1. 

The Supremo Tribunal Administrativo (Supreme Administrative Court, Portugal) raises various questions with the Court of Justice concerning the compatibility with EU law of certain requirements included in the tender specifications for the privatisation of ‘TAP – Transportes Aéreos Portugueses, S.A’ (‘TAP SA’), which took place in 2015.

2. 

Specifically, these relate to the requirement to maintain the company’s headquarters and effective management in Portugal, the capacity to comply with public service obligations, and the commitment to maintain and develop the national hub.

3. 

In order to decide on the issues raised by the referring court, it will be necessary to determine, first, whether Directive 2006/123/EC ( 2 ) or Regulation (EC) No 1008/2008 ( 3 ) applies to the case. Then it will be necessary to consider whether the freedom that is potentially affected is the freedom of establishment, freedom of services or freedom of capital and, whichever it is, whether or not the requirements in the tender specifications respect that freedom.

4.

Recital 21 provides that ‘transport services, including urban transport, taxis and ambulances as well as port services, should be excluded from the scope of this Directive’.

5.

According to Article 1(2), ‘[the directive] does not deal with the liberalisation of services of general economic interest, reserved to public or private entities, nor with the privatisation of public entities providing services’.

6.

Article 2(2)(d) stipulates that the directive shall not apply to ‘services in the field of transport, including port services, falling within the scope of Title V of the Treaty’.

7.

Chapter IV, entitled ‘Free movement of services’, contains provisions in Section 1 (‘Freedom to provide services and related derogations’) which guarantee the right of service providers to provide services in a Member State other than that in which they are established (Article 16) but which also set out certain derogations from that right (Article 17).

8.

Recitals 10 to 12 are as follows:

9.

Article 2 includes the following definitions:

…

…

…

10.

Article 4 stipulates as follows:

‘An undertaking shall be granted an operating licence by the competent licensing authority of a Member State provided that:

…

…’

11.

Article 8 provides that:

‘1.   An operating licence shall be valid as long as the Community air carrier complies with the requirements of this Chapter.

A Community air carrier shall at all times be able on request to demonstrate to the competent licensing authority that it meets all the requirements of this Chapter.

…

5.   A Community air carrier shall notify the competent licensing authority:

…

…

7.   In relation to Community air carriers licensed by it the competent licensing authority shall decide whether the operating licence shall be resubmitted for approval in case of change in one or more elements affecting the legal situation of a Community air carrier and, in particular, in the case of a merger or takeover.

…’

12.

Article 15 stipulates that:

‘1.   Community air carriers shall be entitled to operate intra-Community air services.

2.   Member States shall not subject the operation of intra-Community air services by a Community air carrier to any permit or authorisation. Member States shall not require Community air carriers to provide any documents or information which they have already supplied to the competent licensing authority, provided that the relevant information may be obtained from the competent licensing authority in due time.

…

4.   When operating intra-Community air services, a Community air carrier shall be permitted to combine air services and to enter into code share arrangements, without prejudice to the Community competition rules applicable to undertakings.

Any restrictions on the freedom of Community air carriers to operate intra-Community air services arising from bilateral agreements between Member States are hereby superseded.

5.   Notwithstanding the provisions of bilateral agreements between Member States, and subject to the Community competition rules applicable to undertakings, Community air carriers shall be permitted by the Member State(s) concerned to combine air services and to enter into code share arrangements with any air carrier on air services to, from or via any airport in their territory from or to any point(s) in third countries.

…’

13.

Article 16 is as follows:

‘1.   A Member State, following consultations with the other Member States concerned and after having informed the Commission, the airports concerned and air carriers operating on the route, may impose a public service obligation in respect of scheduled air services between an airport in the Community and an airport serving a peripheral or development region in its territory or on a thin route to any airport on its territory any such route being considered vital for the economic and social development of the region which the airport serves. That obligation shall be imposed only to the extent necessary to ensure on that route the minimum provision of scheduled air services satisfying fixed standards of continuity, regularity, pricing or minimum capacity, which air carriers would not assume if they were solely considering their commercial interest.

The fixed standards imposed on the route subject to that public service obligation shall be set in a transparent and non-discriminatory way.

…

4.   When a Member State wishes to impose a public service obligation, it shall communicate the text of the envisaged imposition of the public service obligation to the Commission, to the other Member States concerned, to the airports concerned and to the air carriers operating the route in question.

The Commission shall publish an information notice in the Official Journal of the European Union:

…’

14.

Under Decree-law No 181/-A/2014 of 24 December 2014, ( 4 ) the Portuguese Government approved the process for the indirect reprivatisation of the share capital of TAP SA through what it terms a reference direct sale (a direct sale to key long-term investors) of up to 61% of the shares in TAP — Transportes Aéreos Portugueses, SGPS, SA (‘TAP SGPS’) and an offer to sell up to 5% of the share capital of TAP SGPS to its employees. In addition, a put option was included in favour of the State, enabling it to transfer the remaining capital of TAP SGPS to the purchaser in the reference direct sale; the State may also agree a call option with the purchaser, in accordance with the terms of the specifications for the transaction.

15.

In Resolution No 4-A/2015 of 15 January 2015, ( 5 ) the Council of Ministers approved the tender specifications for the reference direct sale of shares representing up to 61% of the share capital of TAP SGPS.

16.

Article 1 of the tender specifications reads as follows:

‘1.   These specifications govern the terms and conditions for the reference direct sale of shares in the capital of [TAP SGPS], to be carried out as part of the process for the indirect reprivatisation of the share capital in [TAP SA].

2.   The reference direct sale involves the disposal, by direct negotiation, of one or more indivisible lots of shares in the capital of [TAP SGPS] to one or more national or foreign investors, individually or as a group.

3.   The reference direct sale of shares referred to in the preceding paragraph shall be agreed with one or more tenderers which have been selected as purchasers of the shares covered by the direct sale.

4.   As part of the reference direct sale, the shares to be purchased by the tenderer or tenderers selected shall be disposed of by PARPÚBLICA — Participações Públicas (SGPS), S.A. [“Parpública”].’

17.

Article 5 of the tender specifications lists the following ‘selection criteria’:

18.

The ‘Associação Peço a Palavra’ (‘I Want to be Heard Association’) and others filed an administrative appeal with the Supremo Tribunal Administrativo (Supreme Administrative Court), seeking the annulment of the tender specifications approved by Resolution No 4-A/2015 of the Council of Ministers of 15 January 2015.

19.

The applicants maintain that Article 5(c) of those specifications is contrary to Articles 49 and 54 TFEU, because it requires the headquarters and effective management of the TAP Group to be maintained. In addition, in their opinion, Article 5(d) and (e) of the specifications are in breach of Articles 56 and 57 TFEU and Articles 16 and 17 of Directive 2006/123, because they impose requirements to comply with public service obligations and to maintain and develop the current national hub.

20.

In this context, the Supremo Tribunal Administrativo (Supreme Administrative Court) has referred the following questions for a preliminary ruling:

21.

The request for a preliminary ruling was lodged with the Court of Justice on 25 September 2017. Written observations were submitted by Parpública, the Portuguese, Italian and Dutch Governments and the Commission, and those parties also appeared in the public hearing held on 13 September 2018.

22.

Parpública argues that the answer to question 1 should be that the provisions are not contrary to EU law. In its opinion, the disputed requirements do not limit or restrict freedom of establishment and, if they were to do so, the restriction would be justified. With regard to questions 2 and 3, it maintains that Articles 56 and 57 TFEU do not apply to air transport services, by virtue of Article 58(1), Article 90 and Article 100(2) TFEU. On question 4, it argues that TAP’s activities cannot be considered a service that is subject to Directive 2006/123, in view of the exception in Article 2(2)(d). There is therefore no need to answer questions 5 and 6.

23.

According to the Portuguese Government, the condition at issue in question 1 derives from the arrangements for granting operating licences set out in Regulation No 1008/2008 and does not entail a restriction on freedom of establishment, because it does not apply to potential investors. With regard to questions 2 and 3, it agrees with Parpública and argues that, in any event, the selection criteria are not contrary to secondary law on air transport services. It also endorses Parpública’s position on questions 4, 5 and 6, adding that Regulation No 1008/2008 applies.

24.

According to the Italian Government, the first three questions need to be answered together, and Articles 49, 54, 56 and 57 TFEU do not prevent the imposition of conditions such as those at issue in the reprivatisation process. The contested conditions are not requirements that restrict freedom of establishment or freedom of services, and, if they were, they would still be justified on grounds of overriding public interest.

25.

The Italian Government agrees with Parpública and the Portuguese Government on questions 4, 5 and 6, arguing that Directive 2006/123 does not apply to this case — although it bases its assertion on Article 1(2) of the directive, rather than on Article 2(2)(d). In the alternative, it argues that, as the privatisation process does not affect the capital of the air carrier but of the company that controls the air carrier, one would have to examine whether the controlling company’s services come within the scope of Directive 2006/123. In its opinion they do not, because they are ‘investments’ within the meaning of the exception in Article 2(2)(b) of the directive. If they were transport activities, then the provision in Article 2(2)(d) would apply.

26.

With regard to question 1, the Dutch Government considers that the conditions at issue restrict freedom of establishment, but that they could be justified. On question 2, it agrees with Parpública and the Portuguese Government that Articles 56 and 57 TFEU do not apply. With regard to questions 4, 5 and 6, it also considers that Directive 2006/123 does not apply, by virtue of Article 2(2)(d).

27.

The Commission proposes that question 1 be answered to the effect that Article 49 TFEU does not prevent the conditions at issue in the case, provided that, under bilateral agreements between Portugal and certain third-party States, the retention of the company’s traffic rights is conditional on the company’s headquarters and principal activity remaining in Portugal.

28.

With regard to question 2, the Commission states that the requirement could be admissible under Articles 16, 17 and 18 of Regulation No 1008/2008. On question 3, it believes that the requirement to maintain and develop the national hub could be justified on grounds of overriding public interest but not on grounds of contributing to the growth of the national economy. With regard to questions 4, 5 and 6, it considers that Directive 2006/123 does not apply, based either on Article 2(2)(d) — if the case concerns transport — or on Article 5(4), if it relates to public contracts.

29.

The Supremo Tribunal Administrativo (Supreme Administrative Court) has to determine whether three of the requirements in the tender specifications approved by the Portuguese Government in the procedure for reprivatising the air carrier TAP are compatible with EU law. ( 6 )

30.

As a preliminary point, it should be clarified that, as far as the present case is concerned, in practice the case involves ‘requirements’ or ‘conditions’, even though these formally appear in the tender specifications under the heading of ‘Selection criteria’.

31.

During the hearing, Parpública insisted that the referring court was mistaken in classifying what were merely ‘selection criteria’ as requirements concerning tenderers’ suitability. In its opinion, this error had ‘contaminated’ the remainder of the reference for a preliminary ruling.

32.

In my opinion, we should follow the legal classification used by the referring court, which explicitly and repeatedly uses the term ‘requirements’ ( 7 ) to refer to the conditions included as ‘criteria’ in the tender specifications. While it would be possible to debate whether or not the referring court’s classification is correct, this issue could only be considered from the perspective of national law, and this is not a matter for the Court of Justice, which must accept the terms of the order for reference as regards the factual and legal situation that delimits the subject matter of the original proceedings.

33.

Having said that, the response to the request for a preliminary ruling would be no different if one were to accept that the tender specifications contained genuine selection criteria, because it is also possible to examine whether such criteria comply with EU law, as is customary in judgments of the Court of Justice on tender specifications in public procurement cases.

34.

In the final analysis, regardless of whether they were selection criteria or genuine requirements, ultimately their content would have binding force in the privatisation process, meaning that the purchaser of the shares would have to comply with the demands in question when they were included in the share purchase agreement.

35.

It should be recalled that the three requirements at issue entailed obligations: (a) to keep the company’s headquarters and effective management in Portugal; (b) to comply with the public service obligations; and (c) to maintain and develop the current national hub.

36.

Reversing the order proposed by the referring court, and in line with the views of many of the parties, it is preferable to address question 4 first. The answer to this question will determine whether the substantive issue should be resolved by applying Directive 2006/123 or in accordance with other provisions of EU law.

37.

According to the referring court, its queries concerning the applicability of Directive 2006/123 relate to the fact that the reprivatisation of TAP affects the capital of a company engaged in air transport. In its opinion, in view of the activity involved, the exception in Article 2(2)(d) of Directive 2006/123 may apply, as the directive does not apply to ‘services in the field of transport’.

38.

Virtually all the parties agree that Directive 2006/123 does not apply, because the case concerns the privatisation of an airline, and therefore the exception in Article 2(2)(d) of the directive applies.

39.

However, the Italian Government argues that the reason why Directive 2006/123 does not apply is because of the exception in Article 1(2), which establishes that the directive does not deal with ‘the privatisation of public entities providing services’. ( 8 )

40.

I agree with this view. ( 9 ) In effect, the case involves the privatisation of a company that was until that point a public entity, and therefore this fact alone is enough to rule out the applicability of Directive 2006/123, whatever the services provided by the privatised entity.

41.

As an additional argument, if one looks at the nature of the activities carried out by TAP SA, that is, by the company whose shares are held by the entity whose capital is being reprivatised (TAP SPGS), one will see that the exception in Article 2(2)(d) of Directive 2006/123 also applies.

42.

As noted by the Court of Justice in Grupo Itevelesa and Others, ( 10 )‘it is apparent from the documents preparatory to the adoption of the Services Directive that the exclusion relating to “services in the field of transport” was intentionally drafted in terms designed to correspond to the wording of Article 51 EC, now Article 58 TFEU, paragraph 1 of which states that the “freedom to provide services in the field of transport shall be governed by the provisions of the Title relating to transport”’.

43.

For the Court of Justice, ‘the concept of “services in the field of transport” includes not only transport services in themselves but also any service inherently linked to any physical act of moving persons or goods from one place to another by means of transport’. ( 11 ) Given such a broad definition, the activities carried on by TAP SA can easily be included within that concept and, by a logical connection, so too can those of TAP SPGS. The latter is simply a holding company for the shares in TAP SA, the reprivatisation of which constitutes the subject matter of the proceedings.

44.

Directive 2006/123 is therefore doubly inapplicable in this case, meaning that there is no need to answer questions 5 and 6. In any event, in my opinion the grounds in Article 1(2) of the directive should take precedence, because they refer to a logically prior situation, in that while Article 2 of Directive 2006/123 addresses the scope of the directive, Article 1 delimits its regulatory subject matter, outside of which the directive does not apply. There is, therefore, no need to exempt from application something which, by definition, could not apply.

45.

The privatisation of an airline involves transferring part of the company’s share capital, which had until then been in public hands, to (private) investors who acquire the relevant shares. The privatising effect of the share sale takes precedence over the substantive activities of the privatised entity. The issue therefore falls within the scope of Article 345 TFEU, which sets out the principle of the neutrality of the Treaties with regard to the system of property ownership in Member States.

46.

However, that article ‘does not mean that rules governing the system of property ownership current in the Member States are not subject to the fundamental rules of the FEU Treaty, which rules include, inter alia, the prohibition of discrimination, freedom of establishment and the free movement of capital’. ( 12 )

47.

Having regard to the requirements in the tender specifications at issue, I consider that the freedom involved is the freedom of establishment, rather than the free movement of capital or freedom to provide services.

48.

Thus, the sale of shares representing up to 61% of the share capital of TAP SGPS would enable the acquirer to exercise genuine influence over the management of that company and of the subsidiary (TAP SA). According to the case-law of the Court of Justice, this factor is decisive in determining that the freedom exercised is the freedom of establishment. ( 13 )

49.

As detailed in the order for reference, ( 14 ) shortly after concluding the sale agreement with the selected company, the Portuguese Government ( 15 ) opened a negotiating process to reconfigure the terms and conditions of the State’s holding in TAP SGPS. On completion of those negotiations, the acquiring company agreed to sell Parpública the shares it needed in order to hold 50% of the share capital in TAP SGPS.

50.

According to this (new) state of affairs, while the capital held by the company that was selected in the reprivatisation process is still substantial, it no longer guarantees that the company will be able to exercise decisive influence over the management of TAP SGPS, as would have been the case had it continued to hold 61% of the company’s share capital. ( 16 ) However, the criterion adopted in the case-law cited above is not that of a determining or decisive influence, but that of ‘definite influence’, that is, influence that can be used to play an active part in the management of the company, which, in my view, can be achieved with 45% of the share capital. ( 17 )

51.

In any event, the Court of Justice must restrict itself to the issues raised by the referring court in its questions, that is, the original conditions of the reprivatisation procedure. Without having recourse to any reasons other than the presumption of relevance which the Court of Justice ascribes to references for a preliminary ruling, ( 18 ) let us simply note that the feasibility of the operation to reacquire the share capital of TAP SGPS by Parpública could, in turn, be determined by the validity of the initial privatisation procedure. It still makes sense, therefore, to respond to the questions raised in the context of a process which privatised 61% of the share capital in the previously State-owned company and which was, consequently, sufficient to confer on the acquirer of the shares an influence that was not only definite, but also, in fact, decisive.

52.

In determining whether the clauses in the tender specifications are compatible with EU law, the relevant provisions are, therefore, Articles 49 and 54 TFEU. On this basis, questions 1, 2 and 3 should be reformulated so that each of the selection criteria referred to in the questions is compared against those provisions of the TFEU.

53.

Regard must also be had to Regulation No 1008/2008 (which includes the ‘appropriate provisions for air … transport’ established by the European Parliament and the Council under the power provided for in Article 100(2) TFEU), in that some of the harmonising provisions it contains on the regulation of air services have an impact on this case. ( 19 )

54.

In my opinion, the three criteria referred to in the order for reference include in themselves a restriction on the freedom of establishment. It should be recalled that, for the Court of Justice, ‘all measures which prohibit, impede or render less attractive the exercise of the freedom of establishment must be considered to be restrictions on that freedom’. ( 20 )

55.

There can be general agreement that the conditions imposed on the privatisation process by the Portuguese Government do not go so far as to prohibit the exercise of that freedom; nor do they impede it so much that they prevent it. But, at the very least, they make it less attractive.

56.

Those conditions are not minor restrictions. They mean that whoever acquires up to 61% of the share capital of TAP SGPS will be prevented from having a free hand in managing the airline in accordance with its own economic interests, because it will still have to comply with the provision of public service obligations, and it will not be able to relocate its headquarters or effective management, or to do away with the current hub.

57.

Although the Italian Government makes a point of stressing the differences with the restrictions resulting from the exercise of the special rights attached to so-called ‘golden shares’, ( 21 ) it seems to me that there are marked similarities between those special rights and the conditions at issue here.

58.

The ‘golden shares’ which a Member State retained for itself during the process of privatising previously State-owned companies, on which the Court of Justice has had to rule in the past, ( 22 ) conferred on the holder ‘an influence on the management of [the company] which is not justified by the size of its shareholding in that company [and which] is liable to discourage operators from other Member States from making direct investments in [the company] since they could not be involved in the management and control of that company in proportion to the value of their shareholdings’. ( 23 ) In short, they involved ‘the risk that the [Member] State might exercise its special rights in order to pursue interests which do not coincide with the economic interests of the company concerned’, which would be a disincentive. ( 24 )

59.

The conditions with which we are currently concerned do not simply entail a risk that ‘decisions recommended by the organs of [the company] as being in the economic interests of the latter’ ( 25 ) may be blocked by the Portuguese Government: they also entail the materialisation of that possibility. The organs of the privatised company could not even recommend decisions such as the transfer of the headquarters and effective management, which would already have been ruled out as the result of an unavoidable condition imposed on the company’s new owner.

60.

Both Parpública ( 26 ) and the Portuguese Government ( 27 ) defend the selection criterion of maintaining the company’s headquarters in Portugal, invoking the Yellow Cab Verkehrsbetrieb judgment, ( 28 ) which held that ‘the requirement of a seat or another establishment in the territory of the host Member State cannot logically constitute, as such, a barrier to, or restriction on, the freedom of establishment’, since ‘that obligation does not impose the slightest restriction on the freedom of economic operators established in other Member States to create agencies or other establishments in that territory.’ ( 29 )

61.

In that case, the requirement at issue was to have a seat or another establishment in the territory of a Member State in order to obtain authorisation to operate a public urban bus service. While that requirement was not in itself contrary to freedom of establishment, the timing of the requirement (which had to be satisfied before authorisation was granted) did, however, render it incompatible with that freedom. ( 30 )

62.

By contrast, the present case does not simply involve a requirement to have a seat or permanent establishment in Portugal, but to maintain the main seat and effective management of the company in the territory of that Member State.

63.

For the Court of Justice, freedom of establishment encompasses ‘the right of a company or firm formed in accordance with the legislation of a Member State to convert itself into a company or firm governed by the law of another Member State …, provided that the conditions laid down by the legislation of that other Member State are satisfied’. ( 31 ) Therefore, in my view, the obligation for the company’s headquarters to remain in Portugal also involves a restriction on freedom of establishment.

64.

The same can be said of the requirement to accept obligations under public law and the requirement to maintain the privatised company’s hub in Portugal. Both requirements may dissuade a potential purchaser from acquiring the majority of the company’s share capital, because to a large extent they predetermine subsequent business decisions.

65.

Based on this premiss, we have to examine whether the conditions at issue can be justified under EU law, and whether they are appropriate for achieving the objective that may provide justification for them, and are not disproportionate for that purpose.

66.

In this regard, I share the view of the Netherland’s Government, ( 32 ) which argues that the condition that requires compliance with public service obligations should be examined first. The reason for this, with which I agree, is that the condition concerning maintenance of the company’s headquarters and effective management in Portugal may be connected to that requirement, of which it could in practice constitute an extension.

67.

Under Article 5(d) of the tender specifications, the selection criteria include ‘the capacity to ensure proper compliance, in good time, with the public service obligations of [TAP SA], including the flight connections between the main national airports and the airports of the autonomous regions, where applicable, and the continuation and further development of the routes serving the autonomous regions, the diaspora and Portuguese-speaking countries and communities’.

68.

As I have already noted, the restriction on freedom of establishment arises from the fact that this clause imposes certain conditions on the purchaser of 61% of the reprivatised share capital that could, in principle, deter it from making the purchase, because they restrict its capacity for independent action as a business.

69.

There is settled case-law of the Court of Justice to the effect that the guarantee of a service of general interest may constitute an overriding reason that is capable of justifying an obstacle to the freedoms guaranteed by the Treaties. ( 33 )

70.

In my view, ensuring an air service within the terms of Article 5(d) of the tender specifications — which place particular emphasis on the connections with the Portuguese autonomous regions, that is, with outermost regions within the meaning of Article 349 TFEU — ( 34 ) represents a general interest reason that is sufficient to justify the restriction on freedom of establishment.

71.

The Commission has focused its arguments on whether TAP SA is actually conditioned by public service obligations and whether these have been set in accordance with Article 16 of Regulation No 1008/2008. It states that if they have not, they would be incompatible with that regulation. ( 35 )

72.

In the same vein, the Netherland’s Government ‘deduces’ that TAP SA is subject to a public service obligation that was assigned on the basis of Article 16 of Regulation No 1008/2008. ( 36 ) Parpública refers more specifically to the public service obligations that applied to TAP SA on 20 January 2015, that is, on the date of the official publication of the tender specifications. ( 37 )

73.

Under this approach by the parties, the debate centres on the question of the public service obligations that apply to TAP SA, and it is taken for granted that those obligations already exist (Netherland’s Government), or it is argued that they are effectively in force (Parpública) or that there is only partial information available regarding their existence (Commission). ( 38 )

74.

In my opinion, this focus diverts attention from the fundamental issue that underlies the origins of the reference and that is the issue in the actual question posed by the referring court.

75.

It is helpful to return to the exact wording of the condition in Article 5(d) of the tender specifications. Literally, this refers, using the subjunctive, to ‘the capacity to ensure proper compliance, in good time, with any public service obligations that may apply to [TAP SA]’. ( 39 ) It does not refer to obligations that apply to the company — that is, to obligations that actually affect it — but to those that may apply to it — that is, those that may potentially affect it.

76.

The selection criterion, therefore, is not the capacity to continue to ensure compliance with the public service obligations that already apply to TAP SA (whatever those may be), but to assume whatever obligations may be imposed after the tenderer selected in the reprivatisation process has purchased part of the company’s share capital.

77.

It is true that Article 5(d) of the tender specifications also specifically refers to ‘the flight connections between the main national airports and the airports of the autonomous regions, where applicable, and the continuation and further development of the routes serving the autonomous regions ...’. It is thus referring to services that TAP SA would already be required to provide under Article 16 of Regulation No 1008/2008. But, in addition to the fact that there is no express reference to that existing obligation, I believe that the clause is addressing a potential obligation, in that it refers to connections with the autonomous regions ‘where applicable’. ( 40 )

78.

If this interpretation were considered to be overly literal or formalistic, and one wanted to conclude that the aim of the tender conditions is to ensure compliance with the public service obligations by which TAP SA is already bound, one has to address the unavoidable fact that the referring court refers in its question to ‘the requirement to comply with the public service obligations on the part of the purchasing entity’. There is therefore no mention of the capacity of the purchasing entity to assume the specific public service obligations that encumber the purchased entity.

79.

It is possible that ‘the obligations’ addressed in this part of the order for reference are the obligations that already apply to TAP SA. But — and, in my opinion, this is the important point — the referring court does not specifically ask about those obligations (which, as noted above, appear to have ceased to exist in 2015), nor does it ask whether they were imposed on TAP SA in accordance with Regulation No 1008/2008 or whether, if they were not, it was nevertheless possible for the selection criteria to include a requirement for a guarantee that the obligations would be satisfied. Its question is strictly limited to whether the requirement to have the capacity to comply with public service obligations can constitute a selection criterion that is compatible with EU law.

80.

Given those terms, which are notably abstract, the answer should disregard the specific public service obligations that applied to TAP at the point when it was privatised. I reiterate that the referring court does not raise any questions about that issue. Moreover, it is for the referring court to determine whether or not those obligations were imposed lawfully (and, if they were not, what the consequences are). That would be the position, of course, if an application for a declaration of nullity had been founded on this particular issue in the main proceedings, which does not seem to have been the case.

81.

Therefore, to require the purchasing entity to be capable of taking on public service obligations for the flight connections between the main national airports and the airports of the autonomous regions represents a requirement which, although a restriction on freedom of establishment, is justified because it addresses an overriding reason relating to the public interest. In short, it is that reason that provides the foundation for the very legitimacy of the imposition of that type of obligation, which is explicitly endorsed by Article 16 of Regulation No 1008/2008.

82.

Consequently, the requirement in question is not only justified: it is relevant and appropriate, because it ensures compliance with the public service obligations that may be imposed on the privatised company, without going beyond what is reasonably required to achieve that objective.

83.

Under Article 5(c) of the tender specifications, the selection criteria include ‘the submission of and performance guarantee for an adequate and coherent strategic plan’ designed to preserve and promote the growth of TAP SA and to maintain its integrity, identity and independence. Emphasis is placed on the need to preserve ‘the TAP mark and its association with Portugal’ and to keep its headquarters and effective management in that Member State.

84.

For the Netherland’s Government, sufficient justification for this requirement may be found in the fact that it is designed to ensure compliance with the public service obligations imposed (or which may subsequently be imposed) on the purchasing company. ( 41 ) However, I am not entirely convinced by its arguments.

85.

Indeed, the case-law does not generally support this type of imposition concerning head offices because, as a general rule, less restrictive measures are possible. ( 42 ) And if the public service obligations provided for in Article 16 of Regulation No 1008/2008 (that is, only intra-Community connections) are imposed directly on the routes, whichever company is covering them, the argument set out above would mean that any company that wanted to cover those routes would have to have its headquarters in Portugal, which seems to me to be excessive.

86.

Moreover, one of the requirements in Article 5(d) of the tender specifications (the guarantee for ‘the continuation and further development of the routes serving the … diaspora and Portuguese-speaking countries and communities’), cannot per se be considered a public service obligation within the meaning of the aforementioned Article 16 of Regulation No 1008/2008.

87.

However, as the Commission has pointed out, it is common practice in the air transport sector to include a nationality requirement in bilateral agreements concluded with third parties both by the European Union and by Member States. ( 43 ) Bilateral agreements of this type exist between Portugal and third party States belonging to the Portuguese-speaking community, such as Angola, Brazil or Mozambique, ( 44 ) with which Portugal maintains a special historical, cultural, social and political relationship that requires a stable, regular and adequate system of air transport if it is to be developed and strengthened.

88.

In the same vein, Parpública notes that the agreements concluded with Angola and Mozambique, among other countries, stipulate that the airline appointed to provide connections with Portugal must have its headquarters in Portuguese territory. This means that if it moved its headquarters to another State it would lose the licence and the corresponding traffic rights, ( 45 ) which could very seriously undermine one of the fundamental elements of communication that are the foundation for the traditional relationships between Portugal and the countries of the Lusitanian community of nations, which represent a major cultural and political asset for that Member State.

89.

It is for the national court to verify whether that is the case. If it is, then I believe that this selection criterion constitutes a necessary restriction that is not disproportionate.

90.

Article 5(e) of the tender specifications demands of the acquiring company ‘the contribution to the growth of the national economy, including maintaining and developing the current national hub as a platform of vital strategic importance in relations between Europe, Africa and Latin America’.

91.

It seems clear that maintaining and developing the hub is linked to a purely economic objective, namely the growth of the national economy.

92.

In support of this criterion, it could perhaps be argued (as with the previous criterion under examination), that it is designed to ensure continuity of relations with the countries of the historic and linguistic Portuguese community. However, the clause in the specifications refers only to the ‘vital strategic importance [of the hub] in relations between Europe, Africa and Latin America’, taking for granted that, in the context of the privatisation legislation, the relevance of those relations is justified by reference to the national economy and as a factor that is capable of contributing to economic growth.

93.

Given this purely economic dimension, according to the case-law of the Court of Justice, the criterion regarding maintenance of the national hub could not be grounds for the restriction it entails on freedom of establishment.

94.

As it was put in the judgment of 21 December 2016, AGET Iraklis, ( 46 )‘it is settled case-law that purely economic grounds, such as, in particular, promotion of the national economy or its proper functioning, cannot serve as justification for obstacles prohibited by the Treaty’.

95.

This does not mean that the Court of Justice is impervious to Member States’ economic interests when these are put forward as grounds for hindering freedom of establishment in pursuit of a legitimate social policy objective. Accordingly, the AGET Iraklis judgment also states that ‘since the European Union thus has not only an economic but also a social purpose, the rights under the provisions of the Treaty on the free movement of goods, persons, services and capital must be balanced against the objectives pursued by social policy, which include, as is clear from the first paragraph of Article 151 TFEU, the promotion of employment, improved living and working conditions, so as to make possible their harmonisation while the improvement is being maintained, proper social protection, dialogue between management and labour, the development of human resources with a view to lasting high employment and the combating of exclusion’. ( 47 )

96.

However, in the present case it is not possible to identify in that criterion any dimension other than a purely economic one, which is the only dimension cited in the tender specifications on this point. The application of this criterion is a barrier to freedom of establishment for which there is no reasonable justification and which is therefore incompatible with EU law.

97.

Having regard to the arguments set out above, I propose that the Court of Justice reply to the Supremo Tribunal Administrativo (Supreme Administrative Court, Portugal) in the following terms: