(a)

Articles 11, 12, 14, 16, 18, 20, 25, 28, 40 and 41;

(b)

Article 13, Article 15 (with the exception of point (b) of paragraph 2), Articles 17, 21, 22, 23, 24, 26, 27, 29, 30, 31 and 37, Article 38(1) and Article 39 to the extent that they cover matters for which the Union has already exercised its competence internally;

(c)

Articles 1, 2, 3, 4, 5(1) to the extent that they cover matters falling within the Union's competence to define and implement a common foreign and security policy;

(d)

Article 42 (with the exception of point (c) of paragraph 2), Articles 43-47, Article 48(3) and Articles 49, 50 and 51 to the extent that these provisions are limited to the purpose of ensuring the provisional application of the Agreement.

(1)

Commission Regulation (EC) No 1484/95 (3) lays down detailed rules for implementing the system of additional import duties and fixes representative prices in the poultrymeat and egg sectors and for egg albumin.

(2)

Regular monitoring of the data used to determine representative prices for poultrymeat and egg products and for egg albumin shows that the representative import prices for certain products should be amended to take account of variations in price according to origin.

(3)

Regulation (EC) No 1484/95 should therefore be amended accordingly.

(4)

Given the need to ensure that this measure applies as soon as possible after the updated data have been made available, this Regulation should enter into force on the day of its publication,

(1)

Regulation (EU) 2015/2283 provides that only novel foods authorised and included in the Union list may be placed on the market within the Union.

(2)

Pursuant to Article 8 of Regulation (EU) 2015/2283, Commission Implementing Regulation (EU) 2017/2470 (2) establishing a Union list of authorised novel foods was adopted.

(3)

Pursuant to Article 12 of Regulation (EU) 2015/2283, the Commission is to decide on the authorisation and on the placing on the Union market of a novel food and on the updating of the Union list.

(4)

Commission Decision 2009/752/EC (3) authorised, in accordance with Regulation (EC) No 258/97 of the European Parliament and of the Council (4), the placing on the market of lipid extract from Antarctic Krill (Euphausia superba) as a novel food ingredient to be used in certain foods and foodstuffs. In that Decision, the maximum level of phospholipids was established at 50 %.

(5)

Commission Implementing Decision (EU) 2016/598 (5) authorised, in accordance with Regulation (EC) No 258/97, an extension of use of lipid extract from Antarctic Krill (Euphausia superba) as a novel food ingredient to be used in food supplements. In that Decision, the minimum level of phospholipid was established at 35 %.

(6)

The novel food ingredient ‘Antarctic Krill oil rich in phospholipids from Euphausia superba’ was authorised to be used in certain food categories by the Finnish competent authorities (6). The minimum level of phospholipids was established at 60 %.

(7)

The conditions of use for both ‘Antarctic Krill oil from Euphausia superba’ and ‘Antarctic Krill oil rich in phospholipids from Euphausia superba’ are identical and are based on the maximum levels of combined eicosapentaenoic acid and docosahexaenoic acid. However, they differ in the phospholipid content, which is established at a range of 35 % to 50 % for ‘Antarctic Krill oil from Euphausia superba’ and a minimum of 60 % for ‘Antarctic Krill oil rich in phospholipids from Euphausia superba’. Therefore, the current authorisations do not cover the range of phospholipids in ‘Antarctic Krill oil from Euphausia superba’ between 50 % and 60 %.

(8)

On 29 August 2018, the company Aker BioMarine A/S (‘the Applicant’) made a request to the Commission to change the specifications of the novel food Antarctic Krill oil from Euphausia superba within the meaning of Article 10(1) of Regulation (EU) 2015/2283. The applicant requested to increase the maximum phospholipid content from 50 % to less than 60 % thereby covering the range in the phospholipid concentration, which is not currently authorised.

(9)

The Commission considers that a safety evaluation of the current application by the European Food Safety Authority in accordance with Article 10(3) of Regulation (EU) 2015/2283 is not necessary on the basis of the fact that if certain levels of a given novel food component have been assessed and determined to be safe, then lower levels of the same component would also be safe. The authorised maximum levels of combined eicosapentaenoic acid and docosahexaenoic acid for both ‘Antarctic Krill oil from Euphausia superba’ and ‘Antarctic Krill oil rich in phospholipids from Euphausia superba’ under Implementing Regulation (EU) 2017/2470 are the same. The proposed change in the phospholipid levels in the specification of the ‘Antarctic Krill oil from Euphausia superba’ does not change the safety considerations that supported its authorisation and the authorisation of the ‘Antarctic Krill oil rich in phospholipids from Euphausia superba’ which concluded that phospholipid levels above and below 60 % are both safe.

(10)

The proposed change to the specifications in the phospholipid content will address the gap in phospholipid content between ‘Antarctic Krill oil from Euphausia superba’ and ‘Antarctic Krill oil rich in phospholipids from Euphausia superba’. Therefore, it is appropriate to amend the specifications of the novel food Antarctic Krill oil from Euphausia superba at the proposed level for phospholipids.

(11)

The information provided in the application gives sufficient grounds to establish that the proposed changes to the specifications of the novel food ingredient ‘Antarctic Krill oil from Euphausia superba’ comply with Article 12(2) of Regulation (EU) 2015/2283.

(12)

Implementing Regulation (EU) 2017/2470 should therefore be amended accordingly.

(13)

The measures provided for in this Regulation are in accordance with the opinion of the Standing Committee on Plants, Animals, Food and Feed,

(1)

Regulation (EU) 2015/2283 provides that only novel foods authorised and included in the Union list may be placed on the market within the Union.

(2)

Pursuant to Article 8 of Regulation (EU) 2015/2283 Commission Implementing Regulation (EU) 2017/2470 (2) establishing a Union list of authorised novel foods was adopted.

(3)

Pursuant to Article 12 of Regulation (EU) 2015/2283, the Commission is to decide on the authorisation and on the placing on the Union market of a novel food and on the updating of the Union list.

(4)

Commission Implementing Decision 2014/463/EU (3) authorised, in accordance with Regulation (EC) No 258/97 of the European Parliament and of the Council (4), the placing on the market of oil from the microalgae Schizochytrium sp. as a novel food to be used in a number of foods.

(5)

Commission Implementing Regulation (EU) 2018/1032 (5) extended the authorisation of oil from the microalgae Schizochytrium sp. (T18) as a novel food under Regulation (EU) 2015/2283 to fruit/vegetable purees.

(6)

On 10 September 2018, the company DSM Nutritional Products Europe made a request to the Commission to change the conditions of use of the novel food Schizochytrium sp. oil within the meaning of Article 10(1) of Regulation (EU) 2015/2283. The application requested to extend the use of Schizochytrium sp. oil to fruit and vegetable purees.

(7)

The proposed extension of use of the novel food does not change the safety considerations that supported the authorisation of Schizochytrium sp. (T18) oil by Implementing Regulation (EU) 2018/1032 and it does not either pose any safety concern. Taking into account those considerations, the proposed extension of use complies with Article 12(1) of Regulation (EU) 2015/2283.

(8)

The Commission did not request an opinion from the European Food Safety Authority in accordance with Article 10(3) of Regulation (EU) 2015/2283, as an extension of use of Schizochytrium sp. oil and the subsequent updating of the Union list are not liable to have an effect on human health.

(9)

The measures provided for in this Regulation are in accordance with the opinion of the Standing Committee on Plants, Animals, Food and Feed,

(1)

Regulation (EU) 2015/2283 provides that only novel foods authorised and included in the Union list may be placed on the market within the Union.

(2)

Pursuant to Article 8 of Regulation (EU) 2015/2283 Commission Implementing Regulation (EU) 2017/2470 (2) establishing a Union list of authorised novel foods was adopted.

(3)

Pursuant to Article 12 of Regulation (EU) 2015/2283, the Commission is to submit a draft implementing act authorising the placing on the Union market of a novel food and updating the Union list.

(4)

Commission Decision 2008/559/EC (3) authorised, in accordance with Regulation (EC) No 258/97 of the European Parliament and of the Council (4) and following the European Food Safety Authority's Opinion (‘the Authority’) (5), the placing on the market of Allanblackia seed oil as a novel food to be used in yellow fat spreads and cream based spreads.

(5)

On 22 September 2014, the company Unilever NV/Unilever PLC made a request to the competent authority of the Netherlands in accordance with Article 4 of Regulation (EC) No 258/97 for an extension of use and use levels of Allanblackia seed oil. The application requested to extend the use of Allanblackia seed oil to an additional food category, namely, mixtures of vegetable oils and milk, and to increase the maximum use levels of Allanblackia seed oil for food categories already authorised by Decision 2008/559/EC. The application also requested change of the specification of Allanblackia seed oil, in particular concerning: the simplification of the indication of small amounts of the saturated fatty acids: lauric, myristic and palmitic acid to one combined parameter (C12:0 — C14:0 — C16:0); the omission of the indication of small amounts (each below 1 %) of palmitoleic and arachidic acid and inclusion of Poly Unsaturated Fatty Acids (PUFA); the omission of the indication of the iodine value; increasing the maximum limits for trans-fatty acids (TFA) (from ≤ 0,5 % to ≤ 1 %); increasing the maximum limits for the peroxide value (from ≤ 0,8 to ≤ 1,0 meq/kg); increasing the maximum limits for the unsaponifiable matter (from ≤ 0,1 % to ≤ 1 %). The Authority has no safety concerns regarding the proposed changes of specification parameters.

(6)

On 13 December 2017, the competent authority of the Netherlands issued its initial assessment report. In that report, it concluded that the extension of uses and proposed maximum use levels of Allanblackia seed oil and modification of the specification of Allanblackia seed oil meet the criteria for novel food set out in Article 3(1) of Regulation (EC) No 258/97.

(7)

Pursuant to Article 35(1) of Regulation (EU) 2015/2283, any request for placing a novel food on the market within the Union submitted to a Member State in accordance with Article 4 of Regulation (EC) No 258/97 and for which the final decision has not been taken before 1 January 2018 shall be treated as an application submitted under Regulation (EU) 2015/2283.

(8)

While the request for an extension of use of Allanblackia seed oil was submitted to a Member State in accordance with Article 4 of Regulation (EC) No 258/97, the application also meets the requirements laid down in Regulation (EU) 2015/2283.

(9)

In accordance with Article 10(3) of Regulation (EU) 2015/2283, the Commission consulted the Authority on 25 April 2018, asking it to provide a scientific opinion by carrying out the assessment for Allanblackia seed oil as a novel food.

(10)

On 27 June 2018, the Authority adopted Scientific Opinion on the safety of Allanblackia seed oil for extended uses in mixtures of vegetable oils and milk and in yellow fat and cream based spreads up to 30 % (w/w) (6) as requested by the applicant. That opinion is in line with the requirements of Article 11 of Regulation (EU) 2015/2283. Mixtures of vegetable oils and milk fall under the food category: Dairy analogues, including beverage whiteners.

(11)

The opinion of the Authority gives sufficient grounds to establish that Allanblackia seed oil, with the modified specification, in the proposed uses and use levels complies with Article 12(1) of Regulation (EU) 2015/2283.

(12)

The measures provided for in this Regulation are in accordance with the opinion of the Standing Committee on Plants, Animals, Food and Feed,

(1)

Regulation (EC) No 1831/2003 provides for the authorisation of additives for use in animal nutrition.

(2)

In accordance with Article 7 of Regulation (EC) No 1831/2003, an application was submitted for the authorisation of hop extract (Humulus lupulus L. flos) as a feed additive for all animal species. The application was accompanied by the particulars and documents required under Article 7(3) of that Regulation. The applicant requested that the additive be classified in the additive category ‘sensory additives’.

(3)

The European Food Safety Authority (‘the Authority’) concluded in its opinion of 3 October 2018 (2) that, under the proposed conditions of use, hop extract (Humulus lupulus L. flos) does not have adverse effects on animal health, human health or the environment. The Authority concluded that the tolerance study made with weaned piglets shows that the additive is safe for the proposed dose of 50 mg/kg of complete feed and can be extrapolated to pigs for fattening and to minor growing porcine species weaned and for fattening. It is therefore appropriate to authorise hop extract as a feed additive only for those species and categories. The Authority also concluded that since harvested hop and its extracts are universally recognised to flavour food and their function in feed would be essentially the same as that in food, no further demonstration of efficacy was necessary. Therefore, that conclusion can be extrapolated for feed.

(4)

The Authority further noted that the additive is a potential respiratory and skin sensitiser for users and contains a variety of compounds known to cause allergic reactions in sensitive persons. Consequently, appropriate protective measures should be taken.

(5)

The Authority did not consider that there was a need for specific requirements of post-market monitoring. It also verified the report on the method of analysis of the feed additive in feed submitted by the Reference Laboratory set up by Regulation (EC) No 1831/2003.

(6)

The assessment of this additive shows that the conditions for authorisation, as provided for in Article 5 of Regulation (EC) No 1831/2003, are satisfied. Accordingly, the use of this additive should be authorised as specified in the Annex to this Regulation.

(7)

Having regard to the use level proposed by the applicant, the Authority considered that the maximum proposed use level is safe. For the purpose of official controls along the food chain, the recommended maximum content of the active substance should be indicated on the label of the feed additive and the incorporation into the feedingstuffs should be done via premixtures.

(8)

The fact that the use of the substances concerned in water for drinking is not authorised should not preclude their use in compound feed, which is administered via water.

(9)

The measures provided for in this Regulation are in accordance with the opinion of the Standing Committee on Plants, Animals, Food and Feed,

(1)

Commission Implementing Regulation (EU) 2016/2080 (3) has opened the sale of skimmed milk powder by a tendering procedure.

(2)

In the light of the tenders received for the 31st partial invitation to tender, a minimum selling price should be fixed.

(3)

The measures provided for in this Regulation are in accordance with the opinion of the Committee for the Common Organisation of the Agricultural Markets,

(1)

Regulation (EU) No 1333/2014 of the European Central Bank (ECB/2014/48) (2) requires the reporting of statistical data by reporting agents in order that the European System of Central Banks (ESCB), in the fulfilment of its tasks, may produce statistics on the euro money market.

(2)

To ensure the availability of high quality statistics on the euro money market, it is necessary to amend certain provisions of Regulation (EU) No 1333/2014 (ECB/2014/48). In particular, it is important to ensure that each reporting agent reports to the European Central Bank (ECB) or the relevant national central bank (NCB) all transactions entered into between the reporting agent and financial corporations (except central banks where the transaction is not for investment purposes), as well as general government and certain non-financial corporations. In addition, it is necessary to ensure that the data collection benefits from the extended mandatory use of the Legal Entity Identifier (LEI) in reporting in the Union.

(3)

Given the importance of ensuring the availability of timely statistics on the euro money market, it is also necessary to harmonise and strengthen the obligations of reporting agents to transmit information to NCBs or the ECB in a timely manner.

(4)

Precautions should be taken to ensure that statistical information is collected, compiled and transmitted by reporting agents in a manner which protects the integrity of the information. In particular, it is important to emphasise that statistical information received by the NCBs or the ECB should be impartial, i.e. a neutral representation of observable transactions entered into at arm's-length by the reporting agent, objective and reliable, in order to conform with the general principles in the ESCB's Public commitment on European Statistics (3). Moreover, reporting agents should ensure that any errors in reported statistical information are corrected and communicated to the ECB and the relevant NCB at the earliest possible date.

(5)

Implementation of these provisions will ensure that the ESCB has more timely, comprehensive, detailed, harmonised and reliable statistical information on the euro money market, which will allow for a more in-depth analysis of the monetary policy transmission mechanism. In addition, the data collected may be used for the development and administration of a euro unsecured overnight interest rate.

(6)

Therefore, Regulation (EU) No 1333/2014 (ECB/2014/48) should be amended accordingly,

(1)

Commission Directives 2003/90/EC (3) and 2003/91/EC (4) were adopted to ensure that the varieties the Member States include in their national catalogues comply with the protocols established by the Community Plant Variety Office (CPVO) as regards the characteristics to be covered as a minimum by the examination of the various species and the minimum conditions for examining the varieties, as far as such protocols had been established. For the species not covered by CPVO protocols those Directives provide that guidelines of the International Union for Protection of New Varieties of Plants (UPOV) are to apply.

(2)

Since the last amendment to Directives 2003/90/EC and 2003/91/EC by Implementing Directive (EU) 2018/100 (5) the CPVO and UPOV have established further protocols and guidelines and have updated existing ones.

(3)

Directives 2003/90/EC and 2003/91/EC should therefore be amended accordingly.

(4)

The measures provided for in this Directive are in accordance with the opinion of the Standing Committee on Plants, Animals, Food and Feed,

(1)

On 9 December 2013 and 10 April 2014, the Commission received two anonymous complaints against the Spanish State as regards the alleged granting of unlawful and incompatible aid to Sociedad Estatal Correos y Telégrafos, S.A. (hereinafter ‘Correos’). Both complaints raised the following issues concerning Correos: (i) alleged overcompensation granted to Correos for the delivery of the USO since 1998, (ii) alleged incompatible tax exemptions granted to Correos, and (iii) alleged unpaid social security contributions for civil servants employed by Correos.

(2)

On 14 February 2014, 26 February 2014 and 15 July 2014, the Commission forwarded the non-confidential versions of the two complaints to the Spanish authorities.

(3)

On 11 April 2014 and 18 September 2014, the Spanish authorities responded to those complaints.

(4)

On 10 July 2014, 22 October 2014 and 4 December 2015 the Commission requested further information from the Spanish authorities.

(5)

The Spanish authorities responded to those requests on 7 August 2014, 19 December 2014, 19 January 2015 and 21 December 2015 respectively.

(6)

By letter dated 11 February 2016, the Commission informed Spain that it had decided to initiate the procedure laid down in Article 108(2) of the Treaty in respect of several measures granted to Correos. The Commission decision to initiate the procedure (hereinafter ‘the 2016 Opening Decision’) was published in the Official Journal of the European Union (2).

(7)

The Commission received first comments from Spain on the opening decision by letter dated 21 April 2016.

(8)

The Commission received comments from Correos on the opening decision by letter dated 11 May 2016.

(9)

The Commission received comments from a third party by letter dated 12 May 2016.

(10)

The Commission forwarded the comments received to Spain on 8 June 2016.

(11)

Spain provided its comments on the comments from third parties by letter dated 6 July 2016.

(12)

In the course of the proceedings the Commission received additional comments from Spain on 24 October 2017 and 23 May 2018.

(13)

The Commission received additional observations from a former competitor of Correos, Unipost by letter dated 20 March 2018.

(14)

Prior to Spain's accession to the European Economic Community (EEC) in 1986, postal services in Spain were operated by the General Administration. The Decree 1113/1960 of 9 May 1960 on the Postal Order, implemented by the Postal Services Regulation, adopted by means of Decree No 1653/1964 of 14 May 1964, defined the postal service and entrusted its provision to the Directorate-General of ‘Correos y Telégrafos’. The adoption of the Postal Order and its implementing regulation marked the start of the liberalisation of the Spanish postal market. Whereas ‘Correos y Telégrafos’ monopoly was restricted to interurban and international letters and postcards, urban mail and parcel services were fully liberalised. In the 1970s the first large private operators entered the Spanish postal market.

(15)

Following Spain's accession to the EEC, there was a gradual liberalisation of postal services between 1998 and 2010 based on the European Union Postal Directives. More specifically, Directive 97/67/EC of the European Parliament and of the Council (3) was transposed into national law in 1998 by means of Law 24/1998 of 13 July 1998 on the Universal Postal Service and the Liberalisation of Postal Services (the 1998 Postal Law), which for the first time entrusted Correos with the universal service obligation (4) (‘USO’). The law provided for a reduced list of USO services (5) which were reserved for Correos as USO provider (‘the reserved area’), whereas all other postal services were liberalised (‘non-reserved area’).

(16)

The liberalisation of postal services in Spain continued with the transposition into Spanish Law of Directive 2002/39/EC of the European Parliament and of the Council (6), by Law 53/2002 of 30 December 2002 on Tax, Administrative and Social Measures, which amended the aforementioned 1998 Postal Law and further reduced the scope of the reserved area.

(17)

In 2010 the postal sector was fully liberalised by Law 43/2010 of 30 December 2010 on the universal postal service, users' rights and the postal market (the 2010 Postal Law) which transposed Directive 2008/6/EC of the European Parliament and of the Council (7) into Spanish Law. The 2010 Postal Law redefined the scope of the USO (e.g. the money order service was excluded from the USO) and abolished the reserved area.

(18)

Correos is a wholly State-owned company which is the parent company of the Grupo Correos, with Sociedad Estatal (‘SEPI’) as the sole shareholder. SEPI is a holding company for the State's participations in undertakings.

(19)

Correos offers postal services, including universal services, courier services and other services (e.g. services related to postal services and associated activities, including money transfer operations, philately, etc.). In 2016, Correos had a turnover of approximately EUR 1 761 million, sent 2 774 million postal items (including parcels) and employed 49 785 workers.

(20)

Correos is the largest provider of postal services in Spain, with 8 787 postal points of contact in 2016. It is the market leader in the Spanish postal sector with the biggest market share of the Spanish postal services market, except in parcel services. Until 2017, Unipost S.A. was the main competitor of Correos in the Spanish postal market, however the company underwent financial difficulties and entered into liquidation on 19 February 2018. Other European postal operators (i.e. Deutsche Post, TNT, La Poste, UPS, CTT Correios Portugal and Royal Mail) hold significant market shares in parcel services.

(21)

In Spain, the State has directly administered the postal service since 1716. Correos was part of the Public Administration, being embedded within different Ministries like the Ministry of Interior and subsequently the Ministry of Transport and Communications.

(22)

The Autonomous Body ‘Correos y Telégrafos’ was created by the State General Budget Law 31/1990 of 27 December 1990. The autonomous body ‘Correos y Telégrafos’ was set up in 1992, attached to the Ministry of Transport, Tourism and Communications.

(23)

‘Correos y Telégrafos’ became a Public Business Entity attached to the Ministry of Fomento under Law 6/1997 of 14 April 1997 on the Organisation and Funtioning of the State General Administration.

(24)

Law 14/2000 of 29 December 2000, on Fiscal, Administrative and Social Measures, adopted the legal framework for the ‘Sociedad Estatal Correos y Telégrafos, S.A.’, the Company being set up in June 2001. On 5 June 2012 all the companies belonging to the Correos Group (i.e. Correos and its subsidiaries Correos Express, Nexea and Correos Telecom) were incorporated into the SEPI holding, which became their sole shareholder.

(25)

In 1998, Correos was entrusted with the USO by the 1998 Postal Law. As compensation for delivering the USO, Correos received public funding from 1998 to 2010. Subsequently, the 2010 Postal Law entrusted Correos with the provision of the USO for a period of 15 years starting on 1 January 2011.

(26)

From 11 March 2000, the 1998 Postal Law was complemented with a ‘Plan de Prestación’ (‘the 2000 Plan de Prestación’) that sets out the compensation mechanism to estimate Correos' net cost incurred in relation to the fulfilment of its obligation as universal service provider (‘USP’) and quality criteria for the provision of the USO.

(27)

From 2000 to 2010, the USO compensation to Correos was granted on the basis of a methodology developed by the Spanish authorities (the ‘Spanish methodology’), which is detailed in the 2000 Plan de Prestación. Moreover, the 2000 Plan de Prestación establishes that Correos should implement analytical accounting with separation of accounts as provided in Article 29 of the 1998 Postal Law.

(28)

The Spanish methodology to estimate the net cost of the unfair burden of the USO, consisted of the following steps:

(29)

Table 1 shows the compensations that were granted to Correos for the delivery of the USO during the 2004-2010 period and that were calculated using the Spanish methodology:

Table 1

USO compensations granted to Correos

(30)

The 1998 Postal Law was superseded by the 2010 Postal Law, which entered into force on 1 January 2011. The 2010 Postal Law entrusted Correos with the provision of the USO for a period of 15 years starting on the entry into force of the Law (i.e. until 1 January 2026).

(31)

Article 27 and 28 of 2010 Postal Law provides that the USO provider is allowed to receive compensation up to the net cost incurred in discharging its obligations. The net cost should be calculated according to the net avoided cost method (hereinafter ‘NAC methodology’) as the difference between the net cost for the USP of operating with the USO and the net cost of the USP operating without the USO. The calculation shall take into account all other relevant elements, including any intangible and market benefits which accrue to a postal service provider designated to provide the universal service, the entitlement to a reasonable profit and incentives for cost efficiency in light of Annex 1 of Directive 2008/6/EC.

(32)

As provided in Article 22(3) and Article 27(2)(b) of the 2010 Postal Law, the NAC methodology described in recital 31 should be developed in a new ‘Plan de Prestación’. However, up to this date, such a new Plan de Prestación has not yet been adopted. Therefore, since 2011 there has been no methodology in place to estimate the net cost of the USO.

(33)

At this stage, according to the Spanish authorities, Correos has not formally received any USO compensation since 2011 although it has benefited from advance payments on a provisional basis for the years 2011-2017. The actual net cost corresponding to those years remains to be calculated once the new Plan de Prestación is adopted and the NAC methodology defined. The Commission will assess the USO compensations under the 2010 Postal Law in another decision.

(34)

According to Article 19(1)(b) of the 1998 Postal Law, the USP would benefit from ‘the exemption from all levying taxes on its services in the reserved area, except for the corporate tax’. Article 22(2) of the 2010 Postal Law maintained this tax exemption and extended it to the entire USO.

(35)

According to the Spanish authorities, the only tax that could possibly fall within the scope of this exemption on top of VAT would be the Tax on Economic Activities (Impuesto de Actividades Económicas, hereinafter ‘IAE’) since it is a tax levied upon the performance of an economic activity and is linked to the provision of the USO. Other taxes like the property transfer tax, construction tax, tax on the increase in the value of urban land and tax on motor vehicles do not fall within the scope of the exemption since they are not linked to the economic activity of the provision of the USO.

(36)

The Spanish authorities have explained that Correos has been partially exempted from the IAE tax as it only pays 50 % of the normal tax amount.

(37)

As regards the Real Estate Tax (Impuesto sobre Bienes Inmuebles, hereinafter ‘IBI’), the Spanish authorities explained that it is a tax that is not levied upon the provision of the USO or other postal services, but is levied on the value of real estate. Therefore, it would be outside of the scope of the two Postal Laws. However, between 2008 and 2013 Correos lodged several claims based on its interpretation of Article 19(1)(b) of the 1998 Postal Law, and Article 22(2) of the 2010 Postal Law, in which it stated that it should be exempted from the IBI for a series of offices in different municipalities. Following Correos' request for IBI exemption, several local administrations and courts ruled in favour of Correos thereby granting it a refund of taxes previously paid.

(38)

The IBI is a local tax in the Spanish tax system which is regulated by Royal Legislative Decree 2/2004 of 5 March 2004. According to Article 60 of that Royal Legislative Decree, this tax ‘is an objective direct tax imposed on the value of property under the terms laid down in this Royal Legislative Decree’. The taxable event of the IBI is entitlement to any of the rights laid down in Article 61 of Royal Legislative Decree 2/2004 over rural and urban properties and over property with special characteristics. The IBI is not imposed on any activity, but on the value of property.

(39)

Between 2008 and 2013, based on its interpretation of Article 19(1)(b) of the 1998 Postal Law, and Article 22(2) of the 2010 Postal Law, Correos introduced several claims in which it stated that it should be exempted from the IBI under the Postal Laws for a series of offices in different municipalities. Following Correos' request for IBI exemption, several Administrations and local courts ruled in favour of Correos. According to the Spanish authorities, the tax refunds effectively granted to Correos amount to EUR 752 840,50.

(40)

These courts' interpretations of both the 1998 and the 2010 Postal Laws that allowed the USP to be exempted from the IBI were rejected by the Spanish Supreme Court in 2013 following a cassation appeal from the local authorities of the province of Huesca. The Supreme Court considered in its judgment that Article 22(2) of the 2010 Postal Law should be interpreted restrictively. According to the Supreme Court, the tax exemptions laid down in that Article can only be applied to taxes imposed on activities directly linked to the provision of the USO, and, therefore, could not apply to the IBI, which is a direct tax imposed on the value of property.

(41)

The IBI exemptions granted to Correos between 2008 and 2013 were never recovered. Indeed, under the Spanish national law system the cassation appeal in favour of law (‘recurso de casación en interés de ley’) has an extraordinary and subsidiary character which aims exclusively to unifying legal doctrine and, therefore, cannot have an effect on the matter referred to in the appeal (i.e. for the case at hand, it does not have the power to annul the rulings and decisions on the tax exemptions).

(42)

The IAE was laid down in Law 39/1988 of 28 December 1988, substituted by Royal Legislative Decree 2/2004 of 5 March 2004. It follows from Article 78 of this Royal Legislative Decree that undertakings that carry out economic, business, professional or artistic activities should be subject to the tax.

(43)

According to Article 78 of Royal Legislative Decree 2/2004, IAE ‘is an objective direct tax for which the taxable event is the performance, in the national territory, of economic, business, professional or artistic activities, whether or not performed in a specific place and whether or not specified in the tax rates’.

(44)

The IAE Tariffs were laid down in Royal Legislative Decree 1175/1990 of 28 of September. They classify the postal activity under Group 847 ‘Postal services and telecommunications’ from 1999 onwards. This group includes the provision of postal services consisting of the collection, admission, classification, treatment, transportation, distribution and delivery of items of mail in all its forms. However, note 3 to Tariff Group 847 states that the Public Business Entity of Correos is entitled to pay only 50 % of the tax amount laid down for this group. According to the Spanish authorities, this means that Correos has benefited from an exemption of EUR 8 113,66 per year since 2004. The Spanish authorities have confirmed that Correos continues to benefit from the partial tax exemption laid down in note 3 to Tariff Group 847.

(45)

During the period under analysis, Correos benefited from three capital increases amounting in total EUR 48 081 000:

(46)

According to the Spanish authorities, those capital increases were part of Correos' strategic business plan for the period 2004-2006 in order to compensate for the slowing down of the postal market. The basic strategic lines of such business plan were:

(47)

Organic Law 5/1985 of 19 June 1985 on the General Electoral System (‘LOREG’), and its implementing legislation, regulate the electoral procedure in Spain, recognising the right to vote either in person or via postal ballot.

(48)

Article 22 of the 1998 Postal Law and Article 22(5) of the 2010 Postal Law provide that the State may impose certain obligations on the designated USP in the framework of electoral processes. The same Article 22(5) of the 2010 Postal Law provides that ‘the imposition of additional public service obligations shall be compensated’.

(49)

Pursuant to the First Additional Provision of the 2010 Postal Law, Correos is the designated USP and is entrusted with the obligation to provide several services in the context of the different Spanish elections (i.e. State, regional, European and municipal elections).

(50)

Correos' public service obligations in relation to the organization of electoral processes in Spain concern the following:

(51)

The Spanish authorities explained that given the time constraints related to the electoral process, Correos is obliged to prioritize the activities in recital 50 in comparison with other postal activities. The high number of items that need to be distributed, their high concentration on a few days, and the requirement to deliver most documents in person (in case of certified mail, such as the postal ballots) entail significant additional efforts. As a result, Correos has to temporarily reinforce its staff and other resources (e.g. transport, security, etc.).

(52)

Correos has received compensations (see table 2) for its different obligations in regard to the organisation of elections since 2004

Table 2

Amounts of compensation granted to Correos for organisation of elections

(53)

The Commission decided to initiate the formal investigation procedure because of its serious doubts regarding the compatibility of several measures granted to Correos since 2004:

(54)

The Commission notably expressed doubts on:

(55)

The Commission received comments from two interested parties, namely the alleged beneficiary of the aid measures Correos and another third party (hereinafter ‘the anonymous third party’) which requested that its identity is kept confidential.

(56)

According to Correos, the USO compensation granted to the company for the period 2004-2010 does not constitute State aid. In particular, Correos considers that compensation does not constitute an advantage since it fulfills the four criteria laid down in Case C-280/00 (‘the Altmark criteria’) (8). Correos contests the conclusion reached in the opening decision that the USO compensation does not comply with the third and fourth Altmark criteria.

(57)

As regards the third Altmark criterion, Correos argues that it requires that the compensation received for the provision of a public service should not exceed the net cost, which is the difference between costs and revenues plus a reasonable profit. Correos considers that the third Altmark criterion is inextricably linked to the compatibility analysis of the services of general economic interest, according to the Communication of the Commission (‘2012 SGEI Framework’) (9). In particular, Correos argues that the compensation that it received for the provision of the USO complies with the Net Avoided Cost (hereinafter ‘NAC’) methodology contained in paragraph 27 of the 2012 SGEI Framework and should thereby be considered to comply with the third Altmark criterion.

(58)

Correos explains that the Spanish methodology used to determine the compensation of Correos is based on the report which was commissioned to the consultancy company National Economic Research Associates by the Commission (NERA report) (10). According to Correos, the compensation methodology contained in the NERA report is a valid implementation of the NAC methodology.

(59)

Moreover, Correos considers that the fulfilment of the third Altmark criterion is covered by the principle of legitimate expectations. According to Correos, the Commission created legitimate expectations by means of publishing the NERA report, which recognized the NAC methodology as a valid method for calculating the compensation for the provision of the USO.

(60)

According to Correos it is irrelevant for the compliance with the third Altmark criteria that the NAC methodology was not in place until the entry into force of the 2012 SGEI Framework.

(61)

Correos also considers that the USO compensations granted to Correos comply with the fourth Altmark criteria. In the absence of a public procurement procedure, the level of compensation received would be adequate on the basis of an analysis of the costs, which a typical well-run undertaking within the same sector would incur, taking into account the receipts and a reasonable profit from discharging the public service obligation.

(62)

According to Correos, the Frontier Economics Study submitted by Spain demonstrates that the costs incurred by Correos are below those incurred by a typical undertaking of the postal sector. Correos contests the doubts raised by the Commission as regards the conclusions reached in the Frontier Economics report:

(63)

Correos also indicates that should the Commission conclude that the measure constitutes State aid, it should be considered compatible with the internal market pursuant to Article 106(2) of the Treaty.

(64)

Correos reiterates that the compensation methodology used by the Spanish authorities and contained in the NERA report is a valid implementation of the NAC methodology and should be accepted by the Commission. Furthermore, Correos considers that it has not been overcompensated for the provision of the USO for the period 2004-2010 because the compensation was calculated following the NAC methodology without including any reasonable profit.

(65)

Should the Commission conclude that the measure may involve incompatible State aid, Correos insists that the Commission should take into account the dividends paid to the State during the period 2004-2010 as a reduction of the compensation granted to Correos.

(66)

As regards the IBI tax exemption, Correos explains first that these measures should not be assessed in light of the 1998 Postal Law or the 2010 Postal Law, but with direct reference to the legislation governing each tax.

(67)

Moreover, Correos considers that the measure does not constitute State aid because it is not imputable to the State. The tax exemption is not laid down in any legal provision. Few local Tax Administrations, as well as few local Courts applied the tax exemption to 94 Correos premises out of 13 000. The Spanish Supreme Court in its judgement of 7 October 2013 concluded that Article 22(2) of the 2010 Postal Law did not include the IBI tax exemption.

(68)

Furthermore, Correos considers that the IBI tax exemption cannot be recovered since it is res judicata. Following the jurisprudence of the Union Courts (11), if the final judicial resolution has assessed the existence of State aid, the principle of res judicata should be respected. Correos considers that the judgement of the Spanish Supreme Court applies Union Law and refers to the existence of State aid. Therefore, the principle of res judicata should be respected and recovery should be prevented in the case at stake.

(69)

In addition, Correos considers that the res judicata principle should be considered as a General Principle of Union Law and that this principle should be respected when there is impossibility of recovery due to the existence of a final judgement where the existence of aid has already been determined.

(70)

As regards the IAE tax exemption, Correos argues that the partial tax exemption from IAE does not constitute State aid. In particular, Correos claims that the partial tax exemption is not selective since it is justified by the logic of the IAE tax system. According to Correos, the nature or intrinsic logic of the IAE is to tax economic activities with the aim to intervene in the production or distribution of goods and services. Correos is engaged in economic activities that consist in the production of goods and services, but it is also engaged in providing public services like the USO, which do not follow the economic purpose of the latter. This would therefore be the justification of the partial IAE tax exemption.

(71)

Furthermore, Correos considers that the partial IAE tax exemption constitutes existing aid. The IAE tax exemption has been in place before the accession of Spain to the EEC. The so-called Licence Quota, which was a modality of the Tax on Activities and Commercial and Industrial Benefits, was adopted by Decree 3313/1966 of 29 December 1966. Law 39/1988 of 28 December 1988 would replace the Tax on Economic and Commercial and Industrial Benefits in its modality of the Licence Quota with the IAE. According to Correos, there have been no substantial modifications in the taxable event since 1966.

(72)

Correos alleges that the capital injections carried out in 2004, 2005 and 2006 are compliant with the MEIP and that they do not grant an advantage to Correos.

(73)

According to Correos, the analysis of the investments undertaken due to the capital injections between 2004-2006 demonstrate that the Spanish State carried out the capital injections in its role as shareholder and that those investment could have been undertaken by any private investor.

(74)

Correos argues that the capital injections respond to the need for Correos to make investments above the average level of investment of the company. The aim of the capital injections is stated in the report of Correos' appearance before the Congress of Deputies (‘el Congreso de los Diputados’) on 4 October 2005. The report makes a link between the capital injections and the need of carrying out new investments in the company. The aim of the capital injections was to carry out a modernization process within Correos, increasing the efficiency and quality of the services provided by the company.

(75)

Correos argues that the profitability of the investment demonstrates that any private investor would have carried out a similar investment as the internal rate of return of the capital injections was above the cost of capital of Correos.

(76)

Moreover, Correos argues that the compliance with the MEIP does not necessarily require a precise profitability assessment ex-ante when applied to the situation of the shareholder of a SGEI provider like the USO. Such shareholder would necessarily have to factor in the obligation to deliver the SGEI of the company in its considerations to make or not to make an investment.

(77)

In such circumstances, it would be sufficient to show on the basis of objective and verifiable evidence that a private investor faced with the same public service obligation would have acted in the same way.

(78)

According to Correos this is the conclusion reached by the Court of Justice in cases Chronopost I (12) and Chronopost II (13), where it was accepted that the internal rate of return calculated ex post was an appropriate means to determine whether the capital injection was MEIP conform.

(79)

Correos claims that the distribution of electoral material of political candidates in the context of the organization of elections should be considered to be part of the prerogatives of the State.

(80)

In particular, Correos argues that the distribution of electoral material is an essential function of the State because it is part of the general electoral regime, it is related to the constitutional role of political parties, and because Correos' personnel, when carrying out this activity, is acting in its role of civil public servant.

(81)

According to Correos, the distribution of electoral material by political candidates due to its aim, nature and regulation, is therefore inextricably linked to the exercise of public authority by the State. Therefore, it is not an economic activity and Correos should not be considered an undertaking within the meaning of Article 107(1) of the Treaty.

(82)

Even if it were considered by the Commission that the distribution of electoral material of political candidates is an economic activity, Correos considers that it does not constitute a selective advantage granted to Correos. This activity is entrusted to Correos by the State because is the only postal operator capable of providing a service with the required characteristics and quality of the service. When it comes to the distribution of electoral material of political candidates, Correos is therefore not in a comparable legal and factual situation with any other undertaking of the postal sector.

(83)

Even if it were concluded by the Commission that the measure constitutes State aid, Correos claims that the measure should be considered existing aid. The existence of a reduced tariff for political candidates to send electoral material has been in place since 1977 where the elections of 15 June 1977 took place. The elections of 15 June 1977 where organized by royal Decree 20/1997 of 18 March 1977, which established for the first time a special tariff for the distribution of electoral material.

(84)

Correos explains that the exact amount of the reduced tariff (one peseta which is equivalent to EUR 0,006) was further regulated in a ministerial order of 1977. According to Correos, this reduced tariff has been in place since then. The Spanish Supreme Court in its judgement of 2 October 2006 (14) concluded that the reduced tariff in place for the distribution of electoral material relating to political candidates still in place was one peseta (EUR 0,006).

(85)

Royal Decree 20/1977 was later on superseded by Organic Law 5/1985 of 19 June 1985 on the General Electoral System (‘LOREG’), which contained the same wording relating to the reduced tariffs for the distribution of electoral material concerning political candidates.

(86)

In the event that the Commission concludes that the measure constitutes State aid, Correos also considers that it should be declared compatible with the internal market.

(87)

First, the measure at stake constitutes a genuine service of economic interest. Both Article of the 1998 Postal Law and Article 22(5) of the 2010 Postal Law recognize the provider of the USO might be entrusted with obligations related to the distribution of electoral material with the aim to safeguard the correct development of electoral processes. In addition, Article 22(5) of the 2010 recognises that such entrustment should be subject to compensation.

(88)

Correos considers that the measure is compatible pursuant to the 2012 SGEI Decision (15). Correos explains that the 2012 SGEI Decision would be applicable since the average annual compensation granted to Correos would be below EUR 15 million.

(89)

The anonymous third party agrees with the preliminary conclusions reached by the Commission in the opening decision as regards the following measures:

(90)

The anonymous third party also agrees explicitly that the ongoing investigation should focus on the measures listed in recital 89.

(91)

It however brings to the attention of the Commission several measures which have not been addressed by the Commission in the 2016 opening decision and which in its view would also need to be assessed.

(92)

According to the anonymous third party (16):

(93)

Spain considers that the measure does not constitute State aid pursuant to Article 107(1) of the Treaty. In particular, the Spanish authorities argue that the measure does not grant an economic advantage to Correos because the USO compensations comply with the criteria laid down in the Altmark judgement (19). The Spanish authorities also explain that the measure at hand was not notified because they considered that it complied with the criteria set out in the Altmark judgement.

(94)

The Spanish authorities argue that the measure meets the third Altmark condition, which requires that the USO compensation does not exceed the net cost (i.e. the costs minus the relevant revenues plus a reasonable profit) of the public service obligation. Spain argues that it has implemented a valid compensation methodology which would correspond to the net avoided cost methodology prescribed by Directive 2008/6/EC. The Spanish authorities argue that the methodology that they used resulted from the NERA report, which was commissioned to the consultancy company National Economic Research Associates by the Commission. According to Spain, the compensation methodology contained in the NERA report is a valid implementation of the NAC methodology. The Commission errs in assuming that the overcompensation, including in the Altmark context, can only be calculated using the cost accounting methodology, leading to the conclusion that Correos in the period 2004-2010 exceeded what can be considered to be necessary to cover all or part of the costs incurred in the discharge of its USO.

(95)

The Spanish authorities also argue that the measure complies with the fourth Altmark criterion. The fourth Altmark criterion requires that in the absence of a public procurement procedure, the level of compensation received be adequate provided the analysis of the costs, which a typical undertaking, well-run and adequately provided within the same sector would incur, taking into account the receipts and a reasonable profit from discharging the public service obligation. According to the Spanish authorities, the comparison can only be done with undertakings of the same sector, in this case, the postal sector. Spain contests the doubts raised by the Commission regarding the conclusions reached in the Frontier Economics report which argued that the measure was compliant with the fourth Altmark criteria. According to Spain, the Commission did not demonstrate that the postal operators from Greece and Italy were inefficient in any Commission decision. In addition, Spain considers that it is not relevant for the compliance with the fourth Altmark criteria that the study was carried out ex-post. The Commission in previous decisions did not consider that an ex-post study would constitute an obstacle for accepting the fourth Altmark criterion. In particular, Spain refers to Commission decision of 21 October 2008 regarding Poste Italiane (20). In addition, according to Spain, settled case-law has accepted reports carried out ex-post. In particular, Spain refers to case Chronopost-La Poste (21), where the General Court accepted a report drafted ex-post.

(96)

The Spanish authorities consider that should the measure be qualified as State aid, it should declared compatible with the internal market pursuant to 106(2) of the Treaty. In particular, Spain considers that the measure complies with the compatibility criteria of the 2012 SGEI Framework.

(97)

The Spanish authorities contest the doubts raised by the Commission relating to the completeness of the entrustment act specifying the public service obligations and the methods of calculating the compensation. According to the Spanish authorities, the entrustment act might be constituted by one or various binding legal act. The Member State is free to choose the specific form of that entrustment act. In addition, it would not be necessary that it contains a specific reference to the term ‘entrustment act’. In particular, the Spanish authorities consider that the measure complies with the requirement of paragraph 16 (e) of the 2012 SGEI Framework, whereby the entrustment act should contain the arrangements for avoiding and recovering any overcompensation. This was demonstrated by the fact that the excessive compensation granted in 2005 was subsequently recuperated in subsequent years.

(98)

As regards the possibility of using the net avoided cost as methodology for calculating the compensation, the Spanish authorities argue that paragraph 69 of the 2012 SGEI Framework lays down no obligation to apply the net avoided cost methodology; it does not prohibit Member States from using this methodology. In addition, paragraph 184 of the Guide to the application of the Union rules on state aid, public procurement and the internal market to services of general economic interest, and in particular to social services of general interest (22) clarifies that the aim of the non-applicability of the NAC methodology laid down in paragraph 69 of the 2012 SGEI Framework is not to impose an extra burden to Member State for those measures that existed before the obligation to use the NAC methodology. Therefore, the Spanish authorities consider that the NAC methodology, as implemented by Spain, is a valid one that legally can be used for calculating the compensation granted before 2012.

(99)

As explained in recital 94, the Spanish authorities consider that the Spanish methodology for calculating the compensation of the provision of the USO, and which was based on the NERA report, equates to the net avoided cost methodology. The Spanish authorities consider that it is irrelevant in this respect that the Spanish methodology does not contain efficiency incentives and intangible benefits since these two criteria did not exist at the time that Spain implemented the methodology. These criteria were introduced later on by Directive 2008/6/EC and the 2012 SGEI Framework.

(100)

The Spanish authorities contest the methodology and the criteria applied by the Commission regarding the reasonable profit in the 2016 Opening Decision. The Spanish authorities argue that there should not be a reasonable profit benchmark applicable to all postal operators and that it should be assessed on a case-by-case basis. The reasonable profit benchmark applied by the Commission in the bpost Commission decision of 25 January 2012 (23) should not be set out as a reference for other postal operators. First, bpost case differs considerably from the situation of Correos, insofar as bpost case did not relate to the provision of the USO, but to other SGEIs. Second, the Commission has not applied consistently the reasonable profit benchmark set out in the bpost Decision since it has allowed higher benchmarks in other Commission decisions (24).

(101)

As regards the tax exemption from IBI, the Spanish authorities explain that the 1998 Postal Law and 2010 Postal did not exempt Correos from the IBI. However, certain Spanish courts, when interpreting the provisions of the 1998 Postal Law and 2010 Postal Law, considered that the IBI tax exemption was applicable to Correos. The Spanish authorities explain that the tax exemption was applied in very limited occasions. In fact, it was effectively applied in 94 Correos premises out of 13 000.

(102)

The Spanish authorities consider that the tax exemptions cannot be imputable to the State because they stem from the Spanish Courts that ruled the refunding to Correos of IBI taxes previously paid by the company.

(103)

As regards the tax exemption from IAE, the Spanish authorities consider that the IAE tax exemption should be considered existing aid. The IAE tax exemption would have been in place before the accession of Spain to the EEC. According to the Spanish authorities, the IAE tax exemption dates back to 1966 when the tax on Activities and Commercial and Industrial Benefits was adopted by Decree 3313/1966 of 29 December 1966. Law 39/1988 of 28 December 1988 replaced the Tax on Economic and Commercial and Industrial Benefits in its modality of the Licence Quota with the Tax on Economic Activities (IAE). According to Spain, this tax did not undergo substantial modifications since 1966 notwithstanding the fact that Correos enjoyed full exemption when it was an administrative body due to its nature.

(104)

The Spanish authorities consider that the capital injections carried out in 2004, 2005 and 2006 do not involve State aid because they comply with the MEIP.

(105)

They emphasise that the capital injections were preceded by ex ante economic evaluations, comparable to those which any private investor would have carried out. The capital injections were foreseen in the multiannual action plans approved by the State acting as shareholder and included in the State General Budgets, which in turn reflected the company's strategic plans drawn up in order to expand its business in areas with better prospects and to improve its efficiency, in the context of a pronounced slowdown in the postal market.

(106)

Specifically, the strategic plans for the period 2001-2006 put in place actions to complete the process of modernising the undertaking, pursuing the following objectives:

(107)

According to the Spanish authorities, achieving those objectives called for the company to be equipped with additional resources in order to make the necessary investments. Having analysed the undertaking's strategy, the shareholder resolved to grant three capital increases totalling EUR 48,08 million, each of EUR 16,027 million, to be applied in the financial years 2004, 2005 and 2006. That increase in capital was seen as a key element in achieving the profitability ratios forecast in the company's action plans and reflected in the evaluations carried out by the sole shareholder. The capital increases were in fact dictated by the need to make investments which were ‘incremental’ or additional to those the company was making habitually.

(108)

The Spanish authorities further argue that the evaluation was embodied in a framework of business prospects and results associated with the capital increase, drawn up with a horizon of five years, a reasonable period for assessing whether the business investment decisions were satisfactory. Those projections were reflected in the multiannual action plans (MAPs), which in turn were incorporated into the State General Budgets. The MAP approved in the 2004 financial year showed growth of 3,6 % in annual turnover and an improvement in net profits with average profits of around 5 % a year, all compared with a static scenario of no capital increase. Those results were obtained on the basis of an equal number of capital disbursements in 2004, 2005 and 2006, thereby enabling implementation of the lines of action envisaged in the strategic plans as far as investment was concerned.

(109)

The forecasts included in the MAP and incorporated into the State General Budget would be fully comparable with those a market economy private investor would have made. They are the basis on which the State, in its capacity as shareholder, relied when it resolved to perform three increases in the company's share capital totalling EUR 48 081 000.

(110)

Those forecasts, made ex ante, are shown in table 3.

Table 3

2004 MAP

(111)

The Spanish authorities explain that the MAPs are sound ex ante analyses of economic and financial projections. The forecasts they contain show levels of returns equivalent to those which a private investor would have required, with the effect that the decision to increase the share capital, to enable the company to make the investment necessary to achieve the forecast profits, is fully justified. Those margins of return would have led any private investor, according to the Spanish authorities, to make a similar decision.

(112)

Spain indicates that it passed the resolution to increase the share capital and disburse EUR 16,027 million on 13 December 2004, based on the MAP for the 2004 financial year with the favourable financial projections shown in Table 1. Similarly, the shareholder passed the decisions relating to successive increases on 5 December 2005 and 29 December 2006 respectively, likewise on the basis of the corresponding MAPs. Spain also indicates that the actual evolution of the parameters used in the MAPs clearly improved on the financial projections, as can be seen in the table 4.

Table 4

Actual results

(113)

To supplement the foregoing, the Spanish authorities have also provided a private investor test carried out ex-post by Ernst & Young, which concludes that the Internal Rate of Return (hereinafter ‘RR’) of the capital increases examined was 9,29 %, and the market cost of capital of that investment was 7,87 % at the time of the investment.

(114)

In this respect, the Spanish authorities consider that the remarks made by the Commission in the 2016 Opening Decision, based on the Commission v EDF case (25), on the need to carry out the profitability analysis before the investment in question, fail to take into account that an ex ante economic evaluation was carried out, the private investor test contained in the report serving as supplementary evidence for ratifying the validity of the MEIP used.

(115)

The Spanish authorities dispute more fundamentally the relevance of the Commission v EDF ruling in the present case because EDF was operating under normal market conditions while Correos was entrusted with the USO. The Spanish authorities argue that when analysing the measures adopted in relation to a public undertaking operating in a sector with a USO, an ex post profitability analysis cannot be deemed to be invalid, because delivery of the general economic service is not governed by strictly commercial logic, and it is necessary in that case to take into account all the objective and verifiable data available.

(116)

Following this logic, the Spanish authorities consider that a more relevant jurisprudence would be cases Chronopost I (26) and Chronopost II (27) where the Court of Justice of the European Union endorsed the analysis made by the Commission in Decision 98/365/EC (28) in the two judgments it delivered as a result of the corresponding appeals against that decision. In that decision, the Commission had assessed whether the behaviour of the French postal operator (La Poste) as a shareholder of SFMI-Chronopost, was justified in commercial terms in accordance with the criteria of a market economy private investor and had compared the IRR of the capital injections made by the State in favour of La Poste and its cost of equity on an ex-post basis.

(117)

The Spanish authorities finally explain that should the Commission refuse that the capital injections fulfil the MEIP, they should be considered in the light of Article 106(2) of the Treaty because they represent resources dedicated to covering the public service, and were not under any circumstance operating aid, neither by reason of the destination of the funds nor by their nature.

(118)

The Spanish authorities consider that the distribution of electoral material by Correos does not constitute State aid within the meaning of Article 107(1) of the Treaty. All activities carried out by Correos in the context of the organization of elections, and in particular the distribution of electoral propaganda concerning political candidates, are not economic activities since they constitute a prerogative of the State.

(119)

In particular, as regards the distribution of electoral propaganda of political candidates, the Spanish authorities contest the conclusions reached in the opening decision that the measure is an economic activity. The Spanish authorities claim that the State has not introduced market tools to ensure that all voters receive electoral propaganda of political candidates. An electoral procedure is composed of a number of activities, all of them necessary and intertwined, which aim at ensuring the fundamental right of voting. Therefore, this activity should be considered to be a prerogative of the State.

(120)

The Spanish authorities consider that should the measure constitute aid, it would be existing aid since it predates the accession of Spain to the European Economic Community in 1986. The compensation granted to electoral candidates for the distribution of electoral material has been in place since 1977 without undergoing any substantial modifications. Article 44(3) of Royal Decree-Law 20/1977 of 18 March 1977 relating to Electoral Provisions laid down that a Ministerial Order would set out the special postal tariffs to be applied to electoral material sent by political candidates. Ministerial Order of 3 March 1977 and Ministerial Order of 4 May 1977 set out the fixed tariff of one peseta for letters up to 50 grams, which has remained unaltered since then.

(121)

Article 53 Organic Law 5/1985 of 19 June 1985 on the General Electoral System reiterated the obligation to fix by Ministerial Order the special tariff to be charged to political candidates for sending electoral material. Article 1 of the Ministerial Order of 13 October 1985 declared that the special tariffs of the Ministerial Order of 3 May 1977 were still applicable. Later on, Article 1 of Ministerial Order of 30 April 1986 established that the special tariffs laid down in Article 1 of the Ministerial Order of 30 October 1985 were still applicable, that is, the special tariffs of the Ministerial Order of 3 May 1977. Article 12 of Royal Decree 605/1999 of 6 of April 1999 and the 1998 and 2010 Postal Laws did not alter the special tariff applicable to political candidates, which is currently lay down in Article 59 of Organic Law 5/1985 of 19 June 1985 on the General Electoral System and which refers to the special tariffs laid down in the Ministerial Order of 3 March 1977.

(122)

Furthermore, the Spanish authorities allege that should the measure be considered State aid it should be declared compatible with the internal market pursuant to Article 106(2) of the Treaty.

(123)

Given the limitation period of 10 years contemplated in the opening decision (14 February 2004 - 14 February 2014), the Spanish authorities allege that the period under scrutiny should be 2004-2012 since in 2013 there were no elections.

(124)

The entrustment of the service of general economic interest during the period 2004-2011 was laid down in Ministerial Orders, which included the content, scope and duration of the public service obligation. The entrustment of the service of general economic interest to Correos during the years 2011 and 2012 was laid down in an Agreement of the Council of Ministers for each election. These Agreements indicate the nature, content, scope and duration of the service of general economic interest. Moreover, the table 5 shows that, in any event, the total compensation which Correos received for delivering election material during the elections held from 2004 until 2012 did not exceed the costs incurred.

Table 5

Undercompensation of Correos for the delivery of the electoral material

(125)

Firstly, the Spanish authorities point out that the complainant whose letter gave rise to these proceedings has not submitted observations on the 2016 Opening Decision. The Spanish authorities take note that the only third parties which submitted observations are Correos y Telégrafos, S.A. and an anonymous party representing the parcel delivery sector as can be deduced from the content of the comments made.

(126)

The Spanish authorities refer to their comments made on the 2016 Opening Decision on a number of issues for which the anonymous third party does not provide any specific additional argument.

(127)

In addition, the Spanish authorities provide some additional comments on the following issues

(128)

The Spanish authorities consider that the request for the investigation to be extended to the time-barred period is inadmissible and inconsistent since, in accordance with settled Court of Justice case-law, the Commission only subjects measures that raise serious doubts of compatibility to the formal investigation procedure under Article 108(2) of the Treaty, provided that these measures were carried out outside the ten-year limitation period. The Spanish authorities also note that the anonymous interested party has recognized this legal point in its own comments which mention that ‘It is clear that these amounts cannot be the subject of the investigation procedure, since the time limitation period for review has expired’.

(129)

The Spanish authorities also consider that the request for the investigation to be extended to the period after 2010 is unjustified since the Spanish State confined itself to making advances from the State General Budget which will be adjusted once the net cost has been determined, after the new Plan de Prestación has been notified and the European Commission has given an opinion on it.

(130)

The Spanish authorities consider that the third party implicitly recognises that the net cost cannot be determined until the new Plan de Prestación has been adopted since it refers in its comments to the notes to Correos' annual accounts for 2014 which state: ‘A Resolution by the CNMC (29) on a calculation of the net cost of the UPS in 2011, 2012 and 2013 different from the calculation in the State General Budget might possibly have an impact on the amounts entered in the accounts. It would not be possible to calculate this final impact until the entry into force of the new Plan de Prestación, which will establish the methodology and components for calculating the net cost’.

(131)

As regards the VAT exemption, the Spanish authorities explain that it is laid down in Spanish legislation in full conformity with the provisions of the EU Directive regulating this matter. The Spanish authorities also explain that the condition of imputability is not met if a national measure transposes a Community act that is not subject to any margin of discretion, as ruled in the Court of Justice judgment of 23 April 2009 in Case C-460/07 (Puffer) (30).

(132)

The Spanish authorities deny that Correos may have benefited from aid to finance its publicity and communication campaigns.

(133)

In particular, the Spanish authorities clarify that the related Institutional Publicity and Communication Plans mentioned by the anonymous third party as an indication of such support includes all the activities carried out by the bodies of the General State Administration as well as public undertakings, in this field for statistical purposes but that the Correos publicity costs mentioned in these plans have always been covered by the company resources.

(134)

The Spanish authorities explain that, as indicated in the Plan itself, the Institutional Publicity and Communication Commission, an administrative collegiate body, includes in the Plan all the institutional campaigns to be conducted by the State General Administration and related bodies. Like any other public undertaking, Correos y Telégrafos, S.A. draws up its own publicity plans financed from its own resources, and includes them within that Plan merely for statistical purposes.

(135)

The Spanish authorities agree with the observations made by Correos y Telégrafos, S.A.

(136)

The Spanish authorities react to the request made by Correos in its written observations that the dividends distributed should be assigned to a reduction in the excess compensation indicated in the 2016 Opening Decision by reiterating that so far no proof has been provided on the existence of such overcompensation.

(137)

However, Spain also reiterates its comments stressing the need to take account of the payment of dividends for the purposes of reducing any potential aid that might be identified at the end of the formal investigation procedure. These extraordinary and non-recurring dividends granted by Correos to the State should, according to the Spanish authorities, be taken into account for the purposes of calculating the public resources made available to Correos, in accordance with the Statsbaner decision of the Commission (31).

(138)

While reiterating that the USO compensations granted over 2004-2010 to Correos do not entail State aid and if they do such aid should be considered compatible, the Spanish authorities consider that even accepting the Commission approach in the 2016 Opening Decision to use the cost allocation methodology (32), a potential overcompensation could only be calculated following the premises below:

(139)

First, the reserved area and non-reserved area should be treated separately: the Reserved area corresponds to USO postal services delivered under a monopoly; the Non-reserved area comprised the USO postal services Furthermore, the compensation in the reserved area followed a method whose results fully matched the cost allocation one, whereas the Non-reserved area applied a NAC approach, the compensation being calculated and determined separately for each area. Thus, these areas should be considered as two distinct SGEIs subject to separate assessments and to different compensation methodologies. Under the Spanish methodology, the compensation for the reserved area corresponds to its accounting net cost (overall costs minus revenues), whereas the compensation for the non-reserved is calculated under a NAC approach covering the results of the losses of the loss-making segments of the non-reserved area under the assumption that any private operator would discontinue them in the absence of public service obligations.

(140)

According to this reasoning, out of a total of approx. EUR 955,237 million of total USO compensation granted to Correos over 2004-2010 approximately EUR 637,850 Million (the accounting loss of the reserved area) would be allocated to the reserved area and EUR 317,387 million (the remainder) to the non-reserved area (see table 6).

Table 6

Compensations for USO Reserved and Non Reserved area

(141)

The Spanish authorities consider that the two compensations should then be assessed separately leading to a different result from the one reached by the Commission in the 2016 Opening Decision.

(142)

The Spanish authorities suggest to assess the compensations to the USO reserved area using the cost allocation methodology and a Return on Sales (33) (hereinafter ‘ROS’) benchmark of 4,8 % ROS (the benchmark applied in the bpost case for low risk entrustments).

(143)

Such an approach results in clear under-compensation of Correos for this SGEI since aid granted for the USO reserved area corresponds exactly to its net accounting cost as illustrated by table 7, under-compensation amounting to the reasonable profit not accounted for.

Table 7

Under-compensation of the USO reserved area

(144)

The Spanish authorities explain that given that Correos is undercompensated for the delivery of the USO reserved services and that the other conditions of the 2012 SGEI Framework are complied with, the compensation allocated to the USO Reserved area should be considered compatible.

(145)

The Spanish authorities consider that as regards the USO non-reserved services, the benchmark used in the bpost case for high risk entrustments can be applied.

(146)

However, under such an assumption, the Spanish authorities recognize that the USO non-reserved area would exhibit a negative net cost in every year, that is, a net profit which would not allow for any compensation as illustrated by table 8.

Table 8

Overcompensation of the USO Non Reserved area

(147)

Under this approach, the compensation allocated to the USO non-reserved area could be considered incompatible to the extent that it overcompensated Correos. However, the Spanish authorities also underline that dividends should be taken into account as having de facto reduced the amount of compensation granted to Correos as explained in recitals 148 to 152.

(148)

The Spanish authorities explain that Correos has paid dividends over 2004-2010 (see Table 9).

Table 9

Dividends paid by Correos

(149)

The Spanish authorities explain that these dividends should not be seen primarily as a shareholder remuneration as they have rather played the role of an implicit claw-back mechanism allowing the Spanish authorities, in the particular circumstances of this case, to reduce potential over-funding by recovering resources from the company. The State, acting in its capacity of budgetary authority, decided to include such dividends in each State General Budget adopted in the period 2005-2008 to address potential over-funding identified in the previous year to the one when such budgetary decisions were taken. No such provision was adopted in 2009 and 2010, as forecasts pointed to company losses in those years.

(150)

First, the Spanish authorities explain that the decision to pay dividends is imputable to the Spanish State, as a public authority, rather than to Correos management. In this respect, the Spanish authorities explain that:

(151)

Second, the Spanish authorities explain that circumstances were such that the dividends were the only practical way to modulate the potentially excessive funding in certain years for the following reasons: