Case T‑561/18

ITD, Brancheorganisation for den danske vejgodstransport A/S
and
Danske Fragtmænd A/S

v

European Commission

Judgment of the General Court (Seventh Chamber), 5 May 2021

(State aid – Postal sector – Compensation for the discharge of the universal service obligation – Decision not to raise any objections – Calculation of the compensation – Net avoided cost methodology – Taking into account the intangible benefits of the universal service – Use of funds granted as compensation – State guarantee of redundancy payments in the event of bankruptcy – VAT exemption for certain transactions carried out by the universal service provider – Accounting allocation of common costs between universal service activities and non-universal service activities – Capital contribution from a public undertaking in order to avoid the bankruptcy of its subsidiary – Complaint from a competitor – Decision finding no State aid after the preliminary examination stage – Existing aid – Advantages granted on a periodic basis – Whether imputable to the State – Private investor test)

1. State aid – Planned aid – Examination by the Commission – Preliminary review and main review – Compatibility of aid with the internal market – Difficulties of assessment – Commission’s duty to initiate the main review procedure – Serious difficulties – Concept – Objective nature – Burden of proof – Circumstances enabling the existence of such difficulties to be established – Length of the preliminary investigation procedure

   (Arts 107(1) and 108(2) and (3) TFEU; Council Regulation 2015/1589, Art. 4(5))

   (see paragraphs 43-48, 50, 51, 59-69)

2. State aid – Planned aid – Examination by the Commission – Preliminary review and main review – Obligation of the Commission to open the main procedure where there are serious difficulties – Request for additional information not in itself revealing the existence of serious difficulties

   (Art. 108(2) and (3) TFEU)

   (see paragraphs 71-73)

3. State aid – Planned aid – Examination by the Commission – Preliminary review and main review – Obligation of the Commission to open the main procedure where there are serious difficulties – Duration and conduct of the pre-notification phase – Irrelevant

   (Art. 108(2) and (3) TFEU)

   (see paragraphs 74-79)

4. State aid – Prohibition – Exceptions – Undertakings entrusted with the operation of services of general economic interest – Compensation for the costs generated by the public service mission – Assessment of the compatibility of aid with the internal market – Criteria

   (Art. 106(2) TFEU)

   (see paragraphs 106-109, 114-133, 139-149, 151-159, 162-166, 169-180)

5. State aid – Existing aid – Grant of a guarantee for continuous improvement of the situation – Possibility of adopting a decision of incompatibility solely for the future in the event of expiry of the 10-year limitation period

   (Arts 106(2) and 107(1) TFEU)

   (see paragraphs 195, 208)

6. State aid – Existing aid and new aid – Classification as existing aid – Criteria – Expiry of the 10-year limitation period – Starting point of the limitation period – Date on which aid is granted to the beneficiary – Date likely to vary in accordance with the nature of the aid in question – Starting point liable to restart where advantages are granted on a periodic basis – Aid granted by means of a State guarantee covering redundancy payments to former civil servants in the event of the bankruptcy of the undertaking – Date of grant corresponding to the adoption of that guarantee

   (Council Regulation 2015/1589, Arts 1(b)(iv) and 17(3))

   (see paragraphs 196-210)

7. State aid – Concept – Grant of an advantage to the beneficiaries – State guarantee granted to an undertaking without any consideration in return and covering redundancy payments to former civil servants in the event of the bankruptcy of the undertaking – Included – Conditions – Improvement in the company’s financial situation – None

   (Art. 107(1) TFEU)

   (see paragraphs 212-220)

8. State aid – Concept – Grant of advantages imputable to the State – Tax exemption provided for by national legislation implementing a directive imposing on Member States a clear and precise obligation to that effect – Advantage attributable to an act of the Union – Not included – Condition – No discretion of the State in the transposition of the EU act

   (Art. 107(1) TFEU; Council Directive 2006/112, Arts 78, first para., (b), 79, first para., (c), and 132(1)(a))

   (see paragraphs 238-248, 251-268)

9. State aid – Concept – Aid granted to a public undertaking – Undertaking controlled by the State – Imputability to the State of the aid measure – Set of indicators to be taken into consideration

   (Art. 107(1) TFEU)

   (see paragraphs 330-344)

10. State aid – Examination of complaints – Obligations of the Commission – Preliminary examination phase – Obligation of the Commission to conduct inquiries – Scope – Diligent and impartial examination of the complaint

    (Arts 107(1) and 108 TFEU)

    (see paragraphs 345-349)

11. State aid – Concept – Assessment according to the criterion of the private investor – Reasonableness of the operation for a private investor following a relatively long-term strategy – Investment to ensure the survival of a subsidiary – Need to establish that the investment was preferable to bankruptcy or any alternative measures

    (Art. 107(1) TFEU)

    (see paragraphs 353-356, 359-375)

12. State aid – Concept – Assessment according to the criterion of the private investor – Assessment of all factors relevant to the transaction at issue and its context – Obligation of the Member State to provide objective and verifiable evidence showing the economic character of its activity

    (Art. 107(1) TFEU)

    (see paragraphs 357, 358)

Résumé

Post Danmark is a universal postal service provider in Denmark that is wholly owned by PostNord, which is, in turn, owned by the public authorities (Kingdom of Denmark and Kingdom of Sweden). It benefited from a series of measures granted by the public authorities which formed the subject of a complaint from a competing undertaking concerning, inter alia, compensation for the provision of the universal postal service in Denmark, which had been notified to the Commission.

By its decision of 28 May 2018 (‘the contested decision’), the Commission found that the compensation for the provision of the universal postal service over the period from 2016 to 2019, notified by the Danish authorities, constituted State aid compatible with the internal market. The Commission also took a view on the measures challenged in the complaint of one of the applicants. First, it found that the guarantee provided by the public authorities under which, in the event of the undertaking’s bankruptcy, they undertook to pay, without any consideration in return, the costs relating to the redundancy payments for former civil servants, constituted existing aid. Secondly, the Commission considered that a Danish administrative practice that allowed exemption from VAT for customers of mail-order companies when those companies chose to purchase a transport service from Post Danmark and a capital increase made in February 2017 by PostNord to its subsidiary Post Danmark, did not constitute State aid. The Court annuls that decision in so far as it found, at the end of the preliminary examination stage, that, first, the exemption from VAT and, secondly, PostNord’s capital increase in favour of Post Danmark did not constitute State aid.

In its judgment, by which the Court partially annuls the contested decision, clarification is given concerning the criteria for assessing the compatibility of compensation for the cost of the universal service obligation, the starting point for the limitation period for recovery of the aid, the classification of a guarantee as State aid, the imputability to the State of national measures taken pursuant to a directive and measures taken by a public undertaking, and on the private investor in a market economy test in assessing a measure taken in favour of a company on the verge of bankruptcy.

Findings of the Court

In the first place, the Court holds that the applicants have not provided evidence of serious difficulties as regards the compatibility of the compensation received by Post Danmark for the provision of the universal postal service. In its examination of the arguments relating to that compensation, it recalls that Article 106(2) TFEU seeks to prevent, through the assessment of the proportionality of the aid, that the operator responsible for the public service benefits from funding which exceeds the net costs of the public service. Thus, as part of the review of proportionality, it is for the Commission to compare the amount of the planned State aid with the net costs of the public service missions performed by the beneficiary of that aid.

From that perspective, in order to identify the cost inherent in the provision of a universal service, the net avoided cost methodology, provided for by the framework on services of general economic interest, ( 1 ) involves developing a counterfactual scenario, that is to say, a hypothetical situation in which the provider of the universal service is no longer responsible for it, and to compare that scenario with the factual scenario in which that provider is entrusted with the universal service obligation. In that regard, first, the Court notes that, in order to develop a counterfactual scenario, that scenario must describe a stable situation that does not take account of the costs inherent in the transition, for the universal service provider, to the situation in which it is no longer entrusted with the universal service obligation. Thus, according to the Court, the calculation of the net avoided cost may include, in the counterfactual scenario, activities that are not profitable in the short term but are profitable in the long term.

Secondly, the Court points out that any calculation of the net avoided cost must deduct the intangible benefits attributable to the universal service obligation. In that regard, it notes that the enhancement of the reputation of the universal service provider may be regarded as an intangible benefit attributable to the universal service obligation in the postal sector. It points out, however, that the circumstances of the present case, characterised in particular by a fall in Post Danmark’s activity and revenue in connection with the universal service owing to the generalised use of electronic communications, are such as to exclude the existence of serious difficulties as regards the failure to deduct profits linked to the enhancement of Post Danmark’s reputation in the net avoided cost calculation. In addition, the Court states that, for the purposes of deducting intangible benefits in the context of the net avoided cost calculation, it is necessary not to assess the value of the corporate brand of the universal service provider but rather to determine whether the reputation of a universal service provider is enhanced by the fact that it provides such a service. As regards the ubiquity of the universal service provider, where ubiquity attracts customers and increases the loyalty of customers, who are more inclined to choose the universal service provider than its competitors, the Court notes that, even in the absence of a universal service obligation, Post Danmark’s ubiquity would not have been fundamentally altered. Thus, the Commission was entitled to conclude that there was no need to deduct an intangible benefit linked to ubiquity when calculating the net avoided cost presented by the Danish authorities.

Thirdly, as regards the use of the compensation granted to Post Danmark, the Court holds that the Commission was entitled to declare that that compensation was compatible with the internal market while authorising that such compensation be used not for the discharge of the universal service obligation but to pay the costs arising from the dismissal of former civil servants. According to the Court, an assessment as to whether public service compensation is compatible with the internal market consists in verifying, irrespective of whether the corresponding amount is actually allocated to it, whether such a public service exists and imposes a net cost on the undertaking responsible for providing it. In particular, as regards the postal sector, the interpretation of the provisions relating to the recovery of the net costs of the universal service obligations in Directive 97/67 ( 2 ) excludes any requirement that the transfer of funds corresponding to compensation for the universal service actually be used for the performance of such a service.

In the second place, as regards the guarantee at issue, the Court finds it is an individual measure that is not part of a multiannual aid scheme and, therefore, the limitation period began to run from the date on which it was granted, in 2002. In addition, the Court notes that, irrespective of the classification of the guarantee at issue, the applicants have not put forward any evidence capable of establishing that the amount of the premium that Post Danmark should have paid each year, in return for the guarantee at issue, should be determined periodically on the basis of circumstances specific to each period, or even that that would be the case, in general, as regards the amount of a guarantee premium. Consequently, the guarantee at issue does not entail advantages granted on a periodic basis and the limitation period is not to recommence periodically. The Court concludes that the Commission was entitled to find that that measure constituted existing aid under the provisions regarding limitation periods. ( 3 ) In any event, the Court points out that, for the purposes of classifying a guarantee as State aid, it is necessary to assess the actual impact of the guarantee at issue on the situation of the beneficiary compared with that of its competitors. In the present case, it is not apparent that the guarantee given to Post Danmark improves its situation, since, in particular, it could be implemented only in the event that that undertaking ceases to exist, meaning that, as long as the undertaking is solvent, it is required to pay the special redundancy payments relating to the dismissal of former civil servants.

In the third place, the Court finds that the Commission did not carry out a complete and sufficient examination when it concluded that the administrative practice of exempting from VAT the supply of goods carried out by Post Denmark in transactions between mail-order companies and end customers was attributable to the European Union and not to the Danish State, in so far as that practice followed from Article 132(1)(a) of the VAT Directive. ( 4 ) In that regard, the Court points out that a national administrative practice establishing a tax exemption must be imputed to the European Union where it merely fulfils a clear and precise obligation laid down in a directive, whereas it must be regarded as imputable to the State where that State adopted it by making use of its discretion in the transposition of a directive. In the present case, the Court observes that it is clear and precise from Article 132(1)(a) of the VAT Directive that the transactions carried out by a universal service provider and which fall within the scope of the universal service obligation are exempt from that tax. The exemption from VAT permitted by the Danish administrative practice covers services invoiced by mail-order companies to their end customers, which do not therefore fall within the scope of the universal service obligation, or, therefore, of the exemption provided for in Article 132(1)(a) of the VAT Directive. Furthermore, the Court states that, when assessing whether the effects of the administrative practice at issue were attributable to the European Union or to the Danish State, the Commission failed to examine the links between that practice and the rule laid down in point (c) of the first paragraph of Article 79 of the VAT Directive relating to the taxable amount, on which it was based.

In the fourth place, the Court finds that the Commission did not carry out a complete and sufficient examination when concluding that the capital increase made in February 2017 by PostNord to its subsidiary Post Danmark did not constitute State aid since it was not imputable to the public authorities and did not entail an advantage. In that regard, first, as regards the imputability of that transaction to the public authorities, the Court recalls that, in the case of an undertaking over which a Member State might exercise a dominant influence, the Commission must establish, on the basis of a set of sufficiently precise and convergent indicators, that the involvement of the State in the decision made by that undertaking was specific or that the absence of such involvement was unlikely having regard to the circumstances and the context of the case. In the present case, the Commission merely considered that, even if the Danish and Swedish States were in a position to exercise a dominant influence over PostNord, that did not enable it to assume that the capital increase was imputable to them. Such a conclusion, reached without any concrete examination of the likely extent of involvement of the State shareholders in the adoption of the measure, was tantamount to excluding the imputability to the State of the increase in capital on the sole ground that PostNord was incorporated as a commercial company, in breach of the Court’s case-law. ( 5 ) Secondly, as regards the application of the private investor in a market economy test, the Court notes that, in the context of a public investment seeking to ensure the survival of a subsidiary company, the Commission must carry out a meticulous examination, on the basis of reliable evidence available to it, of the advantages and disadvantages (i) of the option of filing for the bankruptcy of the subsidiary and (ii) of the option of making a public investment in order to ensure the survival of the undertaking, examining, in particular, in the latter case, the prospects of profitability for the public investor. In the present case, the Commission relied exclusively on the negative consequences for the PostNord group of potential bankruptcy proceedings concerning Post Danmark, without excluding the possibility that such proceedings could, in spite of everything, be more advantageous than a capital increase which, for example, offered no prospects of profitability, even in the long term.

( 1 ) Points 25 to 27 of the European Union framework for State aid in the form of public service compensation (OJ 2012 C 8, p. 15).

( 2 ) The first paragraph of Part C of Annex I to Directive 97/67/EC of the European Parliament and of the Council of 15 December 1997 on common rules for the development of the internal market of Community postal services and the improvement of quality of service (OJ 1998 L 15, p. 14), as amended by Directive 2008/6/EC of the European Parliament and of the Council of 20 February 2008 amending Directive 97/67 with regard to the full accomplishment of the internal market of Community postal services (OJ 2008 L 52, p. 3).

( 3 ) Article 17(3) of Regulation 2015/1589.

( 4 ) Council Directive 2006/112/EC of 28 November 2006 on the common system of VAT (OJ 2006 L 347, p. 1; ‘the VAT Directive’).

( 5 ) Judgment of 16 May 2002, France v Commission (C‑482/99, EU:C:2002:294, paragraph 57).