(1)

By Regulation (EC) No 91/2009 (2), the Council imposed a definitive anti-dumping duty on imports of certain iron or steel fasteners originating in the People’s Republic of China (‘the PRC’ or ‘China’). Those measures will hereinafter be referred to as ‘the original measures’ and the investigation that led to these measures will hereinafter be referred to as ‘the original investigation’.

(2)

Following the imposition of the definitive anti-dumping duty, the Commission received evidence that these measures were being circumvented through transhipping via Malaysia.

(3)

For that reason, on 28 November 2010, the Commission, by way of Regulation (EU) No 966/2010 (3), initiated an investigation concerning the possible circumvention of the anti-dumping measures imposed by Regulation (EC) No 91/2009 (‘the anti-circumvention investigation’).

(4)

On 26 July 2011, the Council extended the anti-dumping duty imposed by Regulation (EC) No 91/2009 to certain iron or steel fasteners consigned from Malaysia, whether declared as originating in Malaysia or not, by Council Implementing Regulation (EU) No 723/2011 (4) (‘the anti-circumvention Regulation’).

(5)

On 27 February 2016, the Commission repealed the definitive anti-dumping duty imposed by Regulation (EC) No 91/2009, as extended by Implementing Regulation (EU) No 723/2011, by way of Commission Regulation (EU) 2016/278 (5).

(6)

By its judgment in Case C-644/17 Eurobolt of 3 July 2019 (6), the Court of Justice declared Implementing Regulation (EU) No 723/2011 invalid inasmuch as it was adopted in breach of the consultation procedure contained in Article 15(2) of Council Regulation (EC) No 1225/2009 (7).

(7)

The Court of Justice held that the requirement to provide the Advisory Committee with all relevant information no later than 10 working days before the meeting of that committee, as laid down in Article 15(2) of Regulation (EC) No 1225/2009, constitutes an essential procedural requirement governing the proper conduct of proceedings, the breach of which renders the act concerned invalid (8). According to the Court, that provision had been infringed inasmuch as the observations of Eurobolt, a Dutch importer of fasteners from Malaysia, were not communicated to the Member States no later than 10 working days before the meeting of the Advisory Committee.

(8)

In accordance with Article 266 TFEU, the Union’s institutions must take the necessary steps to comply with the judgment of the Court of Justice of the European Union. On 27 August 2019, the Commission, therefore, re-opened the anti-circumvention investigation in order to correct the illegality identified by the Court of Justice (9).

(9)

The reopening of the anti-circumvention investigation was limited in scope to the implementation of the judgment of the Court of Justice in Case C-644/17 Eurobolt, namely to ensure that all procedural requirements arising from the Advisory Committee procedure contained in Article 15(2) of Regulation (EC) No 1225/2009 were met (10). That procedure has, in the meantime, been replaced by the examination committee procedure contained in Article 5 of Regulation (EU) No 182/2011 of the European Parliament and of the Council (11).

(10)

In this respect, it should be pointed out that acts of the European Union are to be adopted in accordance with the procedural rules in force at the time of their adoption. Article 15(2) of Regulation (EC) No 1225/2009 in the form as it stood at the time of the underlying investigation was repealed. Therefore, a proceeding like the current re-opening of an anti-circumvention investigation initiated pursuant to Article 13(3) of Regulation (EC) No 1225/2009 can, as from the repeal of Article 15(2) of Regulation (EC) No 1225/2009 in the form as applicable at the time of adoption of Implementing Regulation (EU) No 723/2011, be completed only on the basis of the committee procedure currently in place for the imposition of anti-circumvention measures (12). Pursuant to Article 15(3) of Regulation (EC) No 1225/2009, as amended and codified in Regulation (EU) 2016/1036, the procedure to be followed for the purposes of this re-opening is the one contained in Article 5 of Regulation (EU) No 182/2011.

(11)

Eurobolt, in its submission of 13 June 2011, questioned the legality of the Commission’s interpretation of Article 13 of Regulation (EC) No 1225/2009 on two accounts. First, it argued that the extended measures should not apply to the product concerned if it was of genuine Malaysian origin. Second, Eurobolt questioned the Commission’s power to, in an ex officio anti-circumvention investigation, allege injury on the basis of data of the original investigation without providing evidence of injury.

(12)

The Commission observed that neither claim related to the implementation of the judgment. Eurobolt’s comments thus related to issues falling outside the scope of the implementation exercise. In any case, the claims could also be dismissed on the merits.

(13)

Regarding Eurobolt’s first claim, and as noted in recital 46 of the anti-circumvention Regulation, Article 13(1) of the basic Regulation allows for the extension of measures to imports of the like product from ‘third countries’. Article 13(4) of the basic Regulation allows for exceptions for genuine producers from that third country. As the anti-circumvention investigation revealed circumvention practises in line with the findings of investigations carried out by OLAF and the Malaysian authorities, Article 1 of the anti-circumvention Regulation extended the anti-dumping measures to imports consigned from Malaysia. However, any company that had demonstrated that it was a genuine Malaysian producer was granted an exemption from the extended measures. Moreover, requests for future exemptions were possible under Article 2 of the anti-circumvention Regulation. Accordingly, as the existence of transhipment of Chinese-origin products via Malaysia was confirmed (see recitals 34 and 45 of the anti-circumvention Regulation) and exports from genuine Malaysian producers were exempted from the extension of the measures, Eurobolt’s first claim was rejected.

(14)

Regarding Eurobolt’s second claim, it should be pointed out that Article 13(1) of the basic Regulation requires, inter alia, ‘evidence of injury or that the remedial effects of the duty are being undermined in terms of the prices and/or quantities of the like product ...’ (emphasis added). These two requirements are not cumulative. Recitals 37 and 38 of the anti-circumvention Regulation show that the remedial effects of the anti-dumping duty imposed by the original Regulation were undermined by the circumvention, both in terms of prices and quantities. Therefore, the legal requirements of Article 13 of the basic Regulation were met. Accordingly, there was no need or legal obligation to re-assess or re-use injury data from the original investigation with regard to imports from China. Consequently, this claim was rejected as well.

(15)

The Commission concluded from the above that Eurobolt’s submission of 13 June 2011 had been duly considered and Eurobolt’s claims were dealt with in the anti-circumvention Regulation, in particular in Sections 2.8 and 4 thereof. Moreover, it is important to note in this regard that Eurobolt questioned neither the evidence of transhipment of Chinese-origin products via Malaysia nor the finding that the companies from which Eurobolt sourced the product concerned had provided misleading information to the Commission and had not been able to demonstrate that they were genuine Malaysian producers.

(16)

Commission Implementing Regulation (EU) 2019/1374 re-opening the anti-circumvention investigation invited interested parties to make comments pertaining to the reopening of the anti-circumvention investigation. Two parties submitted comments.

(17)

Eurobolt claimed that the violation of Article 15(2) of Regulation (EC) No 1225/2009 found to have occurred by the Court of Justice cannot be cured ex post because it is a violation of an essential procedural requirement and therefore it vitiates the entire conduct of the original anti-circumvention investigation.

(18)

This claim is unfounded for the following reasons. A breach of Article 15(2) does not vitiate the entire proceeding, as the illegality identified by the Court did not concern the substantive findings on circumvention. The breach can therefore be cured by reopening the anti-circumvention investigation at the point at which the illegality occurred. That entailed forwarding Eurobolt’s original observations, together with the draft implementing act, to the committee in line with the procedure currently in place for the imposition of anti-circumvention measures. That is the procedure referred to in recital (10) above. The applicable legal deadline for the relevant information to reach the committee requires submission no later than 14 days before the meeting of that committee. This enables the committee, which consists of representatives of the Member States, to familiarise itself with all relevant information so that the Member States may formulate a position on the draft implementing act. As the Court of Justice has recently recognised, the resumption of the administrative procedure and the re-imposition of anti-dumping duties on imports that were made during the period of application of the regulation which was annulled can also not be considered as contrary to the rule of non-retroactivity (13).

(19)

Where a judgment of the Court of Justice invalidates an anti-dumping regulation, the institution implementing that judgment (in this case the Commission) has the option of resuming the proceeding at the origin of that Regulation (14). Furthermore, except where the irregularity found has vitiated the entire proceeding, the institution has the option, in order to adopt an act intended to replace the act that has been declared invalid, to resume that proceeding at the stage when the irregularity occurred (15).

(20)

Eurobolt also claimed that it would be inappropriate for the Commission to re-impose the anti-circumvention measures, as they have both expired and been repealed since.

(21)

In this respect, it should be pointed out that, by remedying a procedural irregularity and confirming the findings of the investigation which were not contested by the judgment at issue, the Commission complies with its obligation to impose measures on imports of the product concerned that took place during the period of application of these measures, i.e. between 27 July 2011 and 27 February 2016. Therefore, the Commission rejected Eurobolt’s claim.

(22)

Another party, the European Fastener Distributor Association (EFDA), claimed ‘persistent failures to take seriously the valid and carefully considered comments of European fastener distributors and their respective representative bodies.’ They also claimed that, in a case where an importer can demonstrate that they have carried out proper due diligence and taken all reasonable and appropriate measures to ensure that the imported product has been legitimately manufactured in Malaysia, they should not be responsible for paying the anti-dumping duty and any such duties paid should be reimbursed.

(23)

The Commission rejected the first EFDA claim, as the Association did not show any specific violation of due process in the investigation re-opening proceedings and did not provide any evidence in this respect.

(24)

As regards the EFDA’s second claim, Article 13(4) of the basic Regulation stipulates that, where the circumventing practice, process or work takes place outside the Union, exemptions may be granted to producers of the product concerned that are found not to be engaged in the circumvention practices. Consequently, there is no scope for exemptions based on importer due diligence when the circumvention takes place outside the EU (as is the case here). Rather, it is up to the exporter to prove that they are a genuine Malaysian producer and to ask for an exemption. As mentioned in Section 4 of the anti-circumvention Regulation, a number of Malaysian exporters applied and were considered for exemptions, with a total of nine companies being granted such exemptions by the Commission. The Commission, therefore, rejected EFDA’s second claim.

(25)

Having taken account of the comments made and the analysis thereof, the Commission concluded that the original measures should be re-imposed on imports of the product concerned consigned from Malaysia, whether declared as originating in Malaysia or not.

(26)

All parties that came forward at the reopening of the anti-circumvention investigation were informed of the essential facts and considerations on the basis of which it was intended to re-impose the anti-dumping duty. They were granted a period within which to make representations subsequent to disclosure. Eurobolt and EFDA submitted comments.

(27)

First, Eurobolt maintained that violations of essential procedural requirements vitiate the entire proceeding, and so cannot be cured ex post. Second, Eurobolt maintained that the re-imposition of measures whose legal basis is an act found to be illegal by the WTO violates the rule of law and the principle of good administration. Third, Eurobolt claimed that the Commission’s proposal to re-impose measures results in the absence of effective judicial protection as it means that the Commission can simply cure any violation ex post, and that this outcome upsets the balance of power in trade defence proceedings. Fourth, Eurobolt claimed that the Commission’s proposal ignores the decision of the Hoge Raad (the Dutch High Court) of the Netherlands in Eurobolt v Staatssecretaris van Financiën (16), and urged the Commission to refrain from interfering in customs authorities’ exclusive competence to decide on the repayment of the anti-circumvention duties paid by Eurobolt.

(28)

As regards Eurobolt’s first argument, which had already made upon the re-opening of the anti-circumvention investigation, the Commission refers to recital (18) and (19) above. As no new arguments were provided, this claim was rejected.

(29)

As regards Eurobolt’s second argument, the Commission decided to bring the measures in line with the findings of the WTO panels and appellate body, which was the reason why the Regulation of 26 February 2016 (see recital (5) above) was issued. It decided not to do so with ex tunc effect. Subsequently, the Commission had the obligation to take the necessary steps to comply with a judgement of the Court of Justice, i.e. to correct an illegality identified by the Court. As the procedural error could be remedied and the findings of circumvention were confirmed, the Commission was entitled to re-impose the anti-circumvention duties for the period of application of the measures, based on the uncontested findings of the anti-circumvention investigation. None of the above actions implicate a violation of the principle of good administration. In any event, Eurobolt referred to the principle of good administration, but did not specify which right was allegedly violated in this respect (17). Therefore, the Commission rejected this claim.

(30)

As regards Eurobolt’s third argument, it is established case-law that the scope and grounds of the declaration of invalidity by the Court in a judgment should be determined in each specific case (C-283/14 and C-284/14 CM Eurologistik and GLS, judgment of 28 January 2016, EU:C:2016:57, para. 49 and the case-law cited) and may be such that would not necessitate the full and immediate repayment of the relevant duties (case C-256/16 Deichmann SE v Hauptzollamt Duisburg, Judgment of the Court of 15 March 2018, paragraph 70). In the current case, the violation did not vitiate the entire proceeding with irregularity. As set out above in recitals (7) to (10), in this case the violation of the procedural requirement could be cured and the measure could be re-imposed in accordance with the applicable procedural rules. These obligations do not undermine the principle of effective judicial protection. The Commission therefore rejected this claim as well.

(31)

As regards Eurobolt’s fourth argument, as set out in recital (8) above, the Commission had to take the necessary steps to comply with the judgment of the Court of Justice of the European Union. The decision of the Dutch High Court, which in addition concerned the question as to whether interests should be paid in case of repayment of the anti-dumping duties, could not discharge the Commission of its obligation arising from the judgment of the Court of Justice. In any event, the Commission’s action also does not usurp the competences of the customs authorities of the Member States, as recognised by the Court of Justice in both C&J Clark International (18) and Deichmann (19). Therefore, the Commission rejected this claim.

(32)

EFDA expressed regret that its previous claim for the exemption of importers from paying anti-dumping duties in cases where importers were able to demonstrate due diligence in ensuring that the product imported had been legitimately manufactured in Malaysia was rejected. EFDA requested that the Commission reconsider its concerns.

(33)

As stated in recital (24), there is no scope for exemptions based on importer due diligence when the circumvention takes place outside the EU (as is the case here). Therefore, the Commission confirmed its previous rejection of EFDA’s claim.

(34)

In view of the above, the comments made after disclosure did not give rise to a change of the conclusion of the Commission, as set out in recital (25) above.

(35)

In view of Article 109 of Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council (20), when an amount is to be reimbursed following a judgment of the Court of Justice of the European Union, the interest to be paid should be the rate applied by the European Central Bank to its principal refinancing operations, as published in the C series of the Official Journal of the European Union on the first calendar day of each month.

(36)

This Regulation is in accordance with the opinion of the Committee established by Article 15(1) of Regulation (EU) 2016/1036,

(1)

In 1994, United Parcel Service (‘UPS’) filed a complaint concerning the granting of unlawful State aid to Deutsche Bundespost POSTDIENST (‘POSTDIENST’).

(2)

The Commission opened the formal investigation procedure on 23 October 1999 (‘the Opening Decision’) with regard to various State measures: compensations granted for the universal service obligation, a State guarantee and pension subsidies for the period from 1995 to 1999.

(3)

The Opening Decision was published in the Official Journal of the European Union (2). The Commission invited interested parties to submit comments.

(4)

Germany submitted comments on 16 September 1999.

(5)

Following publication, the Commission received comments from 14 interested parties, which were duly transmitted to the German Government by letter dated 15 December 1999 providing it with an opportunity to make its own observations concerning these comments.

(6)

The German authorities responded by letter dated 1 February 2000, which was registered as received on 2 February 2000.

(7)

On 19 June 2002, the Commission adopted Decision 2002/753/EC (3) (‘the 2002 Decision’) finding that POSTDIENST and its successor Deutsche Post AG (‘DPAG’, while POSTDIENST and DPAG will be jointly referred to as ‘Deutsche Post’) priced door-to-door parcels below incremental costs and that its aggressive pricing policy did not fall within Deutsche Post’s universal service obligation.

(8)

The Commission considered that the resulting losses of EUR 572 million were ultimately financed, in contravention of Articles 106 and 107 of the Treaty on the Functioning of the European Union (TFEU), by State resources which were granted to Deutsche Post in various forms (e.g. public transfers from sister company Deutsche Bundespost TELEKOM (‘TELEKOM’), public guarantees for loans, and public subsidies to finance the civil servants’ pensions).

(9)

Following the 2002 Decision, Germany recovered the incompatible State aid of EUR 572 million from DPAG. Deutsche Post challenged the decision in the Union Courts.

(10)

On 13 May 2004, UPS lodged a further complaint concerning unlawful State aid granted to Deutsche Post following the 2002 Decision. UPS argues that the 2002 Decision failed to examine all measures listed in the original 1994 complaint, and that Deutsche Post enjoyed significantly higher financial benefits than the incompatible aid of EUR 572 million. In addition, UPS is of the opinion that Deutsche Post used State resources to expand its parcel operations (e.g. for the purchase of other companies) and to sell services at excessively low transfer prices to its subsidiaries Postbank AG (‘POSTBANK’) and Deutsche Post Euro Express GmbH & Co OHG, which have been active respectively in banking services and marketing of business parcels under the brand name ‘DHL’.

(11)

The Commission services sent information requests to Germany on 9 November 2004 and 1 April 2005. Germany submitted its answers on 2 December 2004 and 3 June 2005 respectively.

(12)

On 16 July 2004, TNT Post AG & Co KG (‘TNT’) filed a complaint also alleging that Deutsche Post sold services at excessively low transfer prices to POSTBANK. It claimed that, whereas POSTBANK only paid variable costs for the provided services, Deutsche Post financed the common fixed costs of the distribution network entirely out of the revenues of its letter monopoly.

(13)

The Commission services sent information requests to Germany on 11 November 2004 and 25 April 2005. Germany submitted its answers on 17 December 2004 and 23 June 2005 respectively.

(14)

Following the further complaints, the Commission informed Germany by letter of 12 September 2007 (4) of its decision to extend the proceedings that had originally been initiated in 1999 (‘the 2007 Extension Decision’).

(15)

The objective of the 2007 Extension Decision was to include the newly submitted information and to comprehensively address all potential distortions of competition which resulted from the public measures that were granted to Deutsche Post.

(16)

Germany submitted its comments on 14 December 2007 and Deutsche Post challenged the validity of the 2007 Extension Decision (5). On 16 November 2007, UPS and TNT submitted their comments. After an initial request for a deadline extension on 20 December 2007, Germany eventually submitted on 12 March 2008 its comments on UPS’ and TNT’s observations.

(17)

The Commission sent an information request to Germany on 17 July 2008 on all public measures under investigation including a questionnaire on revenues and costs of Deutsche Post for the period from 1989 to 2007. On 5 August 2008, Germany asked for an undefined deadline extension because the availability of certain data would have to be checked before a reply could be provided.

(18)

On 12 August 2008, the Commission explained why the investigation on the revenues and costs of Deutsche Post should be effected within the period from 1989 to 2007 and insisted on the submission of the requested information.

(19)

In its submission of 14 August 2008, Germany maintained that there was no reason for examining the revenues and costs of Deutsche Post for the period after 1994. On 22 August 2008, the Commission reserved the right to adopt an information injunction pursuant to Article 10(3) of Council Regulation (EC) No 659/1999 (6) if Germany did not provide the requested information.

(20)

On 2 October 2008, Germany presented the results of a further expert opinion to support the position that an accounting analysis after 1994 was not necessary and therefore the appropriate investigation period should be from 1990 to 1994.

(21)

On 28 October 2008, Germany submitted information on the public guarantee and the pension measure.

(22)

The Commission did not accept Germany’s arguments and insisted that an analysis until 2007 was necessary to fully appreciate the competitive effects of the implemented public measures. Following the two reminders for information of 12 August 2008 and 22 August 2008, the Commission issued an information injunction on 30 October 2008 to enjoin Germany to deliver all necessary accounting information for the whole period from 1989 to 2007.

(23)

Germany and Deutsche Post challenged the validity of the information injunction (7).

(24)

On 27 November 2008, Germany submitted the requested accounting information for the period from 1989 to 1994. On 5 and 16 December 2008, Germany updated the accounting information which had been submitted on 27 November 2008.

(25)

After a meeting between the responsible German Secretary of State, the CEO of DPAG and the Commissioner with responsibility for Competition Policy on 6 February 2009, Germany and Deutsche Post agreed to provide accounting information for the period after 1994.

(26)

On 3 March 2009, Germany submitted a first set of accounting information for the whole investigation period from 1989 to 2007

(27)

Meetings between Deutsche Post and the Commission services took place on 3 March 2009 in Brussels as well as on 12 March 2009, 2 April 2009, 28 May 2009, 23 June 2009, and 18 September 2009 in Bonn. Germany submitted further information by Deutsche Post on 26 March 2009, 7 May 2009, and 22 June 2009.

(28)

Following those meetings and two lists of questions which the Commission services submitted to Deutsche Post on 4 June 2009 and 30 July 2009, Germany provided updated accounting information and further clarifications on 9 July 2009, 31 July 2009, 17 August 2009, 8 September 2009, 10 September 2009 and 15 October 2009.

(29)

On 16 and 24 September 2009, the Commission services submitted further questions to which Germany provided the answers on 14 October 2009.

(30)

By letter dated 10 May 2011 (8), the Commission notified Germany of its decision to extend the procedure laid down in Article 108(2) TFEU that had originally been initiated in 1999 and extended in 2007, in order to conduct an in-depth investigation with regard to the pension subsidies that Deutsche Post has received since 1995 (‘the 2011 Extension Decision’).

(31)

After an initial request for a deadline extension on 23 May 2011, Germany submitted its comments on 29 July 2011.

(32)

On 4 October 2011, UPS submitted its comments. They were followed by comments submitted by Free and Fair Post Initiative on 5 October 2011 and comments submitted by Bundesverband Internationaler Express und Kurierdienste (‘BIEK’) on 7 October 2011. On 13 October 2011, the Commission communicated the comments by interested parties to Germany.

(33)

On 14 November 2011, Germany submitted its comments on the third parties’ observations.

(34)

On 18 November 2011, the Commission sent a further information request concerning details of the pension financing for the period after 2007. On 2 January 2012 and 19 January 2012, Germany submitted replies. On 16 December 2011, the Commission submitted to Germany an expert study by Charles River Associates concerning profit benchmarking (9) for comments to which Germany replied on 16 January 2012.

(35)

On 25 January 2012, the Commission adopted Decision 2012/636/EU- (10) (‘the 2012 Decision’).

(36)

In that Decision, the Commission concluded with regard to the pension measure that the measure constitutes unlawful and incompatible State aid and ordered recovery of the aid for the period from 1 January 2003 until the comparative advantage has been brought to an end. With regard to the aid for the period from 1995 to 2002, the Commission concluded that it was impossible to quantify the amount of incompatible aid. Consequently, the Commission did not order recovery of the aid with regard to this period.

(37)

With regard to the public transfers, the Commission concluded that they were unlawfully granted by Germany in breach of Article 108(3) TFEU, but are compatible with the internal market. With regard to the public guarantee, the Commission concluded that the measure constitutes existing aid to Deutsche Post pursuant to Articles 107(1) and 108(3) TFEU.

(38)

In its 2008 judgment (11), the General Court annulled the 2002 Decision because the Commission failed to carry out a comprehensive analysis of all universal service revenues and costs to determine whether Deutsche Post had been under- or overcompensated.

(39)

Germany subsequently paid back the recovered State aid of EUR 572 million plus accrued interest to Deutsche Post.

(40)

On 2 September 2010, the Court of Justice dismissed the Commission’s appeal against the General Court’s judgment (12).

(41)

Deutsche Post challenged the validity of the 2007 Extension Decision, claiming that the 2002 Decision created legitimate expectations that the Commission would not resume its investigations.

(42)

On 8 December 2011, the General Court rejected that challenge as inadmissible (13), on the basis that the 2007 Extension Decision concerned the same measures targeted by the Opening Decision.

(43)

On 24 October 2013, the Court of Justice annulled the 2011 judgment of the General Court on the 2007 Extension Decision (14), referring the case back to the General Court.

(44)

On 18 September 2015, the General Court annulled the 2007 Extension Decision (15). The judgment was not appealed.

(45)

On 14 July 2016, the General Court annulled Articles 1 and 4 of the 2012 Decision (16), holding that the Commission had not proven the existence of an advantage conferred to Deutsche Post. The judgment was not appealed.

(46)

The remainder of the 2012 Decision was not appealed.

(47)

On 10 April 2019, the General Court annulled the 2011 Extension Decision (17), holding that the Commission did not sufficiently motivate the opening of the formal procedure (violation of Article 296 TFEU) in relation to the existence of an advantage. The judgment was not appealed.

(48)

Following the annulment of the 2012 Decision and the 2011 Extension Decision, the Commission received additional submissions, from UPS by letters of 24 May 2019 and 17 July 2019 and from BIEK by letter of 31 May 2019. In their letters, UPS and BIEK underlined that they remained concerned about the pension measure and urged the Commission to continue and conclude its investigation. On 28 November 2019, UPS submitted further comments.

(49)

At the outset, in view of the numerous decisions adopted by the Commission and the annulment of certain decisions, the Commission considers it necessary to clarify the scope of the present Decision.

(50)

The Commission recalls that it concluded in the 2012 Decision:

(51)

With regard to these conclusions, the 2012 Decision has not been appealed and hence remains in force.

(52)

Moreover, the Commission notes that the 2007 Extension Decision and the 2011 Extension Decision were annulled by the Courts.

(53)

Against this background, the investigation only concerns the payments described in the Opening Decision.

(54)

In particular, the Opening Decision refers to the following:

(55)

Against this background, the pension measure as described above forms the subject of the present Decision.

(56)

The pension measure based on the Law on the regulations governing the staff of the former German federal postal service (Gesetz zum Personalrecht der Beschäftigten der früheren Deutschen Bundespost (Postpersonalrechtsgesetz)) (18) (‘PostPersRG’) has financed since 1995 a major share of the pensions for Deutsche Post’s retired civil servants. To fully apprehend the effects of the pension measure in the assessment in section 5, the following sections will describe in more detail the civil servants’ social benefits and contributions in comparison to the compulsory social insurances for employees under private law contracts (‘private employees’).

(57)

Civil servants are entitled to old age pensions, health care and long-term care. The benefits for Deutsche Post’s civil servants are the same as for all other civil servants.

(58)

After the first postal reform of 1989, pursuant to Article 54(2) of the Law on the corporate legal structure of the German federal postal service (Gesetz über die Unternehmensverfassung der Deutschen Bundespost (Postverfassungsgesetz – PostVerfG) (20), POSTDIENST, TELEKOM and POSTBANK had to fully finance the pension payments and health expenses of the retired civil servants who were allocated to the respective companies on the basis of their former activities.

(59)

That provision lays down that, whereas the claim of the civil servant continues to be directed against the State, the State has the right to claim the entire amount from POSTDIENST, TELEKOM and POSTBANK respectively.

(60)

With the 1994 reform of postal services and telecommunications (Gesetz zur Neuordnung des Postwesens und der Telekommunikation), civil servants who had worked for POSTDIENST were, pursuant to Article 2(1) PostPersRG, transferred to DPAG. Thereby, the civil servants kept, pursuant to Article 2(3) PostPersRG, their existing legal status. DPAG took over, pursuant to Article 1(1) PostPersRG, all employer’s rights and obligations from the federal State and assumed, pursuant to Article 2(3) PostPersRG, all the civil servants’ claims relating to property rights.

(61)

Pursuant to Article 15 PostPersRG, the payment of pension and health expenses to retired civil servants was taken over by a newly created pension fund for Deutsche Post’s civil servants. On 1 July 2001, the pension funds for Deutsche Post, TELEKOM, and POSTBANK were merged into the pension fund for civil servants of the postal service (Postbeamtenversorgungskasse) (‘the Pension Fund’).

(62)

Pursuant to Article 16(1) PostPersRG, Deutsche Post had to pay yearly contributions of EUR 2,045 billion to the Pension Fund for the period from 1995 to 1999 which total EUR 10,225 billion.

(63)

The remaining deficit (e.g. the difference between the pensions for the retired civil servants and the contribution by Deutsche Post to the Pension Fund), was covered by a pension measure, pursuant to Article 16(2) PostPersRG. The pension measure increased from EUR 151 million in 1995 to EUR 1,118 billion in 1999.

(64)

The graphs in Figures 1 and 2 below represent the respective contributions of Deutsche Post and Germany (in amount and percentage) to the Pension Fund.

(65)

Private employees are compulsory members of four statutory social insurances: pension, unemployment, health and long-term care insurances (21). Compared to the civil servants’ regime, the statutory social insurance schemes offer a different coverage for pension insurance and health and long-term care insurances:

(66)

There also exist important differences in the financing of the social benefits compared to those of civil servants:

(67)

Figure 3 below presents the compulsory social contribution rates for private employees for the period from 1995 to 1999.

(68)

Figure 3 shows that the compulsory social contribution rates have ranged from approximately 39 % to 42 % of the gross wage (gross wage = net wage + employee’s share). Given that the employer’s share and the employee’s share cover about half of the total compulsory social contribution rate, their respective compulsory social contribution rates have been each in the range from approximately 19 % to 21 % of the gross wage.

(69)

Deutsche Post’s private employees have not only benefited from the statutory social insurances but also from supplementary pension insurance. Private employees who started before 1997 were offered a supplementary pension insurance cover that would allow them to receive a similar level of pension as civil servants. Thus the supplementary pension insurance covered the difference between the private employees’ statutory social insurance pension, which is equal to a certain percentage of the average life-time salary, and the civil servants’ pension, which is equal to a certain percentage of the last salary. The detailed rules are laid down in the Charter of the supplementary pension agency of the German federal postal service (Satzung der Versorgungsanstalt der Deutschen Bundespost).

(70)

In the Opening Decision, the Commission considered that the fact that the State covered the deficit accumulated by 1999 – in connection with the early retirement of a considerable number of Deutsche Post civil servants between 1995 and 1999 – might have conferred an advantage on Deutsche Post.

(71)

Therefore, the Commission considered that its preliminary investigation of the measure could not confirm the conclusion that the measure did not constitute State aid.

(72)

In addition, the Commission concluded in the Opening Decision that based on its preliminary investigation, doubts were raised as to the compatibility of the measure with the internal market.

(73)

Interested parties submitted comments on the Opening Decision, the (now annulled) 2007 Extension Decision and the (now annulled) 2011 Extension Decision.

(74)

This section summarizes comments that are considered relevant for the assessment of the measure at stake (i.e. the pension measure for the period from 1995 to 1999) and does not reflect all comments received in the course of past investigations on other measures and/or the pension measure for the period after 1999.

(75)

According to the British Post Office (‘the Post Office’), the assumption of pension liabilities that DPAG incurred as a consequence of the early retirement of 25 % of its staff is State aid. The Post Office submits that the pension shortfall should have been financed by the sale of business assets.

(76)

According to UPS, Deutsche Post has benefited from an advantage as it has been partially released from the payment obligation it had to fulfil before 1995. Since normal operators have to bear their own pension costs, Deutsche Post was put into an advantageous position compared to its competitors.

(77)

In its submission of 28 November 2019 (following the General Court’s 2019 judgment annulling the 2011 Extension Decision), UPS argues that the Commission should continue the investigation of the pension measure and, more particularly, should assess the pension measure applying the Orange (22) case law (as opposed to the Combus (23) case law). Furthermore, UPS takes the view that even on the basis of the Combus case law the Commission should conclude that the pension measure constituted incompatible aid.

(78)

According to the German authorities, the State contribution to the Pension Fund was confined to what was necessary to offset an objective disadvantage imposed by the State on DPAG.

(79)

According to the German authorities, financing the early retirement of civil servants recruited before the privatisation of DPAG remained a basic obligation of the State vis-à-vis its civil servants. DPAG’s co-responsibility for the financing of the Pension Fund therefore entailed atypical special costs. The State’s contribution to the pension obligations only partly offset an objective disadvantage previously imposed by the State on DPAG. Therefore, Germany considers that there is no advantage to DPAG and also no distortion of competition or trade when the State makes a contribution toward the Pension Fund.

(80)

Based on the Combus judgment (24), Germany is of the opinion that, in the course of the privatization of formerly State-owned universal service providers, the payment by the State of pension costs – which go beyond the level normally assumed by private competitors – does not constitute aid. Germany considers that a comparison should be undertaken between the social benefits for Deutsche Post’s civil servants and competitors’ social benefits to assess the existence of aid.

(81)

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’.

(82)

A measure qualifies as State aid if the following cumulative conditions are met: (a) the measure is granted by Member States through State resources, (b) it confers a selective economic advantage on certain undertakings or the production of certain goods, (c) the advantage distorts or threatens to distort competition, and (d) the measure affects intra-EU trade.

(83)

As the pension measure is based on Article 16 PostPersG and financed out of the public budget, it is imputable to the State and it is granted through State resources within the meaning of Article 107(1) TFEU. Moreover, as the pension measure has only been implemented to relieve Deutsche Post partly from the civil servants’ pension costs and therefore ultimately benefits Deutsche Post, it is selective.

(84)

On the basis of the Combus judgment, Germany claims that the pension measure did not provide any financial advantage because it relieved Deutsche Post from excess pension costs.

(85)

In the 2012 Decision, the Commission rejected Germany’s claims that the existence of an advantage had to be established based on the Combus case law.

(86)

However, following the annulment of the 2012 Decision and of the 2011 Extension Decision, the Commission considers that the judgments of the General Court in Cases T-143/12 (25) and T-388/11 (26) oblige the Commission, in line with Article 266 TFEU, to apply the Combus case law in relation to the pension measure. Indeed, pursuant to the first paragraph of Article 266 TFEU, ‘[t]he institution […] whose act has been declared void or whose failure to act has been declared contrary to the Treaties shall be required to take the necessary measures to comply with the judgment of the Court of Justice of the European Union’.

(87)

In its judgment of 14 July 2016, the General Court held that ‘the mere assertion that the pension costs are part of the costs which are normally included in the budget of an undertaking was not sufficient to establish, in the present case, the existence of a real economic advantage in favour of Deutsche Post. The Commission, which bore the obligation to prove that advantage, did not discharge that obligation and thus erred in law’ (27).

(88)

Against this background, the Commission will assess the presence of an advantage for Deutsche Post by applying the Combus case law. Notably, the Commission considers that, contrary to the view expressed by UPS, the Commission is obliged to apply the Combus case law to assess the pension measure, rather than applying the Orange (28) case law. More particularly, the Commission considers the fact that in that judgment the Court of Justice may have discontinued its legal approach applied in Combus and that consequently the Combus case law may no longer be applicable to similar measures in other cases, does not call into question the Commission’s obligation to apply the Combus methodology to the pension measure in the present case in accordance with the first paragraph of Article 266 TFEU (see recital (86).

(89)

In view of the application of the Combus case law in the present case, the Commission will assess whether Germany, by assuming responsibility for the difference between the lump sum fixed between 1995 and 1999 and the total amount of the costs of the pensions of former civil servants of Deutsche Post, conferred an economic advantage on Deutsche Post by comparison with its competitors.

(90)

The Commission will carry out this analysis in the following three steps in order to determine the existence of an advantage:

(91)

Private competitors have to compulsorily pay out of their revenues both the employer’s share as well as the employee’s share of social security contributions to the State. As shown in Figure 3, the total compulsory social contribution rates for the period from 1995 to 1999 have been in the range of approximately 39 % to 42 % of the gross wage. The employer’s and the employee’s respective compulsory social contribution rates have been each in the range from approximately 19 % to 21 % of the gross wage (see recital 68).

(92)

Compared to the private employees, civil servants do not have to pay a share of social security contributions with regard to health care and long-term care, but instead have to cover 30 % to 50 % of their health care and long-term care expenses themselves (notably by concluding an additional private insurance). However, the civil servants’ contribution of 30 % to 50 % to their health and long-term care expenses can be assumed to largely correspond in its economic effect to the private employees’ contribution to the statutory health and long-term care insurances (29).

(93)

Moreover, civil servants do not make any contributions to their pension and unemployment insurances. Deutsche Post’s contribution should therefore go beyond the private employers’ share and include the entire cost of the pension and unemployment insurance as well as the remaining health and long-term care expenses of the civil servants.

(94)

The benchmark rate for Deutsche Post’s social contributions (‘benchmark rate’) has therefore to include the total contribution rates (total contribution rate = employer’s share + employee’s share) for the pension and unemployment insurances and the employer’s share of the health and long-term care insurances.

(95)

As shown in Table 1 below, the benchmark rate has been between 32 % and 34,5 % of the private employees’ gross wage for the period from 1995 to 1999.

Table 1

Deutsche Post social contribution benchmark rate

(96)

As the level of social contributions that Deutsche Post has to bear for its civil servants should be equivalent to the level of compulsory social contributions, it is important that Deutsche Post is not only subject to an equivalent rate but also that the rate is calculated on an equivalent gross wage base.

(97)

It is therefore necessary to construct a gross wage for the civil servants (‘civil servants’ gross wage’) that provides an equivalent wage base to the private employees’ gross wage.

(98)

It is assumed that the civil servants’ contributions to their health and long-term care expenses equals the private employees’ contributions to the statutory health and long- term care insurances (see recital (92). Therefore, no adjustment of the wage base is necessary in this regard. However, since civil servants do not make any contributions to their pension and unemployment insurances (see recital (93), the incurred wage (i.e. the actual wage costs) should be increased by applying a factor taking into account the private employees’ share of the contributions to the statutory pension and unemployment insurances.

(99)

The following formula converts the incurred wage into a gross wage that is equivalent to the private employees’ gross wage:

(100)

The following formula applied to the year 1997 would for example lead to the following result:

(101)

Taking e.g. the 1997 contribution rates, the civil servants’ gross wage is 15 % higher than the incurred civil servants’ wage.

(102)

Pursuant to Article 16(1) PostPersRG, Deutsche Post had to pay yearly contributions of EUR 2,045 billion to the Pension Fund for the period from 1995 to 1999 which totals EUR 10,225 billion.

(103)

On that basis and considering the above, it is possible to calculate the gross wage- based social security contributions borne by Deutsche Post for the period from 1995 to 1999 and to compare it with the benchmark rate established in recital 95.

Table 2

Deutsche Post gross wage-based social security contributions and benchmark rate

(104)

From that calculation, it would not appear that Deutsche Post has benefited from an advantage since it paid more than the calculated benchmark rate.

(105)

It should be noted that in recitals 332 to 338 of the 2012 Decision, the Commission considered that the price regulation of Deutsche Post was a relevant factor to calculate the gross wage-based social security contributions effectively borne by Deutsche Post and assess the proportionality of the pension measure.

(106)

This was justified by the fact that Article 20(1) and (2) of the Law on Postal Services (Postgesetz) of 22 December 1997 (30) (‘PostG’) allows Deutsche Post to request that, when the Postal Regulator is setting the allowed level of revenues from the exclusive right and the regulated services, it includes into the costs to be recovered from consumers, an ‘excess social burden’ as well as the costs for the efficient provision of the universal service.

(107)

The Postal Regulator accepted this approach for the first time in the 2002 price cap decision (applied from 1 January 2003) and also approved the ‘excess social burden’ in the 2007 and 2011 price cap decisions. The Commission considered that from an economic point of view, this led Deutsche Post to bear effectively lower contribution rates to social costs than its apparent contribution to the Pension Fund. Based on this consideration, in the 2012 Decision the Commission was able to establish and quantify the amount of incompatible aid to be recovered for the period from 1 January 2003 to the point in time when the comparative advantage has been brought to an end.

(108)

With regard to the present Decision and thus the assessment of the pension measure for the period from 1995 to 1999, it could be discussed whether in the assessment of the existence of an advantage under the Combus methodology the potential impact of the price regulation of Deutsche Post should be taken into account when determining the potential advantage granted to the operator by means of the pension measure.

(109)

However, the Commission considers that, in any event, the potential impact of the price regulation is not relevant with regard to the temporal scope of the measure under assessment in the present Decision, i.e. the period from 1995 to 1999.

(110)

Indeed, as the Commission observed in the 2012 Decision, the first price cap decision of the Postal Regulator which took into account an ‘excess social burden’ as stipulated in the PostG was taken only in 2002 for the period from 2003 to 2007 (31). By contrast, the Commission considered with regard to the period before 2003 that it could not be inferred with certainty from the legal basis for the regulated prices in force during the period from 1995 to 2002 how the competent authorities decided the composition of the regulated prices on an ex-ante basis (32). Against this background, the Commission explained, that in the absence of any earmarked element of the tariff for social costs, it was not possible to determine the level of gross wage-based social security contributions taking into account the price regulation of Deutsche Post (33). Based on these considerations, the Commission concluded in the 2012 Decision that it could not establish and quantify any amount of incompatible aid for the period from 1995 to 2002 (34).

(111)

For the present Decision, the Commission considers that these considerations apply in the same way within the assessment of the existence of an advantage under the Combus methodology, i.e. the benchmarking exercise described in recital 90). Since the Commission cannot, despite its best efforts, quantify any potential impact of the price regulation on the gross wage-based social security contributions borne by Deutsche Post for its civil servants, it cannot establish the existence of an advantage on that basis.

(112)

It results from the above that, if the Commission limits itself to a direct comparison of Deutsche Post’s contributions to the Pension Fund and the relevant benchmark rate, no advantage can be found for Deutsche Post. Moreover, even if the Commission were to enlarge its assessment to consider the potential impact of the regulation of Deutsche Post’s prices – assuming this would be justified – it would still not be possible to determine, quantify and link to the pension measure a precise advantage for the period from 1995 to 1999.

(113)

Based on the above, the Commission considers that it cannot establish that the pension measure, implemented for the period from 1995 to 1999 to Deutsche Post, conferred an advantage to the operator within the meaning of Article 107(1) TFEU. Given that the existence of an advantage, which is one of the cumulative conditions for the existence of aid, cannot be established, the Commission concludes that the pension measure did not involve State aid.

(114)

The Commission finds that the pension measure implemented by Germany for the period from 1995 to 1999 does not constitute State aid within the meaning of Article 107(1) TFEU,