‘EAV’) methods as its main methodologies and to the Market Multiples and Equity methods as secondary methodologies for control purposes.

(114)

Under the DCF methodology, Banca Profilo takes into account: (i) the cash flows generated until the expiry date of the new Convention; (ii) the liquidation value of the Siremar business branch on the day of expiry of the new Convention, based on the assumption that it will not be possible to continue the operations after that date. Under the EAV methodology, Banca Profilo assesses: (i) the adjusted book value; (ii) the badwill/goodwill; (iii) the liquidation value of the Siremar business branch on the day of expiry of the new Convention. This assessment relies on data from the company’s industrial plan and on Banca Profilo’s own calculations.

(115)

With regard to the secondary methodologies, these entailed the following. The Market Multiples analysis is based on Banca Profilo’s calculations using Bloomberg data for nine comparable maritime transport companies. The Equity Method consists of an appraisal of the net value of the assets as recorded in the balance sheet but with some adjustments on assets and liabilities and adding the estimated value of immaterial assets.

(116)

Banca Profilo concluded that the value of the Siremar business branch at the time of its appraisal was in the range of EUR 55 to 61 million. As a result, the minimum price for this company would have to be set at EUR 55 million.

(117)

In the course of the investigation, the Commission entrusted Ecorys with the task of establishing the market value of the Siremar business branch. The consultant was asked to (i) establish the market value of the Siremar business branch bundled with the new Convention, (ii) establish the market value of the business branch without any conditions attached and (iii) establish whether the workforce condition depressed the sale price.

(118)

To determine the value of the Siremar business branch bundled with the new Convention, the First Ecorys Report applied the main methodologies also used by Banca Profilo. In particular, Ecorys applied the Discounted Cash Flow and the Economic Value Added methodologies.

(119)

Firstly, Ecorys concluded that, had the Siremar business branch been sold without any conditions attached, and in particular without the new contract for the operation of the public service, the company would have been sold at its liquidation value (51). i.e. EUR – 0,3 million. Ecorys noted that this liquidation value is negative and indicated that therefore immediate liquidation (in essence a sale of the ships) was not a viable alternative for a market economy operator. Ecorys based this conclusion on the assumption that the Siremar business branch could not profitably continue its operations without public service compensation. Ecorys described the public-service routes operated by both Tirrenia and Siremar as ‘heavily loss-making operations characterised by low passenger volumes and fully dependent on funding from the Conventions’. Furthermore, Ecorys considered that ‘the possibility to change the quality of the services and more headroom to set ticket prices are not sufficient conditions to make these routes economically viable from a business point of view’.

(120)

Secondly, in order to evaluate the Siremar business branch bundled with the new Convention, Ecorys assumed that the new Convention would not be prolonged at its expiry date and that therefore Siremar would be liquidated (52). On this basis, Ecorys determined that the minimum market value of the Siremar business branch amounted to EUR 57 million (i.e. 5 % higher than Banca Profilo’s valuation).

(121)

Thirdly, Ecorys compared the staffing of both the Tirrenia and the Siremar business branches with that of several comparable ferry companies and concluded that Siremar’s staff number and personnel cost structure are ‘not dissimilar from these comparable companies, with reference to the labour cost’s share of total revenues (53) and the labour cost/staff ratio’ (54). On this basis, Ecorys concluded that there are no elements showing that the workforce condition has had any significant impact on the value of the Siremar business branch.

(122)

As explained in recital (99), Italy also commissioned the Second Ecorys Report before concluding the sale procedure with SNS, to verify that the renewed offer of the latter reflected the market value of the business branch, endowed with the public service contract, as of 31 August 2015. This Second Ecorys Report, issued on 28 October 2015, applied the Discounted Cash Flow method as its main evaluation tool and the Equity Method to check the robustness of their findings. The new estimate by Ecorys was EUR 34,4 million with the Discounted Cash Flow method, with the assumption that the new convention would be in force until 31 July 2024. Should the new convention be prolonged until 31 July 2026, the estimated value of the Siremar business branch would then be EUR 35,7 million. The Equity Valuation method yielded an estimate of EUR 39,9 million.

(123)

Finally, that report was complemented by a comparison of the two business plans prepared by SNS: a first one, covering the period 2011-2022 and written in May 2011, and a second one, covering the period 2016-2027 and written in February 2016. Ecorys concluded that the two plans were not identical in their assumptions and did not include the same level of detail (e.g., the second business plan did not include the list of routes and frequencies). In particular, the main differences between the plans were: the assumptions on the use of the fleet, on amortisations, on staff costs; and the use of previous data from CdI, which was not available in the first business plan. Ecorys also prepared a one-page assessment confirming to the Italian authorities the internal logical consistency of SNS’ second business plan for the period 2016-2027.

(124)

Initially, CdI was the successful bidder for the Siremar business branch and signed the new Convention for the operation of maritime routes on 30 July 2012. Then, on 11 April 2016, SNS replaced CdI and started operating the same routes.

(125)

Under the new Convention, CdI and later SNS had to provide passenger and ferry services on 20 cabotage routes divided in 5 bundles, sometimes with different frequencies and/or routes between the high season and the low season (55) (see Table 3).

Table 3 – Routes operated by CdI and later SNS under the new Convention

(126)

Annex A to the new Convention details how each of the routes in Table 3 are to be operated (e.g. type of ships, seasonal frequency). In addition, the fares charged to the users cannot exceed the limits set by Article 6 of the new Convention and detailed in the same Annex A.

(127)

Both the new Convention between Sicily and CdI and that between Sicily and SNS have a duration of 12 years. The contract with SNS entered into force on 12 April 2016 and will expire on 11 April 2028.

(128)

The public service obligations imposed concern the maritime transport links to be operated (see recital (125)), the type and capacity of the vessels assigned to the respective maritime routes operated, the availability of a backup ship to ensure continuity of service, the frequency of service, and the maximum fares charged to users of the service on each of the respective routes.

(129)

The yearly compensation to be received by the company entrusted with the public service obligations defined in the new Convention is capped by law at EUR 55 694 895. The amount of compensation is to be determined based on the methodology laid down by the CIPE Directive (see recitals (48) to (58)). The compensation was paid to the two companies as follows:

Table 4 – Compensation 2012-2019

(130)

Article 8 of the new Convention provides for a regular 3-year review of the scope of the subsidised activities, to verify that there is no financial imbalance. Additionally, Article 9 of the new Convention lays down that, under very specific circumstances of unexpected and structural changes to the revenues or the costs, and in any event, only after the first year of each 3-year period, the parties may trigger such a review earlier.

(131)

Article 19-ter, paragraph 21 of Decree Law 135/2009 laid down that, in order to guarantee the territorial continuity with the islands and in light of their public service obligations, the companies of the former Tirrenia Group, including Siremar, would keep the berthing already allocated and the priority in the allocation of new slots, in line with the procedures set forth by the Italian Maritime Authorities as established by Law No 84 of 28 January 1994 and the Italian Maritime Code.

(132)

The 2010 Law laid down the possibility for the undertakings of the former Tirrenia Group, including Siremar, to use the financial resources already committed to the upgrade and modernisation of the fleet (56), to cover pressing liquidity needs. In particular, drawing from two facilities (57), EUR 23 750 000 had already been set aside to pay for the upgrades of the entire Tirrenia Group, of which EUR 7 215 800 for Siremar. The undertakings of the former Tirrenia Group that used these funds for liquidity purposes were required to later return them, so that the necessary upgrades to the ships could still take place. Those upgrades were necessary to meet certain international safety standards following the 1996 Stockholm Agreement (58).

(133)

In addition, the 2010 Law also laid down the following:

(134)

Following earlier exchanges between the Commission’s services and the Italian authorities, on 19 December 2008, the Commission’s Director-General responsible for energy and transport sent a request for information to Italy. This request concerned among other things, an overview of the public service routes at that time and the public service remit that Italy envisaged under the proposed new Conventions. Furthermore, Italy was asked to provide more details about the privatisation plans for the Tirrenia Group.

(135)

In their letter of 28 April 2009, the Italian authorities provided a detailed reply:

(136)

On 21 December 2009, the Commission’s Director-General responsible for energy and transport sent a letter to the Italian authorities noting, inter alia, that:

(137)

On 22 January 2010, the Italian authorities replied to the Commission services’ letter of 21 December 2009:

(138)

On 29 January 2010 (62), the Commission sent a letter of formal notice regarding the infringement of the Maritime Cabotage Regulation. In this letter, the Commission recalled that that Regulation requires that whenever a Member State concludes public service contracts or imposes public service obligations, it shall do so on a non-discriminatory basis in respect of all Community ship-owners. According to Article 4(3) of the Maritime Cabotage Regulation, existing public service contracts may remain in force up to the expiry date of the relevant contract. However, the Commission noted that the companies of the Tirrenia Group continued to operate maritime transport services after the expiry of the respective public service contracts (the initial Conventions). In particular, those Conventions were due to expire at the end of 2008 but were repeatedly prolonged by Italy. Therefore, the Commission invited the Italian authorities to present their observations.

(139)

Also on 29 January 2010, the Commission’s Director-General responsible for energy and transport replied to the Italian authorities’ letter of 22 January 2010. The Director-General indicated that the justifications provided concerning the lines operated by Tirrenia were sufficient to remove the doubts expressed earlier. Furthermore, the Director-General noted positively that, following his earlier request, Italy had removed an international connection from the new draft Convention for Tirrenia. With respect to the questions raised concerning routes operated by Caremar, only for some of these routes the justifications were considered sufficient. Italy was therefore asked to provide further clarifications about some of Caremar’s routes. The Director-General recalled that public service contracts can only cover routes for which there is a market failure. The Director-General also emphasised that his reply only concerned the compliance with the Maritime Cabotage Regulation and not any State aid issues.

(140)

On 29 March 2010, the Italian authorities replied to the Commission’s letter of formal notice of 29 January 2010:

(141)

On 10 September 2010, the Italian authorities informed the Commission during an ad hoc meeting, that the procedure for the privatisation of Tirrenia and Siremar had been cancelled at the final stage and that, consequently, the deadline of 30 September would not be met. In addition, the Italian authorities reported that the competitive procedures for the contracts of Caremar, Saremar, Siremar and Toremar were also delayed. Subsequently, the 2010 Law further prolonged the initial Conventions until the completion of the privatisation processes of Tirrenia and Siremar.

(142)

Following these developments, the Commission sent a complementary letter of formal notice on 24 November 2010. In that letter, the Commission:

(143)

On 21 June 2012, the Commission adopted a reasoned opinion concerning the delay of privatisation of three companies (Caremar, Laziomar and Saremar) of the former Tirrenia Group. Since the tender procedures for the other three companies (Tirrenia, Toremar and Siremar) had been completed in the course of 2011 (63) those companies were not covered by the reasoned opinion. The Commission noted that Italy had not put in place competitive procedures for the award of public service contracts for maritime cabotage operated by the companies Caremar, Laziomar and Saremar, more than 3 years after the normal expiry of the respective initial Conventions. On the contrary, those Conventions had been extended automatically and indefinitely thereby preventing other Community shipowners from competing for the award of those contracts.

(144)

On 8 August 2012, the Italian authorities replied to the reasoned opinion stating that tender notices for the award of the companies endowed with new public service contracts were or would soon be published in the Official Journal of the European Union. In particular, for Caremar the notice was published on 20 July 2012 and for Laziomar the notice was sent for publication on 1 August 2012. Finally, for Saremar a law was adopted on 2 August 2012 that required publication of such a notice by 2 October 2012.

(145)

On 13 January 2014, Compagnia Laziale di Navigazione became the new owner of Laziomar and signed a 10-year public service contract for links with the Pontine archipelago. On 16 July 2015, ATI SNAV-Rifim took ownership of Caremar and was entrusted with a 9-year public service contract. Finally, following the 2014 Decision, Saremar was put into liquidation and the public service contract for the routes between Sardinia and small islands was awarded to Delcomar in March 2016.

(146)

By letter of 15 July 2016, the Italian authorities informed the Commission that the privatisation of all companies of the former Tirrenia Group had been completed. On 8 December 2016, the Commission decided to close the infringement procedure.

(147)

In its 2011 Decision, the Commission took the preliminary view that the definition of the public service obligations had not been sufficiently clear and hence did not allow the Commission to definitely conclude whether it contained manifest error. In particular, even if the Italian authorities argued that Siremar’s competitors on the routes falling within the scope of the SGEI mission were operators equally providing maritime services under public compensation, without a prior definition of the level of the services required, the Commission could not conclude on whether there was a real need for a public service on these routes.

(148)

The Commission took the preliminary view that the second criterion of the Altmark judgment (64) was met, as the parameters at the basis of the calculation of the compensation had been established in advance and observed the transparency requirements. In particular, the Commission noted that these parameters are described in the initial Convention (for compensation concerning the year 2009) and in the CIPE Directive (for compensation from 2010 onwards).

(149)

The Commission however considered that the third criterion of the Altmark judgment did not seem to be met and that the operators might have been over-compensated for the performance of the public service tasks. In particular, the Commission expressed doubts whether the risk premium of 6,5 % which applies from 2010 onwards reflects an appropriate level of risk since prima facie Siremar did not seem to assume the risks normally borne in the operation of such services.

(150)

The Commission also took the preliminary view that the fourth Altmark criterion was not met inasmuch as the prolongation of the initial Conventions had not been tendered out. The Commission moreover noted it had not received any evidence to support the argument that Siremar in fact provided the services at stake at the least cost to the community.

(151)

The Commission therefore came to the preliminary conclusion that the public service compensations paid to Siremar during 2009-2011 constitute State aid within the meaning of Article 107(1) TFEU. In addition, the Commission took the view that this aid should be considered as new aid.

(152)

In the 2012 Decision, the Commission considered that to the extent that all conditions had remained unchanged in 2012 and until the entry into force of the new Convention, the compensation granted to Siremar since 1 January 2012 under the further prolongation of the initial Convention also constitutes State aid.

(153)

In the 2011 Decision, the Commission took the preliminary view that the public service compensation for the years 2009-2011 falls outside the scope of both the 2005 SGEI Decision (65) and the 2005 SGEI Framework (66). The Commission therefore assessed that measure directly under Article 106(2) TFEU and found it had doubts on whether the applicable compatibility conditions were fulfilled.

(154)

In the 2012 Decision, the Commission noted that on 31 January 2012, a new SGEI package consisting of the 2011 SGEI Decision (67) and 2011 SGEI Framework had entered into force. The Commission however took the preliminary view that the public service compensation under the prolongation of the initial Convention could not be considered compatible with the internal market and exempted from the notification requirement under the 2011 SGEI Decision.

(155)

The 2010 Law provided for the prolongation of the initial Convention from 30 September 2010 up to the end of the privatisation process. Siremar was in difficulty at the moment of adoption of the 2010 Law (see recital (67)). As a result, the compensation received by the company as of 1 October 2010 until its privatisation could not be assessed on the basis of the 2011 SGEI Framework. Instead, based on paragraph 9 of the 2011 SGEI Framework, the Commission took the preliminary view that this aid should be assessed on the basis of the 2004 Rescue and Restructuring Guidelines.

(156)

The Commission noted that the compatibility criteria laid down by the 2004 Rescue and Restructuring Guidelines were not met in this case and therefore took the preliminary view that the compensation paid to Siremar in difficulty would amount to incompatible restructuring aid.

(157)

In the 2012 Decision, the Commission took the preliminary view that the rescue aid had been illegally prolonged from 28 August 2011 until 18 September 2012 and that the prolongation of the rescue aid during this period constituted incompatible aid to Tirrenia and Siremar and possibly also to their respective buyers. In particular, the Commission noted that Italy had not submitted a restructuring or liquidation plan within 6 months after the disbursement of the first instalment of the rescue aid to these companies, as required by the 2004 R&R Guidelines. The Commission considered that the conditions for an extension of the rescue aid as laid down in the 2004 R&R Guidelines were also not fulfilled.

(158)

In the 2011 Decision, the Commission expressed its doubts that the tender procedure for the sale of the Siremar business branch had been sufficiently transparent and unconditional so as to ensure that the sale took place at market price.

(159)

First, the Commission noted that although the call for expression of interest was published in several newspapers and on a number of websites, the call did not seem to detail the scope of the sale and did not give bidders any clear instructions as to the subsequent phases of the procedure. The call also did not seem to contain any pre-qualification or selection criteria or any other conditions that had to be met by the bidders apart from the mandatory condition to continue to provide the public service. Furthermore, all relevant information as regards the assets subject to the sale procedure was made available to the bidders only during the due diligence phase.

(160)

Second, the Commission also considered that certain requirements imposed in the privatisation might have restricted the number of bidders and/or influenced the sale price. The Commission restated its established practice concerning sales of assets of State owned undertakings by the State or imputable to the State: non-economic considerations, which a private seller would not make, such as public policy, employment or regional development concerns, suggest the existence of State aid, if they impose onerous obligations on the potential buyer and are therefore liable to reduce the sale price.

(161)

The sale procedures of the Tirrenia and Siremar business branches were based on the procedure laid down by the Marzano law (see recital (70)). Therefore, the Commission assessed the two procedures together. It considered that the sale of the business branches entrusted with the new Conventions resulted in an obligation on the buyers to provide the public service subject to pre-established quality, frequency and fare obligations laid down by the new Conventions. By imposing such obligations, it seemed to the Commission that the State did not seek to obtain the highest price, but rather to pursue public interest objectives. The Commission considered it was highly unlikely that a private vendor would have given the same significance to the uninterrupted operation of the public service.

(162)

Likewise, the Commission considered that a private vendor, operating under normal market conditions, would not have imposed the obligation to maintain employment levels for 2 years.

(163)

For the above reasons, the Commission preliminarily concluded that the privatisation procedure of the Siremar business branch had not been sufficiently transparent and unconditional so as to ensure by itself that the sale took place at market price. Therefore, the Commission could not exclude that an economic advantage was conferred either to the sold economic activity or to the buyer.

(164)

The Commission also considered, based on the available information, that any aid that might have arisen in the course of the privatisation process would have been incompatible.

(165)

In the 2012 Decision, the Commission took the preliminary view that the counter-guarantee by Sicily of the deferred instalments of the sale price for the Siremar business branch may have constituted aid to CdI as the borrower and to Unicredit as first guarantor.

(166)

Indeed, the counter-guarantee seemed to have allowed CdI to benefit from a guarantee which otherwise would not have been granted or would have been granted on different, less favourable terms. The Commission noted that, based on the information available, the counter-guarantee did not seem to have been remunerated.

(167)

Moreover, the Commission noted that the position of the General Accountant appeared to be such as to influence the decision-making process in Sicily. Given his involvement in the day-to-day management of Mediterranea, and the latter’s significant share in CdI’s capital, the Commission considered it was likely that the counter-guarantee was granted to favour CdI in the sale process, rather than on market terms.

(168)

The Commission also noted that the documents submitted by Italy to prove that the counter-guarantee had not produced any effects did not pre-date the award of the tender to CdI. On the contrary, both documents were issued after SNS had submitted a complaint to the Commission.

(169)

Finally, the Commission considered that the counter-guarantee might have also procured an economic advantage to Unicredit, as first guarantor, by decreasing the risks associated with its own guarantee, unless the counter-guarantee was remunerated by an appropriate premium.

(170)

On the basis of the considerations above, the Commission took the preliminary view that the counter-guarantee may have constituted aid to Unicredit and CdI.

(171)

In the 2012 Decision, the Commission considered that the capital increase by Mediterranea could have conferred an advantage to CdI, to the extent that Sicily had not behaved like a private market investor. Moreover, the Commission considered that the capital increase by Mediterranea was financed by State resources and was imputable to the State.

(172)

Therefore, the Commission took the preliminary view that the capital increase may have constituted aid to CdI.

(173)

In the 2011 Decision, the Commission considered, based on the available information, that any aid that might have arisen in the course of the privatisation process would have been incompatible.

(174)

In the 2012 Decision, the Commission considered, based on the available information, that both the counter-guarantee and the increase in CdI’s capital might have constituted operating aid, which is in principle incompatible with the internal market.

(175)

In the 2012 Decision, the Commission took the preliminary view that the compensation to the purchaser of the Siremar business branch (at the time, CdI), did not fulfil the criteria laid down in the Altmark Judgment and therefore amounted to aid within the meaning of Article 107(1) TFEU.

(176)

The Commission came to this conclusion based on these considerations:

(177)

With respect to the compatibility of the compensation to CdI, the Commission first assessed it under the 2011 SGEI Decision. However, as the contract duration seemed to be longer than 10 years and as it had doubts on the proportionality of the compensation, it took the preliminary view that the compensation could not be considered compatible on the basis of the 2011 SGEI Decision. The Commission then assessed the compatibility of the aid under the 2011 SGEI Framework, and found that it had doubts on whether all the compatibility conditions of that Framework were fulfilled.

(178)

In the 2011 Decision, the Commission took the preliminary view that to the extent that the berthing priority is not remunerated, the measure is a regulatory advantage that does not involve any transfer of State resources and cannot therefore qualify as State aid. If the berthing priority is remunerated, the Commission considered that, to the extent that Siremar provides a genuine SGEI and that this priority is only granted in relation to routes covered by that SGEI, it would not result in an additional economic advantage since it would be intrinsic to the provision of the SGEI.

(179)

Since it had raised doubts on the legitimacy of the SGEI mission, the Commission could not conclude on the compatibility of the measure if it were to be aid.

(180)

In the 2011 Decision, the Commission took the preliminary view that the measures laid down by the 2010 Law constituted State aid in favour of the companies of the former Tirrenia Group, including Siremar. These measures were: (1) the possible use, for liquidity purposes, of the funds earmarked for the upgrade of the ships; (2) the fiscal exemptions related to the privatisation process; (3) the possible use of FAS resources. Indeed, the Commission noted that all the abovementioned measures allowed the companies of the former Tirrenia Group to avoid costs which would ordinarily have to be borne by means of their own financial resources. As a consequence, those companies were able to improve their overall financial situation.

(181)

The Commission also took the preliminary view that these measures likely constituted operating aid reducing the costs that Siremar, and the other companies of the former Tirrenia Group, would otherwise have to bear themselves and thus these measures should be considered as incompatible with the internal market.

(182)

After the 2011 and 2012 Decisions, Italy submitted several letters and documents on all the measures that are assessed in this Decision. This section summarises the main arguments and contributions presented (69).

(183)

Italy provided a list of routes operated by Siremar that are subject to public service obligations, including the seasonal frequency and timetables, the competitive environment and the reasons leading to the imposition of public service obligations.

(184)

As regards the existence of a genuine SGEI, Italy noted that the public service obligations it imposed on Siremar and later CdI and SNS ensure, in terms of regularity, continuity and quality, a satisfactory service connecting Sicily with its smaller islands. This service contributes to the economic development of those islands, while at the same time guaranteeing the essential mobility needs of the island communities and ensuring that the constitutionally guaranteed right to territorial continuity is respected. In this context, Italy noted that the public service obligations are fully in line with the objectives of Articles 174 et seq. TFEU and Declaration No 30 on island regions (annexed to the Final Act of the Amsterdam Treaty). Italy also referred to the jurisprudence of the Court of Justice of the European Union (the ‘Court of Justice’) which confirms that the aim of ensuring that there are sufficient regular shipping services to islands, from islands and between islands, is covered by a legitimate public interest objective (70).

(185)

In particular, Italy pointed out that structural conditions on all of these routes require the imposition of public service obligations to guarantee territorial continuity. The five route bundles described in recital (41) are considered ‘metropolitan maritime areas’: the population of all of those islands depends on the main island of Sicily for the provision of essential services and employment. At the same time, the tourist business is relevant only in the high season. Therefore, shipping companies have a commercial interest in operating the routes only in the high season. In the low season, the demand from tourists almost disappears, to the point where it is impossible to operate any of these routes profitably with the regularity and frequency required to satisfy the user demand.

(186)

Against this background, both Siremar and other operators, selected by Sicily through open tender procedures, have been assigned public service obligations to ensure reliable and stable connections between these islands and between them and Sicily. Non-subsidised operators could not ensure territorial continuity, because they would only operate these connections in the high season. Moreover, Italy pointed out that the ships operated by CdI and later SNS frequently dock in the islands at night, with higher costs, to provide the very first connection in the morning for residents commuting for either education or work and to ensure connections in cases of medical emergencies.

(187)

Additionally, Italy claimed that the services operated by companies subject to public service obligations and those operated by companies carrying out business activity freely would not be fully comparable. In particular, only the former would guarantee the regularity, continuity and quality of the services provided thanks to clear obligations laid down in the Conventions, while private operators would be dependent solely on the calculation of their return on investment. In this regard, Italy gave the example of the route La Maddalena – Palau, operated by Enermar on commercial terms, which was discontinued without prior notice. Saremar, on the contrary, which operated this route under a public service contract, was required to continue its service and hence effectively ensured territorial continuity.

(188)

Finally, Italy pointed out that in the 2004 Decision (71), the Commission had already established that on the five route bundles operated by Siremar, no other private operator could address the public service needs, in particular in terms of continuity of service throughout the year and of the type of ships to be used. Therefore, there was a need for public compensation to address an evident market failure. Italy then clarified that this situation had not changed in the intervening years.

(189)

The Italian authorities recall that they had informed the Commission, by letter of 16 May 2011, that Tirrenia and Siremar in EA would reimburse the State-guaranteed loans after completion of the sale of the Tirrenia and Siremar business branches, using the proceeds from either sales, as there was one Extraordinary Administration and one Extraordinary Commissioner covering both companies. Given that both sale procedures were under way in the spring of 2011 and that on 25 July 2011, CIN had signed the contract for the sale of the Tirrenia business branch, both the Italian authorities and Siremar in EA were confident that the aid could be repaid by the deadline of 28 August 2011.

(190)

However, subsequent events unexpectedly delayed the completion of the sale of the Tirrenia and Siremar business branches. In particular, the sale of the Tirrenia business branch had been delayed due to the need to obtain merger approval from the Commission (see recital (65)), while the sale of the Siremar business branch was delayed by the relaunches of the procedure and related litigation described in Section 2.3.3.2. As a result, Siremar in EA had to continue to operate its services for considerably longer than planned, bearing the related costs. According to Italy, the liquidation plan for Siremar was available on the website of the Extraordinary Administration before the expiry of the 6-month time limit established by the 2004 R&R Guidelines. Italy adds that the Commission was at all times kept up to date of the progress of the privatisation process. The entire amount due from both Tirrenia and Siremar, including interest, was paid back to the State a mere 48 days after the Extraordinary Administration received the first payment from the sale of the Tirrenia and Siremar business branches.

(191)

Italy stressed that the privatisation of the Siremar business branch was conducted in compliance with the Marzano law. Although the law in question refers to the possibility of identifying the buyer through private negotiation, this would not preclude observance of the principles of openness, transparency and non-discrimination. Moreover, in this case there are other legal provisions that explicitly require transparent and non-discriminatory competitive procedures to be organised. In particular, Article 1(5-bis)(b) of the 2010 Law would require the Extraordinary Commissioner to restrict proceedings to ‘the minimum time that is possible under the extraordinary administration procedure while complying with the competitive, transparent and non-discriminatory procedure required for the sales’.

(192)

The procedure provided for in Article 4 (4-quater) of Decree Law 347/2003, according to Italy, offered additional guarantees in terms of transparency and non-discrimination, in particular given the valuation of the market price of the business branch put up for sale by an independent expert and the selection of the most advantageous offer in terms of price.

(193)

Italy claimed that all parties had equal access to all the information necessary to clearly identify the assets put up for sale and prepare an offer. Indeed, the sale concerned the assets and contractual relations inherent in the provision of the public service, as follows:

(194)

Italy has also clarified that one of Siremar’s vessels, which was not necessary for the provision of the public service, was sold under a separate sale procedure. This vessel was hence not included in the tender for the Siremar business branch (see also Section 4.3.2).

(195)

As concerns specifically the obligation to maintain employment levels, Italy stressed that the sale of the Tirrenia and Siremar business branches did not fall within the scope of Article 2112 of the Civil Code and thus there was no automatic transfer of staff (with their existing contracts) to the successful bidders. The only legal obligation on the successful bidders was to re-employ the staff of the seller (on the basis of new contracts) and maintain employment levels for 2 years, as required by Article 63(2) of Decree Law 270/1999. This however did not mean that Siremar’s employees would be automatically transferred to the buyer. In addition, this obligation is limited to staff that, according to the business plan and the manning tables of the vessels of the business branch, were deemed essential for the continued operation of the public service.

(196)

Italy claimed that such obligation, imposed by general domestic law, and which serves to ensure the continuity of business and the performance of the public service, would have been imposed on the same terms by a private vendor.

(197)

Following the publication of the call for expressions of interest in Italian and in English on the website of the Extraordinary Administration and in a number of national and international newspapers and specialist websites, five expressions of interest were received (see recitals (76) and (77)). Italy considers that this demonstrates that the content of this call made it possible to clearly identify what was being sold and the nature of the procedure to be followed, while at the same time safeguarding commercially sensitive information (primarily to protect the interests of potential buyers). During the due diligence phase, the entities were then provided with detailed information concerning among others the specific assets for sale, the business plan, and the draft new Convention (see recital (77)).

(198)

Therefore, Italy claimed that all entities interested in acquiring the Siremar business branch were provided in a transparent and non-discriminatory manner with the information required to make a purchase offer in full knowledge of the facts.

(199)

Italy explained that the Extraordinary Commissioner launched independent, transparent and non-discriminatory tender processes for the sale of the seven ships (72), which Tirrenia and Siremar did not need to operate the public service. On 10 December 2010, calls for expression of interest were published in national and international newspapers and also in some specialised publications. On the expiry of the deadline, which had been extended twice, only offers for demolition purposes had been received for the six fast ferries, including Siremar’s. Attempts were made to acquire higher offers but no such offers were received. On 12 and 14 July 2011, after receiving authorisation from the Ministry of Economic Development, the Extraordinary Commissioner sold the ships to the bidder who had made the highest offer.

(200)

Firstly, Italy argued that the decision to privatise the assets together with the entrustment of the public service obligation was taken with a view to ensure a smooth liberalisation of the maritime cabotage sector. Italy mentions that this strategy was discussed with the Commission in advance (see Section 2.4) and was deemed to be in principle in line with the Maritime Cabotage Regulation.

(201)

Additionally, Italy considered that, given the prevailing market conditions at the time, it was appropriate to bundle the assets of the Tirrenia and Siremar business branches with new Conventions. In a time of recession and significant decline in demand for the maritime transport sector, the possibility to use the fleet of the business branches to operate the public service routes laid down in the new Conventions would constitute viable business opportunities rather than a factor that would lower the market value of the business branches. Therefore, Italy considered that this could not have negatively affected the tender procedure and the resulting price.

(202)

In this regard, Italy recalled that of the seven ships not included in the scope of the Tirrenia and Siremar business branch (see recital (199)), six had to be sold for demolition purposes. Italy considers that in light of the complexity of the maritime transport market and the economic downturn at the time, it was impossible to achieve a better price for the company’s assets, even if the tender process had been repeated or if the assets had not been bundled with the new Convention.

(203)

Finally, Italy pointed out that neither SNS nor other sector operators had a fleet and crews of the size and specifications required for the provision of the services laid down in the new Convention (73). The only way to successfully entrust these services was therefore to bundle them with the assets of the Siremar business branch, so that the operator would have been properly equipped to carry out its public service obligations.

(204)

Italy claimed that, on 16 December 2010, five leading financial institutions with no exposure to the Tirrenia Group were invited to submit offers for the valuation of the Siremar business branch. None of the institutions invited submitted a bid by the deadline set.

(205)

Banca Profilo subsequently expressed an interest in taking on the task of independent advisor under the same conditions as laid down in the selection procedure. By Decree of 4 February 2011, the Minister identified Banca Profilo as the independent expert for the purpose of assessing the market value of the Tirrenia and Siremar business branches.

(206)

Italy described the sale procedure for the Siremar business branch and the judgments by the Italian administrative tribunals (see Section 2.3.3.2), which confirmed that the general principles of competitiveness, transparency and non-discrimination had been respected. The procedure followed was that laid down by Article 4 (4 quarter) of Decree Law 347/2003 and allowed the full satisfaction of the objectives of the Extraordinary Administration, including obtaining the highest possible price from the sale. This is due to certain safeguards included in the procedure, including in particular the existence of a minimum price established by an independent expert. Moreover, all parties that had expressed their interest in the procedure were timely provided with all the relevant information which would allow them to submit an offer.

(207)

Italy also confirmed that the award criterion in case of multiple bids was the highest price, as set out in the specific rules applicable to the procedure.

(208)

In the course of the investigation Italy was invited to comment (see recital (13)) on the First Ecorys report. Italy agreed with the conclusion of Ecorys that neither the bundling of the privatisation with the award of the new Convention nor the workforce condition lowered the market value of the Siremar business branch.

(209)

With respect to the aforementioned bundling, Italy referred in particular to Ecorys’ statement that, at the time of the sale, the only alternative to a sale of the assets under the public service regime was the liquidation of the Siremar business branch. Italy also reiterated that at a time of crisis in the ferry sector characterised by a significant drop in demand, the possibility of using Siremar’s fleet for the public service routes identified in the Convention constituted a valid business opportunity, rather than a factor likely to reduce the value of the assets.

(210)

With respect to the workforce condition, Italy highlighted Ecorys’ conclusion that there are no elements showing that this condition had any significant impact on the value of the Siremar business branch. Italy further recalled that this condition derived from Article 63(2) of Decree Law 270/1999 and only concerned the employees required to guarantee the operation of the business concerned, in compliance with the fleet manning tables. The fleet manning tables (i) lay down the qualitative and quantitative composition of the crew required to operate the vessel in accordance with maritime safety laws, (ii) are set by Ministerial Decree; and (iii) are prepared by a committee that includes, in a consultative role, organisations representing workers and ship-owners. Moreover, Italy added that while the buyer of the Siremar business branch had to offer employment to all employees that are required to guarantee the operation of the public service, this was based on different employment contracts than those that had been in place before.

(211)

More generally on the value of the business branch, the First Ecorys Report concluded that the estimated value of the Siremar business branch could have been approximately 4,6 % higher than the value put forward by the expert appointed by the Italian authorities, Banca Profilo. However, Italy considered that this difference could be explained because both experts had to rely on forecasts for several technical parameters and that by nature there is a margin of difference in such forecasts. Moreover, Italy noted that, thanks to the presence of two bids from SNS and CdI, the price achieved in the first transfer to CdI (EUR 69,15 million) was EUR 14 million higher than the minimum price set by Banca Profilo. The Italian authorities also submitted a counter-valuation, prepared by Banca Profilo, which explained the differences with the Ecorys report in detail, arguing that its own assumptions better reflected the situation under examination (74).

(212)

Additionally, Italy noted that the transfer of ownership over the Siremar business branch took place more than 2 years after the reference date used by both Banca Profilo and Ecorys for their valuations. During that period, the value of the assets of the Siremar business branch depreciated and the economic outlook worsened significantly. For this reason, Italy concluded that there could be no doubts that, on the date when the sale of the Siremar business branch to CdI was completed, the price conditions agreed by the parties fully reflected the market value of the corporate assets.

(213)

Finally, for the later stages of the privatisation procedure, Italy also submitted the Second Ecorys Report, which confirmed that the offer by SNS was in line with the market value of the Siremar business branch, as updated more than 4 years after its first assessment (see Section 2.3.3.7). Therefore, even if the final sale to SNS in 2016 took place at a lower price than that included in the First Ecorys Report, which, for procedural rules, the Extraordinary Administration had to ignore, Italy considers that the price conditions agreed by the parties fully reflected the market value of the corporate assets for sale.

(214)

Italy submitted several letters to inform the Commission on the various steps of national litigation at the administrative tribunals and of the final award of the Siremar business branch to SNS (see recitals (93) to (100)).

(215)

Italy claimed that these developments do not put into question the open, transparent, and non-discriminatory nature of the procedure for the sale of the Siremar business branch (see Section 4.3.5). Indeed, Italy stressed that the rulings by the Italian administrative tribunals did not declare the set-up and execution of the sale procedure flawed, but rather focused on one element of CdI’s bid, i.e. the counter-guarantee, which was not known by Siremar in EA when the tender was first awarded to CdI (75). Therefore, Italy concluded that, by applying decision 592/14 as described in recitals (96) to (100), the procedure had been correctly finalised with the award of the business branch to SNS.

(216)

Italy reiterated that it had notified the public service compensation to be paid under the new Convention only for reasons of legal certainty, since it considered this measure not to constitute State aid (see recital (9)). In particular, the Italian authorities argued that the four Altmark criteria are complied with for the following reasons:

(217)

Italy pointed out that, irrespective of the statutory 6,5 % risk premium, in 2009 the compensation paid to Siremar amounted to EUR 67 009 405. From 2010 onwards, the maximum amount of compensation was fixed at EUR 55 694 895. Italy noted that this represents a 25 % decrease. This would force the buyer of the Siremar business branch to make operations much more efficient in order to bring costs within the limits of the fixed subsidy amount over the whole duration of the new Convention and to offset inflation over a long period in the future.

(218)

Italy noted that the CIPE Directive provides that the risk premium of 6,5 % would be used to determine the return on capital on the basis of the WACC (see recitals (49) to (58)). However, because the 2009 Law caps the amount of compensation, the calculation was simplified by applying the 6,5 % as a flat rate return on capital to verify any overcompensation. This approach applies under the new Convention. The Italian authorities also demonstrated that applying the full methodology as laid down in the CIPE Directive might have resulted in a return on capital that, at least in some years, would have exceeded 6,5 % (i.e. 8,87 %). For this reason, Italy considers that their simplified approach is conservative and does not allow for higher compensation for Siremar, CdI or SNS than what was established by the CIPE Directive.

(219)

Italy also claimed that a return on capital of 6,5 % reflects the risk of the activities entrusted to Siremar, CdI or SNS, and that there was no overcompensation of the public service, for the following reasons:

(220)

Even if Italy considered that the public service compensation paid under the new Convention does not constitute State aid, it has also argued why this measure would comply with the 2011 SGEI Decision if it were aid.

(221)

Italy recalled that the Commission’s assessment of the genuine nature of an SGEI is limited to checking whether the Member State has made a manifest error when defining a service as an SGEI. Against this background, Italy described the routes specified in the new Convention and pointed out that all of the connections structurally require the imposition of public service obligations, to Siremar as well as to other operators.

(222)

Italy also provided annual passenger traffic data for the 2 financial years preceding that in which the SGEI was assigned (i.e. 2010 and 2011), to argue that the threshold of 300 000 passengers as laid down in Article 2(1)(d) and (e) of the 2011 SGEI Decision had not been breached on the individual routes operated by Siremar. Furthermore, Italy claimed that Article 2(4) of the 2011 SGEI Decision is complied with since by selling the Siremar business branch via a competitive, transparent and non-discriminatory tender procedure, the requirements of the Maritime Cabotage Regulation were fully respected.

(223)

Italy claimed that the new Convention fulfils all the conditions that apply to entrustment acts as specified in Articles 4 to 9 of the 2011 SGEI Decision. In particular, the Convention sets out in detail the public service obligations, their duration, the compensation mechanism (based on the CIPE Directive and the 2009 Law), and the mechanisms to avoid and recover any overcompensation. Finally, Italy pointed to the measures that are in place to ensure strict compliance with the terms of the new Convention, which include a system of remedies and financial sanctions.

(224)

Italy argued that the documents submitted by the potential bidders during the tender procedure had provided no indication of the existence of a counter-guarantee backing Unicredit’s comfort letter attached to CdI’s successful offer. Indeed, that letter did not refer, neither explicitly nor implicitly, to the existence of a counter-guarantee by Sicily. According to Italy, the tender was awarded to CdI as its offer met all the necessary requirements and was more advantageous than the offer made by SNS. Italy also argued that the absence of any link between the comfort letter and the counter-guarantee by Sicily is confirmed by the fact that even after Sicily withdrew this counter-guarantee (78), Unicredit confirmed its commitment to CdI and subsequently did issue a bank guarantee addressed to Siremar in EA to cover CdI’s payment instalments (79).

(225)

Italy also submitted certain documents to show that the counter-guarantee had not conferred a selective advantage on CdI and hence did not qualify as State aid. In particular, Italy submitted: a Guarantee Agreement signed on 20 November 2011 by CdI’s shareholders (i.e. Sicily, Mediterranea, Isolemar S.r.l., Lauro.it SpA and Davimar), by which they agreed to jointly counter-guarantee CdI’s successful bid up to EUR 35 million; and a letter by Unicredit of 10 May 2012, informing CdI of the conditions applicable to its guarantee, notably a premium of at least 250 basis points per annum. According to Italy, there could not be any State aid elements in the counter-guarantee, if its later withdrawal did not have any effect on the rights and obligations of its beneficiary. These documents would thus show that the conditions for a finding of aid in a guarantee, as specified by settled Union case law, are not present in this case.

(226)

The Italian authorities argued that no State resources were or are foregone through the allocation of the berthing priority. Indeed, all ferry operators pay regular fees to the relevant port authorities for berthing, irrespective of whether they provide public services or not. This berthing priority is applicable only to the public service routes and was accepted by the Commission with letter of 24 January 2011, sent in the context of infringement procedure No 2007/4609 (see Section 2.4), in so far as it only applied to those routes. Moreover, Italy clarified that Siremar and its successors, did and do not pay any additional fee for this berthing priority.

(227)

Because no fee is due for the berthing priority, the monetary advantage granted to Siremar and its successors, if any, cannot be quantified. However, Italy noted that, in practice, the berthing priority would only apply in limited circumstances, due to the size of most of the ports and the advance scheduling of arrivals and departures.

(228)

Italy did not dispute that Siremar received EUR 7 215 800 to carry out ship upgrades required to respect international safety standards (referred to as ‘Stockholm funds’). However, the Italian authorities confirmed that these funds were only used to pay for the upgrades of ships. Indeed, by the time the sale contract with CdI was signed on 21 October 2011, only EUR 580 600 were still to be spent. Siremar in EA spent those remaining funds in January 2012, before the transfer of the business branch to CdI, to carry out certain required works on the Martini vessel that were still outstanding.

(229)

With regard to the fiscal exemptions on the acts and operations related to the privatisation of the Siremar business branch, laid down by the 2010 Law, the Italian authorities first pointed out that for companies involved in insolvency proceedings, earnings are determined according to the rules laid down in Article 183 of the Consolidated Income Tax Law. Based on that provision, an undertaking’s earnings for the period from the start of the bankruptcy proceedings until their conclusion are the difference between the undertaking’s assets at the beginning of the proceedings and the residual assets at their end. Before the end of proceedings, it is therefore not possible to anticipate if there is a tax liability and its size.

(230)

On the indirect taxes, the Italian authorities emphasised that the exemptions provided for were designed with a view to achieving administrative simplification. From the taxation perspective, their effects could be regarded as negligible and of little impact in relation to taxes on documents that are charged at flat rates. More specifically, this concerns the registration duty (EUR 168 per document), land registry and mortgage registration fees (EUR 168 each) and stamp duty (EUR 14,62 for four sides). Moreover, the Italian authorities noted that under Article 9 of the contracts for the sale of the business branch from Siremar in EA to CdI and to SNS, all duties and fees were payable by the buyer. In the case of the transfer to SNS, the Italian authorities clarified that a fixed registration duty of EUR 245 applied, pursuant to the Article 19-ter, paragraph 24-bis of Decree law 135/2009.

(231)

Finally, the Italian authorities clarified that the FAS resources were not used to give an additional compensation to the companies of the former Tirrenia Group, including Siremar. Instead, these resources were made available to supplement the budget appropriations set up for the payment of the public service compensations to the companies of the former Tirrenia Group, in case those budget appropriations proved to be insufficient. Italy notes that Article 1, paragraph 5-ter, of Decree Law 125/2010 enabled the regions to use the FAS resources to fund (part of) the regular public service compensation and thereby ensure continuity of the maritime public services. Moreover, Italy clarified that, under Article 26 of Decree Law 185/2008, EUR 65 million for each of the years 2009, 2010 and 2011 were earmarked to the Tirrenia group and EUR 195 million were accordingly drawn from the FAS resources. Those funds were then transferred to the account of the Ministry of Transport earmarked for the payment of the public service compensation to the companies of the former Tirrenia Group (Tirrenia, Siremar, Caremar, Toremar and Saremar). Therefore, this measure would merely concern an allocation of resources in the Italian state budget for payment of the public service compensations.

(232)

Italy submitted that there is no economic continuity between Siremar in EA and CdI based on the following grounds:

(233)

Siremar in EA submitted one main set of observations and one subsequent letter. Subsequent informal exchanges also took place, with full knowledge of the Italian authorities, to clarify certain pending issues or acquire specific information. Moreover, on most aid measures, Siremar in EA submitted arguments which were very similar to those provided by Italy.

(234)

In its reply to the 2012 Decision, received on 19 April 2013, Siremar in EA first referred to the Commission’s infringement procedure No 2007/4609 concerning misapplication of the Maritime Cabotage Regulation (see also Section 2.4). In this context, Siremar in EA referred to the letter of 21 December 2009 (see recital (136)) concerning Italy’s intention to launch tenders not for the public service contracts but for the sale of the shipping companies holding such contracts. In that letter, it was noted that, taking into account the radical overhaul of the sector planned, and given the social impact the tenders would have if they did not include the companies, the procedures chosen were acceptable – in principle and as an exception – for the purpose of ensuring compliance with the principle of non-discrimination among Community ship-owners.

(235)

On 21 June 2012 (see recital (143)), the Commission sent Italy a reasoned opinion concerning the delay in implementing competitive procedures for the awarding of the maritime cabotage public services operated by Caremar, Laziomar and Saremar, more than 3 years after the normal expiry of the relevant contracts. Since the Italian authorities had completed the competitive procedures for awarding the maritime cabotage public services operated by the Tirrenia, Siremar and Toremar companies, the reasoned opinion did not concern those companies. On this basis and in light of the earlier exchanges between the Italian authorities and the services of the Commission, Siremar in EA claimed that the Commission had found that the privatisation of the Siremar business branch was compliant with Article 4 of the Maritime Cabotage Regulation.

(236)

Based on case law of the European Courts (81), Siremar in EA argued that once public service obligations have been established in compliance with the Maritime Cabotage Regulation, they must be considered to comply with Union law without the need to perform further scrutiny pursuant to Article 106(2) TFEU. According to Siremar in EA, since the infringement procedure reached the conclusion that the public service obligations imposed on the routes operated by the Siremar business branch before the privatisation were justified in light of the Maritime Cabotage Regulation, such conclusion cannot be questioned in the context of the Commission’s formal investigation procedure laid down in Article 108(2) TFEU (82). Therefore, any additional action under Article 108(2) TFEU should be limited to other measures, different from the compensation for the additional costs caused by the public service obligations lawfully entrusted and operated under the Maritime Cabotage Regulation.

(237)

Finally, Siremar in EA referred to the 2009 Judgment that annulled the 2004 Decision and the possibility that the public service compensation assessed in that Decision could be classified as existing aid. If the aid awarded to the former Tirrenia Group were indeed classified as existing aid, this classification would likely also apply to the compensation paid for the public service obligations operated by the Siremar business branch up to the privatisation, for the following reasons:

(238)

Concerning the existence of a real SGEI on the routes served by the Siremar business branch under the initial Convention, Siremar in EA first listed the connections where it was operating a public service during the prolongation period. There was competition on some routes for some periods of the year. However, these operators were also providing a public service and were compensated accordingly. Therefore, Siremar in EA noted that the presence of those operators did not put into question the existence of a genuine SGEI. Additionally, Siremar in EA provided passenger data on the routes operated in 2010 and 2011, which showed that on all individual routes, the average yearly passenger traffic was below 300 000 (83). On this basis, the conditions laid down in Article 2(1)(d) and (e) of the 2011 SGEI Decision would be complied with. Additionally, since the compensation paid on the basis of the prolongation of the initial Conventions was cleared in the context of the infringement procedure, the condition laid down respectively in Article 2(4) and (2) of the 2011 and 2005 SGEI Decisions would also be met.

(239)

Moreover, Siremar in EA claimed that it had not been overcompensated by Italy. Firstly, the company referred to a report by the Corte dei Conti that signed off on the methodology set out in Article 3 of the initial Convention for determining the compensation amount of the companies of the former Tirrenia Group. Secondly, Siremar in EA pointed out that during the period in which it was under extraordinary administration (September 2010 – July 2012) the amount of the subsidy was approximately EUR 16 million lower in absolute terms, and about 25 % lower in relative terms, than the average amount of subsidies received by the company over the previous 2 years (2008 – 2009). Siremar in EA noted that the public service compensation paid until the end of 2009 allowed it to balance its income and expenses and to continue to operate despite the gradual deterioration of its economic and financial outlook. However, over time Siremar had become more reliant on the subsidies: between 1999 and 2008, their share of the turnover increased from 64 % to 77 %. Then, from 2010 onwards, the 2009 Law capped the amount of compensation at a level significantly lower than in the previous years. Siremar in EA argued that the public subsidy would thus not have been able to cover its operating costs. Therefore, Siremar in EA concluded that, in the years when the initial Convention was prolonged, there could not have been any overcompensation and that the new methodology for calculating the compensation would force the new owner of the business branch to reorganise the operations of the latter to increase its efficiency.

(240)

Siremar in EA recalled that the Italian authorities informed the Commission on 16 May 2011 that the Extraordinary Administrations of Tirrenia and Siremar would repay the rescue aid approved by the 2010 Decision following completion of the sale of the Tirrenia and Siremar business branches, using the receipts from the sale of these branches. However, Siremar in EA noted that the completion of the sale of the Siremar business branch was delayed due to unexpected events, and therefore Siremar in EA had to continue to operate its services for a considerably longer time than planned, bearing the associated costs. The entire rescue aid was however repaid to the State in full by means of a single payment on 18 September 2012, i.e. only 48 days after transfer of the Siremar business branch, which took place on 1 August 2012.

(241)

With respect to the requirement laid down in paragraph 25(c) of the Rescue & Restructuring Guidelines, Siremar in EA noted that the liquidation plan for both Tirrenia and Siremar had been published on the website of the Extraordinary Administration (84) long before the expiry of the aforementioned 6-month time limit. Siremar in EA added that any relevant information on the subsequent progress of the privatisation process – which it claimed to be, in essence, a restructuring plan as defined by the Rescue & Restructuring Guidelines – was regularly submitted to the Commission under the State aid and merger approval procedures. Siremar in EA therefore claimed that the Commission was fully informed and that this plan was feasible, coherent and far-reaching, so as to restore Siremar’s viability as required by the Rescue & Restructuring Guidelines.

(242)

Siremar in EA also argued that Siremar ceased being an undertaking in difficulty as soon as it received the rescue aid that enabled it to provide the public service regularly, while duly managing the liquidation process. In its view, over the period in question, these activities were performed regularly and with none of the disruptions that usually mark out an undertaking in difficulty. Siremar in EA added that the completion of the privatisation coincided with the complete implementation of the restructuring plan. This involved structural modifications to Siremar’s organisation and management, ensuring its return to long-term profitability. Finally, Siremar in EA pointed out that the 2010 Decision confirmed that the ‘one time, only time’ principle had been complied with also concerning the past, in relation to any rescue and restructuring aid or unlawful aid, such us the compensation for the public service obligations. Therefore, Siremar in EA argued that the Italian authorities might have held legitimate expectations that that compensation did not entail any State aid.

(243)

With respect to the procedure followed, Siremar in EA claimed that Italy had notified the new Convention to the Commission on 10 January 2012 only for reasons of legal certainty. Indeed, Siremar in EA disagreed with the Commission’s view in the 2012 Decision that this measure could constitute unlawful aid, granted in breach of the standstill obligation under Article 108(3) TFEU.

(244)

On substance, Siremar in EA presented the four Altmark criteria and argued why it considered that each criterion was respected, thereby excluding the presence of any State aid element in the new Convention.

(245)

Firstly, the company was entrusted with providing an SGEI (Altmark I): Article 3 of the new Convention clearly sets out the services to be provided, while its Annex A identifies in detail the types of ships to be used and the time bands to be covered, specifying the requirements for evening and night service and the fare constraints. Secondly, the parameters for the calculation of the compensation were set out in advance in a transparent and objective manner (Altmark II): the new Convention, its annexes and the CIPE Directive provided a detailed description of the calculation methodology. Thirdly, only the net costs of providing the public service were compensated (Altmark III): the new Convention lays down that only the services operated as a public mission would be compensated. The elements to be taken into account for the calculation of costs and the reasonable profit, i.e. 6,5 % return on risk capital, were listed in the CIPE Directive and annexes B and C of the new Convention. Fourthly, the compensation has to be set at the minimum level (Altmark IV): Siremar in EA argued that the tender for the privatisation of the Siremar business branch was transparent, open and non-discriminatory, and that the method of calculation of the compensation required increased efficiency on the part of the operator of the service.

(246)

The Altmark reasoning notwithstanding, Siremar in EA also addressed the Commission’s doubts on the new Convention’s compliance with the conditions laid down in the 2011 SGEI Decision.

(247)

In particular, Siremar in EA claimed that, on the basis of the passenger data for 2010 and 2011, the passenger threshold set by Article 2(1)(d) and (e) of the 2011 SGEI Decision was not breached. Furthermore, Siremar in EA argued that in light of the outcome of the infringement procedure (see also Section 5.1.1), and following the privatisation of the Siremar business branch, the condition in Article 2(4) of the 2011 SGEI Decision is also respected.

(248)

Siremar in EA referred to the arguments provided for its Altmark reasoning to prove compliance with the conditions required by Article 4(a) and (b) of the 2011 SGEI Decision. Moreover, the new Convention lays down the parameters for calculating, controlling and reviewing the compensation and the arrangements for avoiding and recovering any overcompensation, as well as binding requirements covering essential aspects (price, quality and quantity) of the services provided (Article 4(d) and (e) of the 2011 SGEI Decision). Additionally, for each route, the maximum fares applicable per person or vehicle are laid down in Annex A to the new Convention, distinguishing between standard fares and reduced fares for island residents. The annual compensation for the public service obligations is fixed for the duration of the Convention. However, there is a mechanism for revising every 3 years the reference economic parameters, as well as a safeguarding clause in favour of both parties in the event of unforeseen and structural changes, above a fixed threshold, for certain economic parameters. Moreover, to ensure full compliance with the requirements described above, the new Convention introduced a strict and comprehensive system of penalties for the service operator, based on the principle of deterrence. The supervisory Ministries are also empowered to perform inspections and checks, and obtain information to assess fulfilment of the obligations laid down in the Convention (Article 5 of the 2011 SGEI Decision). Finally, Siremar in EA claimed that it complied with the other applicable provisions of the 2011 SGEI Decision (Articles 6 to 9) through the general provisions regulating an open, transparent and non-discriminatory tender, such as the one used for the sale of the Siremar business branch.

(249)

Siremar in EA recalled the main steps of the tender procedure and the subsequent developments. It emphasised that the Extraordinary Commissioner designed and conducted the tender procedure in the manner considered most appropriate to ensure the attainment of the highest possible value and that he was required by law to establish safeguards to ensure the transparency, impartiality and fairness of the tender procedure. In particular, an independent expert had set the minimum price and the selection of the successful offer had been based on the highest price criterion. Moreover, Siremar in EA noted that, when considering aid possibly granted in a privatisation, the Commission should follow the GRAWE case law (85), which states that when a State-owned company is privatised, it can be presumed that the market price corresponds to the highest offer received, if such offer is credible and has economic value.

(250)

Siremar in EA also argued that the tender process was not subject to any conditions capable by themselves of causing a reduction in the value of the assets offered for sale, or of reducing the number of potential purchasers. In particular, this applies to the conditions mentioned in the 2011 Decision concerning: (i) the preservation of employment levels (ii) the bundling of the ships with the public service obligations in a single tender procedure. With respect to the former, Siremar in EA pointed out that it concerns a mandatory provision, established by legislative act of general scope and applicable without distinction, for a period limited to 2 years. On the latter, Siremar in EA noted that the possibility of using the business branch’s fleet to operate the public service routes established in the Convention seemed to constitute a viable business opportunity rather than a negative factor impacting the value of the business branch put up for sale, especially at a time of recession for the maritime transport sector.

(251)

On the specific issue of the counter-guarantee by Sicily, Siremar in EA submitted that there was no evidence of the existence of any counter-guarantee in the documents submitted by the bidders in the course of the tender procedure. In particular, Unicredit’s comfort letter of 12 October 2011 did not contain any reference, explicit or implicit, to a counter-guarantee issued by Sicily. In addition, Unicredit maintained its commitment to guarantee the deferred payments of part of the sale price even after Sicily withdrew its counter-guarantee. Indeed, the fact that the sale was completed long after Sicily had recalled its counter-guarantee would suffice to conclude that there was no material link between Unicredit’s comfort letter and Sicily’s counter-guarantee.

(252)

For these reasons, Siremar in EA concluded that the Commission’s doubts on the existence of aid in the privatisation of Siremar’s business branch, including the counter-guarantee issued by Sicily, were not justified.

(253)

Siremar in EA described the following features of the privatisation of the Siremar business branch: the scope of the transfer (assets and liabilities); the economic activity, workforce and identity of the parties; the sale price; the logic and timing of the operation. Siremar in EA claimed that in the present case, all of these elements pointed towards economic discontinuity between the Extraordinary Administration selling the Siremar business branch and the acquirer.

(254)

In particular, Siremar in EA noted that:

(255)

On 12 February 2014, Siremar in EA submitted decision 592/14 on the issue of the counter-guarantee provided by Sicily (see recital (96)), and presented its own preliminary assessment. In particular, decision 592/14:

(256)

With regard to the last point, already at that stage, the Extraordinary Administration flagged that it could not be excluded that it would be newly called to put in place the activities legally required to finalise the Siremar privatisation process.

(257)

SNS submitted four letters in the course of the investigation: three submissions of information and one formal request for the Commission to prioritise the Siremar part of the investigation on the Tirrenia Group. Subsequent informal exchanges also took place, with full knowledge of the Italian authorities, to clarify certain pending issues or acquire specific information. This section will summarise only the three submissions (86).

(258)

In the first submission, sent on 22 February 2012 after the adoption of the 2011 Decision, the company submitted an update on Siremar’s privatisation process and certain clarifications regarding the counter-guarantee issued by Sicily on 12 October 2011, after the last request for incremental offers of 29 September 2011. In particular, SNS pointed out that this counter-guarantee: (1) was not proportional to the shares of Sicily in Mediterranea; (2) was issued by Sicily on its own initiative and was not remunerated; (3) was made without any intervening compensation or risk mitigation on the part of CdI’s shareholders. SNS also submitted the counter-guarantee itself to the Commission. Moreover, it claimed that the text of that counter-guarantee made clear that the latter was a requirement to the issuing of the guarantee on the deferred instalments of the sale price by Unicredit. SNS thus concluded that the counter-guarantee amounted to illegal State aid to CdI and possibly to Unicredit.

(259)

In the second submission, sent on 21 March 2013 after the adoption of the 2012 Decision, the company retraced the various steps of the privatisation procedure and related litigation up to that date (see Section 2.3.3.2). It also reported about a complaint issued by the ferry operator NGI to the Ministry of Transport, against the awarding of a contract to operate services to the Egadi islands, Pantelleria and Ustica to CdI (87). Then, it clarified the nature of Sicily’s indirect shareholding in CdI, and argued why both the counter-guarantee and the capital increase represented State aid measures.

(260)

Firstly, in SNS’s view, Sicily’s indirect shareholding in CdI cannot be considered a minority shareholding without any influence on the management of the company. Indeed, Sicily would have intervened in all strategic decisions of CdI. In particular, the complainant pointed out that Mr Vincenzo Emanuele held simultaneously the position of General Accountant of Sicily and President of the Supervisory Board of Mediterranea, and was therefore in a position to influence the decisions of CdI. Under Article 2409-octies of the Italian Civil Code, the Supervisory Board exerts functions of control. It is entrusted with the following responsibilities, among others: appointment and revocation of the Board of Directors; approval of the balance sheet; carrying out the functions attributed to the Collegio Sindacale under Article 2403 of the Italian Civil Code; promoting damages actions against members of the Board of Directors; presenting a yearly update in writing to the shareholders. Moreover, the Statute of Mediterranea attributed to its Supervisory Board the additional competence of voting on the strategic operations and financial and business plans prepared by the Board of Directors. SNS also pointed out that, when Mediterranea was being set up, Sicily did nominate two of the three members of the company’s Board of Directors. Finally, SNS noted that the minority shareholders of Mediterranea and CdI were partially the same, thereby increasing the leverage of Sicily. In particular, Lauro.it SpA and Isolemar S.r.l. were minority shareholders in both Mediterranea and CdI.

(261)

Secondly, on the counter-guarantee, SNS pointed out that, when the tender was about to be awarded to SNS, and after the expiry of the procedural deadline, CdI modified its offer by proposing to replace the guarantee previously submitted, from Commercial Fidi, with a guarantee from Unicredit, which was counter-guaranteed by Sicily. Then, on 12 October 2011, after the last request for incremental offers, Unicredit issued a new comfort letter to CdI, without mentioning any counter-guarantee. However, the same day, Sicily did confirm its counter-guarantee to Unicredit, modifying the amounts to match those in Unicredit’s letter. SNS also noted that in addition to its indirect equity participation in CdI, Sicily also held a minority shareholding in Unicredit (0,62 %) and had a close relationship with the latter (88).

(262)

SNS considers that the Extraordinary Administration would have awarded the Siremar business branch to SNS, without the granting by Unicredit of the guarantee to CdI. Against this background, SNS claimed that, based on State aid case law and the Guarantee Notice, the counter-guarantee fit the definition of a State aid measure as it gave a selective economic advantage to CdI by allowing it to win the tender for Siremar’s business branch, using State resources and distorting competition and trade. Indeed, SNS submitted that the measure might also involve aid to Unicredit, as the risk profile of its guarantee in favour of CdI would accordingly be lowered.

(263)

Thirdly, SNS described the capital increase by CdI, and the changes in the shareholding structures of both CdI and Mediterranea over time. SNS first noted that after the capital increase which happened in two stages, from EUR 1 million to EUR 21 480 263, Mediterranea still held the majority of the shares of CdI. SNS also noted that, at the time of the two stages of the capital increase, Sicily was the majority shareholder of CdI, even if its share would later be diluted to 43,02 %. SNS considers that the decisions to undertake the capital increase and to grant the counter-guarantee would have been linked, and neither of them would have been ultimately profit seeking. Indeed, no private investor would have underwritten the capital increase and at the same time issued such a counter-guarantee, taking into consideration the amounts involved and the timing of both measures. Finally, SNS pointed out that the private partners, which did participate in CdI’s capital increase, had much smaller shareholdings than Sicily (roughly a half), and would have never participated in that capital increase without Sicily providing most of the funds by using public resources. Therefore, SNS claimed that the capital increase by CdI also fulfilled all the conditions to be considered State aid.

(264)

Finally, the company described problems in the execution of the new Convention by CdI, with considerable delays, cancellations and fare rises that affected end users, and asked the Commission to finalise the investigation concerning just the counter-guarantee and the capital increase.

(265)

In the third submission, sent on 31 July 2019, SNS made preliminary remarks on the minor islands served under the new Convention. Sicily’s minor islands are fourteen, each with its own population and maritime connection needs, requiring regular and frequent maritime services with the mainland also for the provision of essential supplies such as food, water, fuel and mail. Many of these islands have no hospitals or high schools so that patients and pupils rely on stable and affordable connections to fulfil their education and health needs (89). SNS also noted that all evacuation plans for these islands, in cases of natural disasters or for civil protection purposes, rely on the maritime connections provided under the new Convention.

(266)

SNS then argued that it considered that the compensation paid to it under the new Convention did not amount to State aid as it complied with the Altmark criteria. In particular, SNS compared its case with services provided by Saremar which were assessed in the 2014 Decision, and highlighted several elements that apply to SNS but did not apply to those services:

(267)

Additionally and as a subsidiary reasoning, SNS noted that the compensation under the new Convention also respected the compatibility conditions set by the 2011 SGEI Decision. Indeed, the public service obligations to be fulfilled by SNS are clearly identified and defined in all their characteristics. Additionally, the convention with SNS:

(268)

In its reply to the 2011 Decision, sent on 29 February 2012, Pan Med stated that it agreed with certain sections of that decision concerning the Commission’s preliminary assessment on the existence of aid in the privatisation, the berthing priority, and the measures laid down by the 2010 Law.

(269)

In its reply to the 2012 Decision, sent on 19 April 2013, Pan Med noted that it intended to start operating certain new routes but alleged that competition was hampered by the incompatible aid granted to the companies of the former Tirrenia Group and their acquirers. The following recitals summarise Pan Med’s comments that refer to Siremar.

(270)

Regarding the rescue aid granted to Tirrenia and Siremar, Pan Med claimed that from 28 August 2011 – i.e. the date by which that aid should have been terminated – until its reimbursement approximately 1 year and 2 months later, these two companies benefited from illegal and irregular rescue aid. In particular, the rescue aid would not have complied with the Rescue & Restructuring Guidelines and would not have been part of a comprehensive restructuring plan. Therefore, in Pan Med’s view it amounted to operating aid to Tirrenia and Siremar.

(271)

On the new Conventions, Pan Med expressed its observations concerning the genuine nature of the SGEI performed by CIN and CdI, focusing its reasoning on the routes operated by the former (i.e. the connections between Sicily and the mainland, as opposed to the connections between Sicily and the smaller islands, operated by CdI). Pan Med argued that neither the mobility needs of the local communities nor economic development arguments could justify the public compensation granted to these operators. Pan Med pointed out that the objective of ensuring territorial continuity should not be addressed through arbitrarily selected route bundles, which did not seem to reflect the general interest and had been defined almost 25 years earlier. Moreover, Pan Med argued that the compensation for the operation of the public service allowed the operators to realise profits that were more than reasonable and hence would not meet the third Altmark criterion (90). In particular, Pan Med claimed that the risk premium of 6,5 % as laid down in the CIPE Directive would not be justified, as there would no business risk left to the operators.

(272)

In its letter, Pan Med also described a number of new routes it had decided to operate and a new daily service on the Gaeta – Milazzo route, which it was still evaluating. Pan Med deemed this service commercially viable. However, the project would have been stalled due to red tape and resistance from CdI and other operators (91). This service would compete with the ferry services operated by CdI on the Naples – Aeolian Islands – Milazzo route (as well as with the service provided by Tirrenia on the Naples – Palermo route). On the competitive situation on the cabotage routes served by CdI, Pan Med recalled that the Commission had already noted that competing operators were providing comparable mixed services, at least on the following routes: Milazzo – Aeolian Islands – Naples, Trapani – Pantelleria and Palermo – Ustica. This would in Pan Med’s view show that the market is indeed capable to meet the public service obligations that were arbitrarily entrusted to CdI.

(273)

Pan Med concluded that the aid granted under the prolongation of the initial Convention, the rescue aid and the aid granted under the new Convention is unlawful and incompatible and had to be recovered from the respective beneficiaries (i.e. the original companies or the new owners, depending on the measure in question and on the existence of economic continuity).

(274)

On 1 March 2012, in reply to the 2011 Decision, Grandi Navi Veloci submitted comments concerning the following items:

Grandi Navi Veloci claimed that the aid measures listed in point (b) and (e) represent new aid, which is both unlawful and incompatible with the TFEU. However, the focus of Grandi Navi Veloci’s comments is on the specific case of Saremar, which is outside the scope of this Decision. Those comments, which are also relevant to this Decision, are summarised below.

(275)

On the alleged violation of the Maritime Cabotage Regulation, Grandi Navi Veloci noted that under that Regulation, Member States can intervene in the event of market failure to provide adequate services, granting subsidies related to public service obligations on routes identified by the Member States themselves. However, Member States must limit their intervention to the essential requirements established in the Maritime Cabotage Regulation and have to fulfil the requirement of non-discrimination in respect of all Community shipowners interested in serving those routes. As Italy awarded the routes to the companies of the former Tirrenia group exclusively without launching an open tender, it breached Article 4(1) and (2) of the Maritime Cabotage Regulation. Additionally, Grandi Navi Veloci notes that, if there are competitors offering the same services on those routes, the conditions set by the Analir case law would not be met (93).

(276)

Regarding the berthing priority, Grandi Navi Veloci did not contest the Commission’s preliminary view that the measure does not constitute State aid, as there is no loss of State resources. However, Grandi Navi Veloci argued that the transfer of the berthing priority to the new owners of the companies of the former Tirrenia Group, as mandated by paragraph 21 of Article 19-ter of Decree Law 135/2009, is also a breach of Article 4 of the Maritime Cabotage Regulation. Grandi Navi Veloci then mentioned two decisions (segnalazioni) adopted by the AGCM in 1995 and 1997 and concerning Caremar, stating that this priority may have a negative impact on competition, particularly if the beneficiary has an exclusive right over the berthing slots that are most valuable from an economic point of view.

(277)

On the privatisation of the Tirrenia and the Siremar business branches, Grandi Navi Veloci agreed with the preliminary view of the Commission, as expressed in the 2011 Decision, that the procedures would not have been sufficiently transparent and unconditional to exclude the existence of aid. Additionally, Grandi Navi Veloci argued that the Italian authorities were indefinitely delaying the privatisation of the companies of the Tirrenia Group, including the regional companies, in spite of the guarantees given over the years to the Commission and formalised in the 2001 Decision (in its recitals 4 and 12) and 2004 Decision (in its recitals 5 and 45). Grandi Navi Veloci claimed that the prospect of the future privatisations had been used as a bargaining chip vis-à-vis the Commission to allow for the payment of public service compensation to the companies of the Tirrenia Group until the end of 2008.

(278)

On 2 December 2019, the mayor of Lipari and the other Aeolian Islands except Salina (94) submitted a letter, beyond the procedural deadlines for interested third parties to make their views known with respect to the 2011 and 2012 Decisions.

(279)

In this letter, the mayor stressed the importance of the maritime transport sector for the everyday life of people living in the Aeolian Islands. In particular, the mayor highlighted that the islands in question are much smaller than Sardinia or Sicily and for this reason the maritime cabotage connections are of crucial importance. The mayor noted that these islands – especially the smallest ones – need these connections for basic food and medicine supplies. Without reliable and frequent connections, these islands would risk mass emigration until they would become uninhabited. Additionally, the mayor highlighted how tourism represents the key economic activity of these islands and how efficient and effective transports are essential for tourism, particularly in the high season. On this point, the mayor noted that the user demand for these transport services is relatively small but stable in the low season, concerning mostly commuters and island residents, while it is stronger in the high season, concerning mostly tourists. As a consequence, the connections to the Aeolian Islands need State support and withdrawing it would be a disaster for the basic rights and needs of the people living in those islands.

(280)

On 23 October 2014, CdI participated in a meeting with the Commission and the Italian authorities. The company also submitted three sets of observations, all beyond the procedural deadlines for interested third parties to make their views known with respect to the 2011 and 2012 Decisions. For none of these submissions, CdI completed the compulsory complaint form referred to in Article 24(2) of Council Regulation (EU) 2015/1589 (95). Nevertheless, the Commission will summarise these submissions in the following sections and has taken them into account in its assessment.

(281)

In its first letter sent on 8 August 2013, sent upon request from the Commission, CdI provided detailed data regarding the routes it operated in the period between 1 August 2012 and 31 December 2012. The information provided included, among other elements, a list of the routes operated with the following data:

(282)

Additionally, CdI stated that it had acquired the Siremar business branch after a valuation by an independent expert and that there was no economic continuity with Siremar in EA.

(283)

In its second set of observations, sent on 23 and 30 October 2014, CdI provided comments on the counter-guarantee.

(284)

Firstly, it noted that Sicily had decided to set up Mediterranea with clear political and economic objectives: supporting the minor islands communities with the ‘in house’ provision of maritime cabotage services and providing the necessary capital for a qualified and well-defined participation in the provision of those services. In this respect, in order to carry out its business object, CdI made several purchase offers for Siremar, the latest being those of 9 June, 18 July and 13 October 2011.

(285)

Secondly, it claimed that the award of the business branch was legitimate and provided documents on the tender procedure and related national litigation. CdI claimed that Siremar in EA and the Ministry of Economic Development were aware of the existence of the counter-guarantee, and still they carried out the transfer of the Siremar business branch to CdI, a full 10 months after the awarding of the tender. In particular, CdI shared with the Commission a ruling by the Tribunal of Rome of 15 April 2014, clearing the plaintiffs of any criminal charges, as the Tribunal had concluded that the Extraordinary Administration had known about the counter-guarantee by Sicily, when it awarded the business branch to CdI. As facts established in final rulings in criminal proceedings cannot be contested in related procedures, CdI argued that this proved that the counter-guarantee was fully regular and at the same time not decisive for the outcome of the tender (98).

(286)

Thirdly, CdI noted that Sicily offered the counter-guarantee in its capacity as an investor owning a stake in a company, not as a public authority. Since a counter-guarantee was necessary to obtain the guarantee by Unicredit on the deferred payments of the sale price, all its shareholders, including private parties Lauro.it SpA, Davimar and Isolemar S.r.l, issued a counter-guarantee. For the first offer by CdI, they did so even before Sicily issued its own counter-guarantee, because of the lengthier decision-making procedures of a public administration. Indeed, that delay caused CdI to rely at first on the guarantee by Commercial Fidi, which would later be replaced by the comfort letter from Unicredit, which included a suspensory clause on the verification of the powers of the General Accountant of Sicily to issue the counter-guarantee (see recital (84)). However, this would not be relevant, for two reasons: first, the Extraordinary Commissioner did not take it into account and requested another round of offers; second, the counter-guarantees by the other parties were complete. Therefore, CdI concluded that the counter-guarantee from Sicily was an ordinary business transaction and did not provide any advantage to CdI or Unicredit.

(287)

In its third letter, sent on 15 July 2015, CdI first referred to the arguments submitted by the Italian authorities on the price of the business branch, which met the private vendor criterion, and on economic discontinuity between Siremar in EA and CdI. CdI claimed, in particular, that decisions 5172/2012 and 592/14 did not change this conclusion, as they focused on one item of the privatisation procedure, namely the counter-guarantee by Sicily. The decisions by the TAR and CdS did not have any effect on the mechanisms put in place to ensure economic discontinuity: the scope of the transfer and of the public services under the new Convention, as defined by the 2010 Law; and the provisions on the workforce laid down by Article 56(3-bis) of Decree Law 270/1999. Moreover, Sicily had issued the counter-guarantee, while the Extraordinary Administration and the Ministry of Economic Development supervised the transfer of the business branch. Therefore, the existence of such a counter-guarantee cannot call into question the legitimacy of the sale procedure. CdI also informed the Commission that the various institutions and stakeholders involved had met on 20 April 2015 to ensure the correct application of decisions 5172/2012 and 592/14 (99).

(288)

Additionally, CdI argued that the safeguards of the procedure ensured that the price paid for the Siremar business branch was its real market price after the granting of the aid, meaning that the value of such aid was effectively already included in the sale price (100). By this reading, the seller would have kept the advantage of any State aid, as the market price of its assets was correspondingly higher, and the buyer would therefore not be required to repay that aid. Therefore, any recovery order potentially directed to Siremar in EA should not be extended to the buyer of the Siremar business branch.

(289)

The Commission forwarded to Italy the comments and submissions summarised in Sections 5 and 6. However, Italy only provided comments to the second submission by SNS (see Section 5.2.2), by letter of 13 May 2015.

(290)

In particular, Italy noted that in the last phase of the sale procedure, with the deadline of 13 October 2011, the Extraordinary Commissioner explicitly advised the bidders against submitting offers backed by any guarantee in violation with State aid rules. Accordingly, CdI submitted its offer with the comfort letter by Unicredit, which did not include any reference to a counter-guarantee by Sicily, while still subjecting the validity of the comfort letter to other conditions (101). Therefore, the ministerial authorisation was granted on the assumption that the rules of the procedure had been fully respected.

(291)

Italy also argued that the capital increase by Mediterranea was undertaken pari passu with the other private shareholders of CdI, and that for this reason it did not entail any State aid. Moreover, Italy reiterated that Sicily’s shares were statutorily different from those of CdI’s private shareholders, thereby strictly limiting its influence within the company.

(292)

According to Article 107(1) TFEU ‘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 production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market’.

(293)

The criteria laid down in Article 107(1) TFEU are cumulative. Therefore, in order to determine whether the measures in scope of this Decision constitute State aid within the meaning of Article 107(1) TFEU, all the above-mentioned conditions need to be fulfilled. Namely, the financial support should:

(294)

Firstly, the Commission notes that the new Convention should be assessed jointly with the privatisation of the Siremar business branch. Such joint assessment is appropriate because in essence Italy organised a tender for a public service contract (i.e. the new Convention) whereby the winning bidder had to acquire from Siremar a number of assets (mainly ships) necessary to discharge the public service obligations laid down in that public service contract.

(295)

Secondly, the Commission notes that, at the time of adoption of this Decision, the Italian authorities and CdI have already rescinded both the sale contract and the new Convention they had concluded. The latter, bundled with the Siremar business branch, was then transferred to SNS. Indeed, as described in recitals (99) and (100), the initial award of the new Convention and the Siremar business branch to CdI has been entirely annulled and both were ultimately attributed to SNS on 11 April 2016. Moreover, as the award of the new Convention and the sale of the business branch are intrinsically linked, it is not possible to assess either of the two measures separately, not even for a limited period of time. Against this background, concluding the investigation on the initial award of the new Convention, bundled with the Siremar business branch, to CdI, over the period 1 August 2012 – 10 April 2016, would be logically impossible, as it would amount to assessing the same procedure twice (once for the intermediary award to CdI and once for the final award to SNS) (102). Therefore, this Decision will assess only the award of the new Convention, bundled with the Siremar business branch, from Siremar in EA to SNS. As the new Convention, in force since 11 April 2016, had essentially the same terms and conditions as that which applied in the period 1 August 2012 – 10 April 2016, and as the business branch was also essentially the same, the Commission has integrated all the relevant information it has gathered in the course of the formal investigation concerning the period 1 August 2012 – 10 April 2016 in the assessment of the award of the new Convention bundled with the Siremar business branch to SNS.

(296)

Finally, the Commission notes that the berthing priority, which only applies to the public service routes, is inextricably linked with the performance of the SGEI by Siremar and its acquirer SNS. Therefore, this measure will be assessed jointly with the public service compensation granted to those companies (see Sections 8.1.1, 8.1.3 and 8.3.1).

(297)

In order to be qualified as State aid, a measure must be imputable to the State and granted directly or indirectly by means of State resources.

(298)

Siremar was entrusted by the Italian State with the operation of maritime routes as detailed by the initial Convention, as prolonged. The initial Convention was concluded with the State and the resulting public service compensation for Siremar is paid by the State from its own budget. Therefore, the public service compensation to Siremar is imputable to the State and is given through State resources.

(299)

The Commission takes note that, according to Italy, all ferry operators pay regular fees to the relevant port authorities for berthing but that Siremar did and does not pay any additional fee for the berthing priority. Nevertheless, the Commission considers that in principle Italy could have chosen to impose an additional fee for the berthing priority and that by not doing so, it has foregone State revenues. Furthermore, since the berthing priority is granted by law, it is imputable to the State (see recital (131)).

(300)

In order to be qualified as State aid, a measure must be selective. The public service compensation for the provision of the maritime services in question is only granted to Siremar, thus it is selective. Since the berthing priority was only granted to the companies of the former Tirrenia Group, including to Siremar, it is also selective.

(301)

The Commission recalls that public service compensations granted to a company may not constitute an economic advantage under certain strictly defined conditions.

(302)

In particular, in its Altmark judgment (103), the Court of Justice held that where a State measure must be regarded as compensation for the services provided by the recipient undertakings in order to discharge public service obligations, so that those undertakings do not enjoy a real financial advantage and the measure thus does not have the effect of putting them in a more favourable competitive position than the undertakings competing with them, such a measure is not within the scope of Article 107(1) TFEU.

(303)

However, the Court of Justice also made clear that for such public service compensation to escape qualification as State aid in a particular case, the four cumulative criteria (the ‘Altmark Criteria’), summarised below, must be satisfied:

(304)

The Commission specified how it applies the Altmark Criteria in its Communication on the application of State aid rules to compensation granted for the provision of SGEI (the ‘SGEI Communication’) (104).

(305)

Given that the Altmark criteria have to be complied with cumulatively, if any one of these criteria is not met, the Commission would conclude that the measure under assessment provides an economic advantage to the beneficiary. The Commission will then first assess observance of Altmark 4.

(306)

Altmark 4 provides that the compensation must be the minimum necessary in order for it not to qualify as State aid. This criterion is deemed to be fulfilled if the recipient of the public service compensation has been chosen following a tender procedure that allows for the selection of the tenderer capable of providing the services at the least cost to the community or, failing that, the compensation has been calculated by reference to the costs of an efficient undertaking.

(307)

For none of the prolongations of the initial Convention in the period between 1 January 2009 and 31 July 2012 was Siremar selected following a public tender procedure. Italy merely prolonged the system already in force, thereby entitling the pre-established operator to continue receiving compensation for the discharge of the public service obligations.

(308)

Moreover, the Italian authorities have not provided to the Commission any information suggesting that the level of compensation has been 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, taking into account the relevant revenues and a reasonable profit. Italy has only argued that the public service compensation for Siremar decreased significantly from 2010 onwards, following the introduction of the maximum compensation amount set by the 2009 Law. However, Italy has not shown that the costs incurred by Siremar in the provision of its public service obligations were in line with those of a typical undertaking, well run and adequately provided with means of transport.

(309)

The Commission therefore concludes that Altmark 4 has not been complied with in this case.

(310)

Given that the four Altmark criteria are not cumulatively observed in this case, the Commission concludes that the compensation for the operation of maritime routes under the prolongation of the initial Convention provided Siremar with an economic advantage.

(311)

With respect to the berthing priority, the Commission first recalls that the Italian competition authority AGCM has at least on two occasions considered that this measure has economic value (see recital (276)). Nevertheless, Siremar does not pay any fee for the berthing priority (see recital (226)). Furthermore, the Commission observes that the berthing priority has at least in theory the potential to lower the operator’s costs (e.g. because the guaranteed berthing could reduce waiting times in ports and hence result in lower fuel costs) or increase its revenues (e.g., because some timings possibly attract more demand from passengers). Indeed, to the extent the berthing priority allows for a faster docking procedure, users of the ferry service may prefer the ferry operator that benefits from this measure. Even if these effects would only materialise in rare circumstances or would be limited, the berthing priority could nevertheless constitute an economic advantage for Siremar.

(312)

When aid granted by a Member State strengthens the position of an undertaking compared to other undertakings competing in intra-Union trade, the latter must be regarded as affected by that aid (105). It is sufficient that the recipient of the aid competes with other undertakings on markets open to competition (106).

(313)

In the present case, the beneficiary operates in competition with other undertakings providing maritime transport services in the Union, in particular since the entry into force of Council Regulation (EEC) No 4055/86 (107) and the Maritime Cabotage Regulation, liberalising the market of the international maritime transport and maritime cabotage, respectively. Therefore, the compensation for the operation of maritime routes under the prolongation of the initial Convention is liable to affect Union trade and distort competition within the internal market. For the same reasons, that conclusion also holds for the berthing priority.

(314)

Since all criteria laid down in Article 107(1) TFEU are fulfilled, the Commission concludes that the public service compensation paid on the basis of the successive prolongations of the initial Convention and the berthing priority constitute State aid to Siremar.

(315)

The Commission first recalls that, according to Article 1(c) of Regulation (EU) 2015/1589, new aid means ‘all aid, that is to say, aid schemes and individual aid, which is not existing aid, including alterations to existing aid’. Indeed, Article 108(3) TFEU provides that plans to grant or alter existing aid must be notified, in due time, to the Commission and may not be implemented until the procedure has led to a final decision (108).

(316)

Siremar in EA considers that if the public service compensation awarded to Siremar until 2008 included would be considered existing aid on the basis of Article 4(3) of the Maritime Cabotage Regulation, this would also apply to the compensation paid on the basis of the prolongation of the initial Convention (recital (237)). The Commission notes that the compensation paid to Siremar for the operation of maritime public service obligations until 2008 was assessed in the 2020 Tirrenia Group decision and was indeed classified as existing aid (see recital (19)).

(317)

However, in line with the position of the European Courts (109), the Commission considers that amending (i.e. prolonging) the duration of an aid scheme that had a clear expiry date (in this case, 31 December 2008) is sufficient to make it a new aid, irrespective of whether or not other characteristics of the measure were changed. On this basis, the Commission concludes that the public service compensation paid under the successive prolongations of the initial Convention should be considered as new aid. The arguments of Siremar in EA should thus be rejected.

(318)

The Commission notes that neither the Italian authorities nor Siremar in EA have argued that the berthing priority is existing aid. The Commission will therefore assess this measure as new aid.

(319)

The Commission has already established in recitals (34) to (40) of the 2010 Decision, that the notified rescue aid measure constituted State aid to Siremar within the meaning of Article 107(1) TFEU.

(320)

In the 2010 Decision, the Commission declared the notified rescue aid to Siremar compatible with the internal market. In accordance with the 2004 Rescue and Restructuring Guidelines, Italy undertook to communicate to the Commission within 6 months, either a restructuring (or liquidation) plan or proof that the loan has been reimbursed in full and/or that the guarantee has been terminated.

(321)

The first instalment of the guaranteed loan was disbursed to Siremar on 28 February 2011 and thus the 6-month deadline would have expired on 28 August 2011.

(322)

Italy did not submit to the Commission a restructuring (or liquidation) plan by that date. On 11 July 2011, the guarantee was called by BIIS and Siremar became debtor to the State (see recital (63)). On 18 September 2012, Siremar reimbursed to the State the amount due (see recital (65)). Until the latter date, Siremar continued to fully benefit from the rescue aid measure.

(323)

The Italian authorities have neither argued nor demonstrated that the prolongation of the rescue aid would no longer constitute State aid. They have only provided arguments (see Section 4.2) for why the measure would have remained compatible even following the expiry of the 6-month deadline.

(324)

The Commission therefore considers that the extension of the rescue aid beyond the 6-month deadline, i.e. from 28 August 2011 until 18 September 2012, also constitutes State aid to Siremar within the meaning of Article 107(1) TFEU.

(325)

In order to conclude on whether the award of the new Convention bundled with the Siremar business branch and the berthing priority constitutes an advantage to SNS within the meaning of Article 107(1) TFEU, the Commission must assess observance of the Altmark criteria (see recitals (301) to (304)).

(326)

The Commission recalls that there is no uniform and precise definition of a service that may constitute an SGEI under Union law, either within the meaning of the first Altmark criterion or within the meaning of Article 106(2) TFEU. Paragraph 46 of the SGEI Communication is worded as follows:

‘In the absence of specific Union rules defining the scope for the existence of an SGEI, Member States have a wide margin of discretion in defining a given service as an SGEI and in granting compensation to the service provider. The Commission’s competence in this respect is limited to checking whether the Member State has made a manifest error when defining the service as an SGEI and to assessing any State aid involved in the compensation. Where specific Union rules exist, the Member States’ discretion is further bound by those rules, without prejudice to the Commission’s duty to carry out an assessment of whether the SGEI has been correctly defined for the purpose of State aid control.’

(327)

National authorities are therefore entitled to take the view that certain services are in the general interest and must be operated by means of public service obligations to ensure that the public interest is protected when market forces do not suffice to guarantee that they are provided at the level or conditions required.

(328)

In the field of maritime cabotage, detailed Union rules governing public service obligations have been laid down in the Maritime Cabotage Regulation and, for the examination of potential State aid to undertakings engaged in maritime transport, in the Community guidelines on State aid to maritime transport (‘the Maritime Guidelines’) (110).

(329)

Article 4(1) of the Maritime Cabotage Regulation provides:

‘A Member State may conclude public service contracts with or impose public service obligations as a condition for the provision of cabotage services, on shipping companies participating in regular services to, from and between islands. Whenever a Member State concludes public service contracts or imposes public service obligations, it shall do so on a non-discriminatory basis in respect of all Community shipowners.’

(330)

Article 2(3) of the Maritime Cabotage Regulation sets out that a public service contract may cover:

(331)

In accordance with Section 9 of the Maritime Guidelines, ‘public service obligations may be imposed or public service contracts (PSCs) may be concluded for the services indicated in Article 4 of Regulation (EEC) No 3577/92’, i.e. scheduled services to, from and between islands.

(332)

It results from established case law that public service obligations may only be imposed if justified by the need to ensure adequate regular maritime transport services which cannot be ensured by market forces alone (111). The Communication on interpretation of the Maritime Cabotage Regulation (112) confirms that ‘it is for the Member States (including regional and local authorities where appropriate) and not the shipowners to determine which routes require public service obligations. In particular, public service obligations may be envisaged for regular (scheduled) island cabotage services in the event of market failure to provide adequate services.’ Moreover, Article 2(4) of the Maritime Cabotage Regulation defines public service obligations as obligations that the ship-owner in question, if he were considering his own commercial interest, would not assume or would not assume to the same extent or under the same conditions.

(333)

In line with the case-law (113), to verify whether there is a real public service need and whether the use of a public service contract (i.e. the new Convention) was necessary and proportional, and hence whether the first Altmark criterion is met, the Commission will assess:

(334)

In this case, CdI and later SNS were entrusted with the provision of mixed passenger and freight services and passenger only high-speed services on multiple lines. The public service obligations imposed on CdI and later SNS concern the maritime transport links to be operated, the type and capacity of the vessels assigned to the respective maritime routes operated, the availability of a backup ship to ensure continuity of service, the frequency of service, and the maximum fares charged to users of the service on each of the respective routes (i.e. lower fares for residents of the smaller islands and higher fares for other passengers).

(335)

As described in recital (184), Italy has imposed the public service obligations laid down in the new Convention mainly to (i) ensure the territorial continuity between Sicily and its smaller islands and (ii) contribute to the economic development of the islands concerned, through regular and reliable maritime transport services. The Commission considers that these indeed can be legitimate public interest objectives.

(336)

Before CdI was originally entrusted with the operation of the maritime links as defined by the new Convention, these routes were operated by Siremar on the basis of the initial Conventions. Indeed, the Commission notes that the routes in question have been operated, largely unaltered, for many years i.e. at least since the entry into force of the initial Convention (114). When entrusting the new Convention in 2012, the Italian authorities, and in particular Sicily, considered that these services continued to be necessary to meet user demand.

(337)

To illustrate the genuine demand from users for the services, Italy provided statistics which show that in 2010, Siremar transported 1 342 402 passengers and 311 114,50 linear meters of cargo on the five route bundles combined. In 2011, those figures were 1 332 400 and 290 704,70 respectively. This shows that in the 2 years before CdI was entrusted with its public service obligations, there was a significant aggregate demand for maritime transport services on the routes concerned.

(338)

However, in order to establish that there is a real user demand on each of the twenty routes concerned, grouped in the five bundles, a more detailed assessment is necessary. For this purpose, Italy provided route-by-route statistics for the period 2007 – 2019 (115). These statistics include the total number of passengers or linear meters of cargo transported per year, which allowed calculating averages per sailing. As an illustration, Table 5 shows two such metrics for the years 2010 and 2019. These figures show that throughout both years, most of the round trip sailings on the routes concerned carried more than a hundred passengers. In 2010, only four routes carried below a hundred passenger on average, while in 2019, only three routes did. The Commission notes that the low number of passengers on those individual routes can be explained by the low populations and small sizes of the islands concerned, as well as by the relatively short and frequent trips, which are necessary to meet the mobility needs of the inhabitants of those islands. The Commission has also analysed the route-by-route statistics for each year until end 2019 (116). The Commission notes that there were fluctuations in the number of recorded trips and passengers on the various lines throughout the years. However, this is because these are very small islands, with limited port infrastructure, that are relatively close to each other. This requires a frequent adjustment of schedules to accommodate local needs (such as commuting patterns for education or work purposes) and mitigate any connection problems (for instance, if a berth is undergoing maintenance and can only accommodate smaller ships, or fewer ships at the same time, one route of a bundle may not be operated for some time, while other routes of that bundle could be operated at increased frequencies). However, based on the data at the Commission’s disposal, there are no indications that the user demand on any route or route bundle had or has actually disappeared.

Table 5 – User demand statistics for the year 2010 (operated by Siremar) and 2019 (operated by SNS)

(339)

To demonstrate that user demand remained present when CdI and later SNS started operating the routes under the new Convention, Italy provided further statistics. The figures in Table 6 show that from 2013 onwards, CdI and later SNS transported more passengers and cargo than Siremar had done in 2010 and 2011 (see recital (337)). While there were some fluctuations over time, these figures confirm that user demand remained present and even increased in recent years.

Table 6 – Statistics for the years 2012-2019 (mixed and passengers only routed operated by CdI and SNS)

(340)

The Commission considers that the above statistics (see recitals (337), (338) and (339)) clearly demonstrate that there is a genuine demand for passenger and freight services on each of the twenty public service routes grouped in five bundles. It can therefore be concluded that these services meet a genuine user demand and hence address real public needs.

(341)

According to paragraph 48 of the SGEI Communication, ‘it would not be appropriate to attach specific public service obligations to an activity which is already provided or can be provided satisfactorily and under conditions, such as price, objective quality characteristics, continuity and access to the service, consistent with the public interest, as defined by the State, by undertakings operating under normal market conditions’ (122). Therefore, the Commission must examine whether the service would be inadequate, in light of the public service requirements imposed by the Member State through the new Convention, if its provision were left to the market forces alone. Paragraph 48 of the SGEI Communication notes in this respect that ‘the Commission’s assessment is limited to checking whether the Member State has made a manifest error’.

(342)

The Commission has already analysed in past decisions whether there was a market failure on these bundles of routes. In particular, in its 2004 Decision, the Commission noted that, regarding Siremar, none of the private Italian operators on the route bundles served by the (then) public operator provided comparable services all year round capable of meeting all the public service requirements stipulated in the 5-year plans (123). This finding relates to the period 1992-2008 and is not put into question by the 2009 Judgment that annulled the 2004 Decision, nor by the 2020 Tirrenia Group decision, which concluded that the public service compensation granted to Siremar was existing aid.

(343)

However, in its 2012 Decision, the Commission noted that during the time period leading up to the first award of the new Convention, other operators were providing regular services on the relevant routes (124). At the time, Italy had argued that Sicily, through several tender procedures, had selected these other operators to operate additional public services under separate contracts. Before proceeding with its assessment, the Commission notes the following.

(344)

Firstly, this assessment is limited to the competitive situation of the market in the years before July 2012, as this was the relevant period for the Italian authorities when they were defining the public service obligations. Although the new Convention imposes specific public service obligations in terms of fares to be charged (including reduced fares for the residents of the smaller islands), Italy has not justified the necessity of the public service by arguing that CdI and later SNS needed to maintain fares at a level lower than those charged by the other operators. In the course of the investigation Italy has rather claimed that, to the extent that other operators provided ferry services on the routes operated by CdI and later SNS, these competing services would differ in terms of the continuity and frequency throughout the year, would not be equivalent (in terms of ports or type of service, e.g. passenger-only instead of mixed), would not be of the same quality, or would also be subsidised under separate contracts. The Commission has therefore not carried out a comparative analysis of the fares charged by all operators on the routes in question. On the contrary, the Commission has focused on possible differences in terms of continuity, regularity, capacity and quality (see recital (330)), and on whether the competing operators were also subsidised under separate contracts.

(345)

Secondly, the comparable services offered by other operators on the route bundles defined in the new Convention were also provided under public compensation regimes, as complementary SGEI defined by Sicily (125). In principle, the presence of other providers of SGEI on the route bundles set out in the new Convention does not put into question the validity of the SGEI for those bundles, but rather it reinforces it, as it suggests that the need for these connections was so strong and/or varied that only multiple operators could fulfil it. Indeed, the fact that other operators are present on a certain route bundle cannot be an indication that that bundle can be adequately served by market forces alone, if those other operators are also receiving public compensation under separate contracts to offer their services.

(346)

Thirdly, Italy identified 20 routes on five bundles, or networks of connections, to be included in the new Convention (126). The Commission notes that, according to Section 5.5.3 of the Communication on interpretation of the Maritime Cabotage Regulation (127), ‘Member States often wish to group public service routes to and from different islands into a single bundle in order to generate economies of scale and attract operators. Bundles as such are not contrary to Union law provided that bundling does not lead to discrimination and does not lead to undue market distortions. The most appropriate size of bundles should be decided by taking account of the best synergy to be made in meeting essential transport needs.’

(347)

In this case, the routes were grouped in geographical bundles for planning purposes, to identify potential gaps or overlaps and ensure a coherent and complete set of connections for the inhabitants of these islands, both with Sicily and with the other islands, particularly the relatively larger ones. Indeed, Table 3 shows that the routes within each bundle are frequently overlapping and are complementary to each other (128). Given the presence of certain essential services such as schools, large grocery stores, and specialised medical services only on Sicily or on the relatively larger islands, Italy chose to entrust route bundles instead of individual routes. Indeed, while private operators do offer some connections between the relatively larger islands (e.g. Lipari and Pantelleria) and Sicily, they do not offer connections to and between all of the islands throughout the year. Given the need to ensure connections between several small islands in various and sometimes relatively remote locations, the Commission considers that Italy has not made a manifest error in identifying the five bundles, comprising one or more routes depending on the characteristics of the island or archipelago in question. For these reasons, given the particular circumstances of this case, the Commission has not assessed each individual connection but instead focused on each bundle as a coherent set of connections to, from and within an archipelago or island.

(348)

Against this background, on the basis of the competitive situation leading up to the moment of the first entrustment on 30 July 2012 and drawing on the comments from interested parties (see Section 5), the Commission has analysed each route bundle to verify that Italy did not make a manifest error in establishing that there was a market failure:

(349)

In light of the above, the Commission concludes that, at the moment of entrustment, market forces alone were insufficient to meet the public service needs. In this regards, the Commission further notes that, on all of the route bundles currently operated under the new Convention by SNS, the to some extent comparable services provided by the other operators were also subsidised and were in any event not fully equivalent in terms of continuity, regularity, capacity and quality and therefore did not satisfy in full the public service needs identified by Italy in the new Convention.

(350)

The Commission notes that the Italian authorities have chosen to conclude a public service contract with one operator (CdI and later SNS) rather than to impose public service obligations on multiple operators. Based on the information provided by Italy, the Commission accepts that the user demand (as described above, see recitals (334) to (340)) could not have been met by imposing public service obligations. On all of the route bundles, the provision of regular services throughout the year requires public service compensations. Where there are private operators present who do not receive public service compensation, the offer is provided only in the high season (see recital (348)). Furthermore, an analysis of the detailed accounts per route under the new Convention shows that the operation of all routes by SNS in 2017, 2018 and 2019 is structurally loss-making, so that without any public service compensation they would not be operated with the desired frequency, capacity and quality (132). Ecorys drew a similar conclusion in its report to the Commission (see recital (119)). In addition, the Commission takes note of Italy’s argument that the choice for a public service contract was also necessary in view of the privatisation of Siremar. More specifically, Italy argued that tendering out Siremar’s assets together with a new public service contract allowed to (i) ensure continuity of the maritime public service, (ii) maximise value for the State, and (iii) safeguard employment. It is for these reasons that the Commission agreed that Italy would tender out the Siremar business branch together with the new Convention (see recital (136)). In doing so, the Commission also accepted, and reiterates in this Decision, that Italy would not rely on public service obligations that apply to all operators but would conclude a single public service contract, initially with CdI and later with SNS.

(351)

Based on the above assessment, the Commission concludes that Italy has not made a manifest error when defining the services entrusted to CdI and later SNS as SGEI. The doubts expressed by the Commission in the 2012 Decision are hence dispelled.

(352)

In order to conclude that Altmark 1 is complied with, the Commission must still check whether CdI and later SNS were entrusted with public service obligations which were clearly defined. In this regard, the Commission notes that the public service obligations are clearly described in the new Convention and its annexes (which include for instance ship specifications for each route). Likewise, the rules regulating the compensation are detailed in the Convention, the 2009 Law and the CIPE Directive. The new Convention also has a clear duration (12 years), identifies CdI and later SNS as the public service operator and contains the arrangements for avoiding and recovering any overcompensation (see also Section 2.3.4). Therefore, the Commission concludes that the first Altmark criterion is met.

(353)

Article 19-ter, paragraph 21, of Decree Law 135/2009 clearly specifies that the berthing priority is necessary to guarantee the territorial continuity with the islands and in light of the public service obligations of the companies of the former Tirrenia Group, including Siremar. Indeed, if there were no priority berthing for companies entrusted with public service obligations, these may (sometimes) have to wait their turn before docking and thereby incur delays, which would defeat the purpose of ensuring reliable and convenient connectivity to the citizens. A regular timetable is indeed necessary to satisfy the mobility needs of the smaller islands’ population and to contribute to the economic development of the islands concerned. Furthermore, since there are certain time scheduling obligations in the new Convention, such as taking the timetables of other means of transportation (such as buses) into account, the berthing priority helps to ensure that ports allocate the berths and berthing times in such a way as to enable the public service operator to respect its public service obligations. This berthing priority was transferred to CdI and later SNS after the acquisition of the Siremar business branch. Against this background, the Commission considers that this measure is awarded to enable CdI and later SNS to perform their public service obligations that constitute genuine SGEI (see recital (351)). Therefore, the berthing priority also complies with the first condition of the Altmark judgment.

(354)

The Commission recalls that in the 2012 Decision (see its recital 205), it had taken the preliminary view that the second condition of the Altmark judgment is observed.

(355)

Against this background, the Commission notes that the parameters at the basis of the calculation of the compensation have been established in advance and observe the transparency requirements in line with the second Altmark criterion.

(356)

More specifically, the parameters on the basis of which the compensation was calculated are explained in detail in the CIPE Directive and have been applied in the new Convention (and annexes thereto) while the maximum compensation amounts are laid down in the 2009 Law. The method of calculation of the compensation, including for instance the cost elements taken into account, are detailed in the CIPE Directive. Since the berthing priority does not include any financial transfer to the operator of the service, the Commission considers that this measure complies with the second Altmark criterion.

(357)

Therefore, the Commission concludes that the second condition of the Altmark judgment is observed.

(358)

According to the third Altmark criterion, the compensation received cannot exceed what is necessary to cover all or part of the costs incurred in the discharge of the public service obligations, taking into account the relevant receipts and a reasonable profit.

(359)

However, the Altmark ruling does not provide a precise definition of the reasonable profit. According to the SGEI Communication, reasonable profit should be taken to mean the rate of return on capital that would be required by a typical company considering whether or not to provide the service of general economic interest for the whole duration of the period of entrustment, taking into account the level of risk. The level of risk depends on the sector concerned, the type of service and the characteristics of the compensation mechanism.

(360)

In the 2012 Decision, the Commission expressed doubts as to the proportionality of the compensation paid to CdI. In particular, the Commission took the preliminary view that the 6,5 % risk premium does not reflect an appropriate level of risk because prima facie CdI did not seem to assume the risks normally borne in the operation of such services. More specifically, the cost elements taken into account for the purpose of calculation of the compensation include all costs involved in the provision of the service and variations in e.g. fuel prices have been taken into account. As a result, the Commission considered at that stage that CdI may have been overcompensated.

(361)

The Commission notes that certain aspects of the compensation method as laid down in the new Convention, indeed seem to reduce the commercial risk incurred by CdI and later SNS. In particular, the maximum fares that the operator can charge are adjusted annually to take into account inflation and reflect variations in fuel costs. Moreover, the new Convention contains certain clauses that aim at maintaining the economic-financial equilibrium of the public service (see recital (130)). In particular, in case the public service compensation would be insufficient to cover the cost of the services entrusted by the new Convention, these clauses allow to revise (i) the scope of these services, (ii) the way the services are delivered (e.g. type of ships), or (iii) the maximum fares.

(362)

However, the abovementioned clauses are subject to a number of restrictions. In particular, under Article 8 of the new Convention, the economic-financial equilibrium of the public service is only reviewed every 3 years. If this review shows that the compensation is insufficient to cover the public service cost, then the operator and the Italian authorities can only agree to make changes for the next 3-year period. In case the revenues or costs of the public service show unforeseeable structural differences more than 3 % higher or lower than the values laid down in the new Convention, its Article 9 allows the parties to request (subject to a number of conditions) a revision of the economic-financial equilibrium. Under both Articles, such changes (if any) are the outcome of a negotiation procedure and until an agreement is reached, the operator must continue to operate the public service unaltered. As a result, the operator remains partially exposed to the risk that the compensation is insufficient to cover the costs of running the service. While Articles 8 and 9 of the new Convention can be used to restore the economic-financial equilibrium, this is only done on a forward-looking basis and there is no retroactive correction possible.

(363)

As explained in recitals (49) to (58), the CIPE Directive provides that the risk premium of 6,5 % would be used to determine the return on capital using the WACC formula. In particular, for Siremar Italy initially took into account a Beta of 0,56 for that formula. The Beta reflects the risk of the activity carried out by the operator and its level shows that in the calculation of the return on capital, Italy took into account the fact that the risk of the activity carried out by operator is substantially lower than the market risk. However, in the course of the formal investigation (see recital (218)), Italy has clarified that, because the amount of compensation is capped by the 2009 Law, the decision was taken to simplify the calculation by applying the 6,5 % as a flat rate return on capital. The Italian authorities also demonstrated that applying the full methodology as laid down in the CIPE Directive would have resulted in a return on capital that exceeds 6,5 % (i.e. 8,87 %). For this reason, Italy considers that their simplified approach is conservative and does not allow for higher compensation for the operator than what was established under the CIPE Directive.

(364)

Against the above background, at recital (363) of the 2020 Tirrenia/CIN decision, the Commission has compared the return on capital of 6,5 %, also applied in the calculation of the compensation for the company subject to that investigation (i.e. CIN), with the median return on capital generated by a benchmark group in 2011 (the year before CdI’s first entrustment). The benchmark group consisted of selected ferry operators that offered maritime connections within Italy or between Italy and other Member States (133). The Commission notes that Siremar is an operator of comparable size to CIN. However, the routes in question are different from those operated by CIN, as they are shorter and connect smaller islands. The Commission considers that while the benchmark group is still relevant for Siremar, the latter’s activities may be considered more risky, which means that a higher risk premium would not be unreasonable. The analysis showed that the return on capital realised by CdI and later SNS is just below the median return generated by the benchmark group. This comparison illustrates that in the year before CdI’s entrustment, a 6,5 % return on capital for the maritime sector was not unreasonable.

(365)

Most importantly, the Commission notes that regardless of the amount that the operator would be entitled to on the basis of the abovementioned methodology (including the return on capital), in practice later SNS can never receive more than the maximum amount set by the 2009 Law (i.e. EUR 55 694 895). The same applied for CdI in the period when it was carrying out the public services under the new convention. This amount, which was set in 2009 and never adjusted for inflation, was most likely conservative as it was almost 17 % lower of what Siremar had needed to operate the service in that same year (134). Irrespective of whether CdI or SNS was entrusted with the public service obligations, the actual figures for the period 2012-2019 in Table 7 show that in all entire years, the public service compensation was insufficient to cover the net cost of the service, including the 6,5 % return on capital (135). In 2012, CdI did obtain a small overcompensation, which was more than offset with losses in 2013 and 2014. However, CdI operated the service only in the months August to December. This period includes the most profitable month, when tourist demand is at its highest (August), and excludes the first months of the years where demand is very low. A similar consideration applies to the compensation received by SNS in 2016. The overcompensation SNS received in that year – which was also more than offset in later years – was due to the fact that SNS only operated the service in the period 11 April – 31 December 2016, which excludes the first 3 months of that year. In line with paragraph 47 of the 2011 SGEI Framework, the Commission assesses whether there was overcompensation over the whole duration of the contract. For the period 2012-2019, SNS and CdI combined received approximately EUR 30,3 million less than the amount as calculated using the methodology including the 6,5 % return. This figure confirms that the review clauses of the new Convention do not protect the operator from all the risks related to the operation of the public service. Some fluctuations between years notwithstanding, the Siremar business branch’s realised return on capital for the period as a whole (up to 2019) was hence approximately – 4,7 % instead of the 6,5 % initially foreseen by Italy. Indeed, the total amount of compensation received by CdI and SNS over the period 2012-2019 is lower than the net cost incurred in the provision of the public service, even assuming a return on capital of 0 %. As shown in Table 7, CdI and SNS combined would have required additional compensation of approximately EUR 12,7 million just to cover their net costs. The conclusion that the review clauses of the new Convention do not protect the operator from all the risks also holds for SNS by itself (period 2016-2019): SNS received approximately EUR 23,3 million less than the amount as calculated using the methodology including the 6,5 % return on capital; the realised return on capital for SNS is about – 11,8 %, instead of the 6,5 % initially foreseen by Italy; and SNS would have required approximately EUR 15 million additional compensation just to cover its net costs.