I. Italian law

A. The Stability Law for 2016

B. Decree No 9/2016

C. Decree No 264/2016

D. The instrument of transfer

E. Decree-Law No 50/2017

II. The facts, the main proceedings and the questions referred for a preliminary ruling

III. Analysis

A. The allocation of EUR 70 million

1. An intervention by the State or through State resources

2. Effect on trade between Member States

3. Selective advantage conferred on the recipient

4. Distortion of competition, or threat thereof

B. The transfer to FSI of the MIT’s shareholding in FSE

1. An intervention by the State or through State resources

2. Effect on trade between Member States

3. Selective advantage conferred on the recipient

(a) Was an advantage conferred on FSI?

(b) Was an advantage conferred on FSE?

4. Distortion of competition, or threat thereof

IV. Conclusion

1. 

The dispute in the present case arose from measures taken in 2016 by the Italian State, whereby a large, non-repayable subsidy was granted to the State-owned operator of local railway infrastructure and provider of local passenger transport services, on account of its serious financial situation. Moreover, the State’s entire shareholding in that operator was transferred, for no consideration, to the State-owned operator of the national railway infrastructure, subject to an undertaking by the latter to restore the financial viability of the transferred company. The legality of those measures was challenged by other providers of local passenger transport services that had expressed, in vain, an interest in the transfer. The Consiglio di Stato (Council of State, Italy) asks the Court whether those measures constitute State aid.

2. 

This case presents the Court with the opportunity to provide guidance on the notions of advantage and distortion of competition for the purpose of classifying State intervention as State aid. One question which must be answered by the Court is whether an advantage was conferred on the acquirer although it undertook to restore the viability of the local operator, and whether the beneficiary of the transfer is the acquirer (if the viability of the transferred company can be restored and it becomes profitable again) or the transferred company (which benefits from the acquirer’s undertaking to restore its viability). Another question before the Court is whether the circumstance that the beneficiary (or beneficiaries) of aid operates on markets that are subject to legal monopolies — and, therefore, not open to competition — precludes a finding that the aid is liable to distort competition.

3.

In Article 1(867) of the Stability Law for 2016, ( 2 ) the Italian State provided that Ferrovie del Sud Est e Servizi Automobilistici Srl (‘FSE’) was to be put into administration on account of its ‘serious financial situation’. This was to be implemented by decree of the Ministro delle Infrastrutture e dei Trasporti (Minister for Infrastructure and Transport, Italy) (‘the MIT’).

4.

The second and fifth sentences of Article 1(867) of the Stability Law for 2016 called upon the Special Commissioner, respectively, to ‘prepare a business plan for restructuring’ focused on reducing operating costs, and to submit proposals to the MIT for ‘the transfer or disposal [of FSE] according to criteria and procedures defined by decree’ of the MIT. Moreover, the sixth and last sentence of Article 1(867) of the Stability Law for 2016 provides that ‘pending the implementation of the aforementioned restructuring plan, for the purpose of ensuring the continued operation of [FSE], the expenditure of [EUR 70 million] is authorised for 2016’.

5.

Article 6 of Decree No 9/2016 ( 3 ) provided that FSE was to be put into administration and established that the EUR 70 million allocated under the Stability Law for 2016 were intended as an increase in FSE’s capital, which could be used even without prior authorisation by the public shareholder ‘in order to ensure the continuity and regularity of the public service provided [by FSE] by taking all necessary measures to ensure business continuity and to restore the economic and financial balance of [FSE]’.

6.

Decree No 264/2016 ( 4 ) provided that the entire shareholding held by the MIT in the capital of FSE was to be transferred to Ferrovie dello Stato Italiane SpA (‘FSI’), a company wholly owned by the Ministero dell’Economia e delle Finanze (Ministry of Economic Affairs and Finance, Italy) (‘the MEF’).

7.

The acquirer was selected on the basis of the criteria listed in Article 1(1) of Decree No 264/2016, namely: (a) ‘the efficiency of public shareholdings in the context of a reorganisation within a single economic entity held by the same owner (State body)’; (b) ‘the possession, by the acquirer, of industrial capacity and assets sufficient to ensure the continuity of employment and service and to provide a guarantee for creditors …’; and (c) ‘the restructuring of the company, account being taken of the negative net equity of [FSE]’.

8.

In view of those criteria, Article 2(2) of Decree No 264/2016 stated that the transfer to FSI would be ‘for no consideration’.

9.

By instrument of 28 November 2016 certified by a notary (‘the instrument of transfer’), the MIT transferred to FSI its entire shareholding in the capital of FSE.

10.

By memorandum of the same day (‘the ministerial memorandum’), the MIT established that the conditions laid down in Article 1(1) of Decree No 264/2016 were met. In particular, according to that memorandum, FSI had undertaken to remedy the situation of asset imbalance in FSE. Still according to the ministerial memorandum, the Autorità Garante della Concorrenza e del Mercato (Competition and Market Authority, Italy) (‘the AGCM’) had decided not to initiate the investigation procedure provided for by Article 16(4) of Law No 287/1990 ( 5 ) in connection with the transfer.

11.

Furthermore, the ministerial memorandum states that the allocation of EUR 70 million provided for by Article 1(867) of the Stability Law for 2016 ‘must be used — subject to an exclusive restriction on utilisation — to cover the financial requirements of [FSE]’s rail infrastructure, in accordance with EU legislation’.

12.

Following the transfer, Article 47(7) of Decree-Law No 50/2017 ( 6 ) replaced the last sentence in Article 1(867) of the Stability Law for 2016 with the following wording: ‘Without prejudice to the obligations laid down in this paragraph, the expenditure of EUR 70 million shall be authorised for 2016. The corresponding resources shall be transferred to the capital of [FSE], to be used, in accordance with [EU] rules in this matter and in relation to the plan for the restructuring of the company, only to cover the liabilities, where applicable pre-existing, and financial requirements of the infrastructure sector. The acts, measures and operations already implemented under [Decree No 264/2016] shall be unaffected.’

13.

FSE, an undertaking at the time fully owned by the MIT, operates a railway infrastructure owned by the Regione Puglia (the Apulia region, Italy) and provides public rail passenger transport services and related road transport services in an area of Apulia (in Salento).

14.

On account of its serious financial situation, FSE was put into administration by the Italian State, pursuant to Article 1(867) of the Stability Law for 2016 and Decree No 9/2016. The Italian State also authorised the allocation of EUR 70 million to guarantee the continued operation of the services operated by FSE pending the implementation of the restructuring plan.

15.

On 4 August 2016, Decree No 264/2016 provided that the entire shareholding held by the MIT in the capital of FSE was to be transferred to FSI, an undertaking wholly owned by the MEF and the holding company of a group that (through Rete Ferroviaria SpA, a subsidiary of FSI) operates the national railway infrastructure and (through Trenitalia SpA [‘Trenitalia’], a wholly owned subsidiary of FSI) provides transport services for passengers and goods, by rail and by road. The transfer was for no consideration. It was subject to the undertaking, by FSI, to remedy the situation of asset imbalance of FSE. No competitive tender was held for the selection of the acquirer of FSE.

16.

On 12 October 2016, pursuant to Articles 20 and 21 of Law No 287/1990, the AGCM notified the Italian Government of the planned transfer of the MIT’s shareholding in FSE and the allocation of EUR 70 million because, in its view, that operation could constitute State aid. ( 7 )

17.

Arriva Italia Srl (‘Arriva Italia’), Ferrotramviaria SpA (‘Ferrotramviaria’) and Consorzio Trasporti Aziende Pugliesi (CO.TRA.P) (‘Consorzio Trasporti Aziende Pugliesi’), all of which operate in the sector of public rail and road transport, had expressed an interest in acquiring FSE. On 24 October 2016, those companies brought an action for annulment of Decree No 264/2016 before the Tribunale Amministrativo Regionale per il Lazio (Regional Administrative Court, Lazio, Italy). They argued that the allocation of EUR 70 million and the transfer of the shareholding in FSE constituted State aid, and that, in failing to notify the Commission of such measures and in implementing them, the Italian State acted in breach of Article 108(3) TFEU.

18.

On 21 November 2016, the AGCM, in the exercise of its power to authorise concentrations, decided not to initiate the investigation procedure under Article 16(4) of Law No 287/1990 in connection with the notification of the transfer to FSI of the MIT’s shareholding in FSE. ( 8 )

19.

On 28 November 2016, the transfer was implemented by means of the instrument of transfer mentioned in point 9 above.

20.

In January 2017, FSE filed an application with the Tribunale di Bari (District Court, Bari, Italy) seeking admission to an arrangement with creditors.

21.

By judgment of 31 May 2017, the Tribunale Amministrativo Regionale per il Lazio (Regional Administrative Court, Lazio) dismissed the action brought before it.

22.

Arriva Italia, Ferrotramviaria and Consorzio Trasporti Aziende Pugliesi lodged an appeal before the Consiglio di Stato (Council of State).

23.

The Consiglio di Stato (Council of State) stayed the proceedings and referred the following questions to the Court for a preliminary ruling:

24.

Written observations were submitted collectively by Arriva Italia, Ferrotramviaria and Consorzio Trasporti Aziende Pugliesi, FSI, the Italian Republic, the Republic of Poland and the European Commission also submitted written observations. These parties, with the exception of the Republic of Poland, presented oral argument at the hearing on 8 May 2019.

25.

As requested by the Court, I will limit myself in this Opinion to examining the first question referred.

26.

By that question, the referring court asks the Court of Justice, in essence, whether the statutory allocation of EUR 70 million to a local operator in the rail transport sector, in accordance with the conditions laid down by the Stability Law for 2016, as amended by Decree-Law No 50/2017, and the subsequent transfer of that local operator to the State-owned operator of the national railway infrastructure, without a competitive tender procedure and for no consideration, constitute State aid within the meaning of Article 107(1) TFEU.

27.

I will assess, first, whether the allocation of EUR 70 million constitutes State aid, and, second, whether the transfer to FSI of the MIT’s shareholding in FSE constitutes State aid. ( 10 )

28.

As mentioned above, Article 1(867) of the Stability Law for 2016 authorised the allocation of EUR 70 million for the benefit of FSE.

29.

According to case-law, classification of a national measure as ‘State aid’ requires all of the following conditions to be fulfilled. First, there must be an intervention by the State or through State resources. Second, the intervention must be liable to affect trade between the Member States. Third, it must confer a selective advantage on the recipient. Fourth, it must distort or threaten to distort competition. ( 11 )

30.

I will examine below whether each of these conditions is met.

31.

According to case-law, for it to be possible to classify advantages as State aid within the meaning of Article 107(1) TFEU, they must be granted directly or indirectly through State resources and be attributable to the State. ( 12 )

32.

As regards, first, the condition regarding the commitment of State resources, it is settled case-law that the concept of ‘aid’ embraces not only positive benefits, such as subsidies, but also measures which, in various forms, mitigate the charges which are normally included in the budget of an undertaking and which, therefore, without being subsidies in the strict sense of the word, are similar in character and have the same effect. ( 13 )

33.

In the present case, there is no doubt that the allocation of EUR 70 million must be considered to be a transfer of State resources since that expenditure was authorised by a finance law, namely the Stability Law for 2016, and it is, as stated by the referring court, to be charged to the State budget.

34.

As regards, second, the condition that the measure is attributable to the State, it is necessary to examine whether the public authorities were involved in the adoption of that measure. ( 14 )

35.

In the present case, they were, given that the allocation of EUR 70 million was authorised by Article 1(867) of the Stability Law for 2016, as modified by Article 47(7) of Decree-Law No 50/2017.

36.

However, before it can be concluded that the allocation of EUR 70 million meets the first condition in point 29 above, it is necessary to examine the objection raised by the referring court, which doubts that the aid may be regarded as granted because there is no evidence of a cash outflow from the State budget and the allocation of EUR 70 million does not appear to have been paid.

37.

I note that, according to case-law, aid must be considered to be granted at the time the right to receive it is conferred on the beneficiary under the applicable national rules. It is for the referring court to determine, on the basis of applicable national law, when that aid must be considered to be granted. To that end, that court must take account of all the conditions laid down by national law for obtaining the aid in question. ( 15 )

38.

Therefore, aid is not considered to be granted at the time it is paid to the beneficiary, ( 16 ) and it is irrelevant that, as became apparent at the hearing, the allocation of EUR 70 million has not been paid yet. ( 17 )

39.

It must, however, be ascertained whether the right to receive that allocation has been conferred under Italian law. To that end, the referring court should, as mentioned in point 37 above, determine whether FSE has been conferred an unconditional right to receive the allocation of EUR 70 million or whether it has been conferred a conditional right and, if so, whether the conditions to which that right is subject have been met.

40.

In that regard, I note that, at the hearing, FSI indicated that, pursuant to Article 1(867) of the Stability Law for 2016 and Decree No 9/2016, the right to the allocation of EUR 70 million was subject, first, to the submission and approval of a restructuring plan that confirmed the viability of FSE, and, second, to the approval of FSE’s budget for 2015. However, no restructuring plan was finalised as, following further enquiry by the Special Commissioner, a simple restructuring of FSE no longer seemed a viable option. Instead, Decree No 264/2016 was adopted, which provided for the transfer to FSI of the MIT’s shareholding in FSE and for the corresponding obligation on FSI to restore the viability of FSE. Therefore, the condition regarding the adoption and approval of a restructuring plan, to which the right to the allocation of EUR 70 million was subject, was never met, with the result that, according to FSI, FSE never acquired that right. In support of FSI’s position, the Italian Government stated, at the hearing, that the allocation of EUR 70 million was ‘suspended’.

41.

By contrast, Arriva Italia contended, at the hearing, that the Special Commissioner was able to pay the allocation of EUR 70 million from the day Decree No 9/2016, which implements Article 1(867) of the Stability Law for 2016, became applicable. Moreover, it stressed that that sum had been entered in FSE’s balance sheet as a credit line towards the State, with the result that FSE must be considered to have a right to the allocation of EUR 70 million. The Commission supports Arriva Italia’s position.

42.

While it is for the referring court to decide between those positions, I am inclined to consider that Article 1(867) of the Stability Law for 2016 conferred on FSE an unconditional right to the allocation of EUR 70 million.

43.

It is true that the parties disagree as to the interpretation of the last sentence of Article 1(867) of the Stability Law for 2016, which states that that allocation is authorised ‘nelle more dell’attuazione del piano di risanamento’ (‘pending the implementation of the restructuring plan’). At the hearing, Arriva Italia submitted that the term ‘nelle more’ was to be understood as meaning that the allocation is authorised ‘forthwith’, whereas FSI argued that it meant ‘during’ (the implementation of the restructuring plan). ( 18 ) While I understand that the last sentence of Article 1(867) of the Stability Law for 2016 is somewhat ambiguous, I note that the reference to the ‘purpose of ensuring the continued operation of [FSE]’ suggests that the allocation of EUR 70 million seeks to ensure that FSE is able to carry on its activities and remain on the market while the Special Commissioner prepares the restructuring plan. Therefore, it seems to me that, as argued by Arriva Italia, FSE acquired a right to the allocation when Decree No 9/2016, which implements Article 1(867) of the Stability Law for 2016, entered into force.

44.

This will be for the referring court to verify. I should point out, however, that, were that court to find that the right to the allocation of EUR 70 million is conditional and that the conditions to which that right is subject have not been met, the right to the allocation of EUR 70 million would not have been acquired. Consequently, the allocation would not be regarded as State aid within the meaning of Article 107(1) TFEU.

45.

As regards the second condition mentioned in point 29 above, it is settled case-law that, for the purpose of classifying a national measure as ‘State aid’, it is necessary, not to establish that the aid has a real effect on trade between Member States or that competition is actually being distorted, but only to examine whether that aid is liable to affect trade and distort competition. However, the effect on trade between the Member States cannot be purely hypothetical or presumed. Thus, it is necessary to determine the reason why the measure concerned distorts or threatens to distort competition and is liable by its foreseeable effects to have an impact on trade between the Member States. ( 19 )

46.

In that connection, it not necessary that the beneficiary undertaking itself be involved in intra-Union trade. Where a Member State grants aid to an undertaking, internal activity may be maintained or increased as a result, so that the opportunities for undertakings established in other Member States to penetrate the market in that Member State are reduced as a result. ( 20 )

47.

FSI, supported by the Italian Government and the Polish Government, contends that the allocation of EUR 70 million is not liable to affect trade between Member States as the railway infrastructure at issue is purely local. The Commission takes the opposite position.

48.

In my opinion, the allocation of EUR 70 million to FSE affects trade between Member States. Admittedly, FSE does not appear to be involved in trade with other Member States. However, that allocation reduced the possibility for Arriva Italia, a subsidiary of the German group Deutsche Bahn, to operate the railway infrastructure entrusted to FSE or to provide passenger transport services on that infrastructure.

49.

As regards the third condition mentioned in point 29 above, it should be noted that, according to settled case-law, measures which, whatever their form, are likely directly or indirectly to favour certain undertakings, or which fall to be regarded as an economic advantage that the recipient undertaking would not have obtained under normal market conditions, are regarded as State aid. ( 21 )

50.

In the case of public undertakings, that assessment is made by applying, in principle, the private investor test. In order to assess whether the same measure would have been adopted in normal market conditions by a private investor in a situation as close as possible to that of the State, only the benefits and obligations linked to the situation of the State as shareholder — to the exclusion of those linked to its situation as a public authority — are to be taken into account. It follows that the roles of the State as shareholder of an undertaking, on the one hand, and of the State acting as a public authority, on the other, must be distinguished. The applicability of the private investor test ultimately depends, therefore, on the Member State concerned having conferred, in its capacity as shareholder and not in its capacity as public authority, an economic advantage on an undertaking belonging to it. ( 22 )

51.

In the present case, it must be determined whether Article 1(867) of the Stability Law for 2016, which authorised the non-repayable allocation of EUR 70 million for the benefit of FSE, conferred an advantage on that undertaking.

52.

I am of the opinion that, in the present case, it is unlikely that the private investor test is applicable.

53.

Indeed, according to case-law, where there is doubt, objective and verifiable evidence must be provided that the measure in question falls to be ascribed to the State acting as shareholder. In that regard, it may be necessary to produce evidence showing that the decision is based on economic evaluations comparable to that which, in the circumstances, a rational private investor in a situation as close as possible to that of the Member State would have had carried out, before making the investment, in order to determine its future profitability. It is not enough to rely on economic evaluations made after the advantage was conferred. ( 23 )

54.

I should point out that there is no evidence that any economic evaluation of the profitability of that investment was conducted by the Italian State prior to the adoption, on 28 December 2015, of the Stability Law for 2016. Admittedly, the technical report that accompanies that law refers to an ‘economic and financial analysis’ that was carried out by the management of FSE. ( 24 ) However, there is no indication that that analysis sought to determine the profitability of that investment. As the Commission submitted at the hearing, when the Italian Government decided to make that investment, it had no clear picture of the financial situation of FSE, given that Article 1(867) of the Stability Law for 2016 also requires the Special Commissioner to prepare a detailed report on the financial situation of FSE. It follows that the Italian State did not have the necessary information to determine whether the investment would be profitable. Consequently, it seems to me that, in deciding on the allocation of EUR 70 million, the Italian State did not act as a shareholder, with the result that the private investor test is not applicable.

55.

However, should the referring court consider, in particular, on the basis of additional information, that the private investor test is applicable, that test would not, in my opinion, be met. It is doubtful that a private investor would have granted EUR 70 million to a company in a financial situation as serious as that of FSE, which, by the end of 2015, had negative equity amounting to approximately EUR 200 million. ( 25 )

56.

I conclude that, in granting FSE an allocation of EUR 70 million, Article 1(867) of the Stability Law for 2016 conferred an advantage on that undertaking. That advantage is undoubtedly selective, given that the allocation is granted to one particular undertaking, namely FSE.

57.

Concerning the fourth condition for classification as State aid, reference is made to the case-law cited in point 45 above and to the case-law according to which, when aid granted by a Member State strengthens the position of an undertaking compared with other undertakings competing in intra-Union trade, the latter must be regarded as affected by that aid. ( 26 )

58.

FSI and the Italian Government contend that the allocation of EUR 70 million can be used only to finance the railway infrastructure operated by FSE, and that, consequently, it does not distort competition. Their reasoning can be summarised as follows. First, the operation of the infrastructure at issue is subject to a legal monopoly under Italian law, with the result that there is no competition either on the market for the operation of that infrastructure or for that market. Therefore, a distortion of competition is excluded. Second, cross-subsidisation of economic activities such as the provision of passenger transport services on the infrastructure at issue is prevented by, in particular, the fact that FSE keeps separate accounts for, on the one side, the operation of the railway infrastructure and, on the other side, the provision of those services. The Polish Government agrees that the allocation of EUR 70 million does not distort competition.

59.

Arriva Italia, supported by the Commission, takes the opposite position and submits that that allocation distorts competition. The Commission contends that the allocation of EUR 70 million must be used to ensure the continued operation of FSE. It stresses, however, that, should it be considered that that allocation can be used only to finance the railway infrastructure, it would nonetheless be liable to distort competition. In the Commission’s view, this is because, although there is no competition on the market for the operation of that infrastructure and the market for the provision of passenger transport services, there is competition for those markets. It follows that the allocation of EUR 70 million may have distorted competition as it allowed FSE to remain on the market, thereby preventing other players from being entrusted with the two activities mentioned above.

60.

I take the view that the allocation of EUR 70 million is liable to distort competition, for the following reasons.

61.

First, I disagree with the position of FSI and of the Italian Government, which submits that that allocation can be used only to finance the railway infrastructure.

62.

I recall that Article 1(867) of the Stability Law for 2016, in its original version, provides that the allocation of EUR 70 million must be used to ensure the continued operation of FSE. However, following amendment by Article 47(7) of Decree-Law No 50/2017, that same provision states that that allocation can be used only to cover the liabilities and financial requirements of the railway infrastructure. As I have shown in points 42 and 43 above, it seems to me that that allocation must be regarded as granted at the time of entry into force of Decree-Law No 9/2016, which implements Article 1(867) of the Stability Law for 2016. It follows — subject to verification by the referring court — that the allocation of EUR 70 million was granted for the purpose mentioned in that law and that decree, that is, to ensure the continued operation of FSE.

63.

As regards the impact on competition, I should point out that the operation, by FSE, of the railway infrastructure and the provision of passenger transport services are subject to a legal monopoly, in the words of the referring court (or, as the Commission submits, they must be considered to be a system of exclusive rights conceded by the Regione Puglia.

64.

Indeed, FSE operates, under a concession agreement awarded directly by the Regione Puglia, eight railway lines ( 27 ) owned by the latter. Moreover, FSE provides, also under a concession agreement awarded directly by the Regione Puglia, first, passenger transport services by rail on those eight lines, and, second, passenger transport services by road in the corresponding area. FSE is the only operator of the eight railway lines, and it is the only provider of passenger transport services on that infrastructure. As noted in the decision of the AGCM, the other four providers of regional passenger transport services by rail in Apulia, namely Trenitalia, Ferrovie del Gargano SpA, Ferrovie Apulo-Lucane Srl and Ferrotramviaria, operate on other railway networks. ( 28 )

65.

It would thus appear that the allocation of EUR 70 million is not liable to distort competition, given that the markets on which the beneficiary, namely FSE, is active are not open to competition.

66.

However, in my opinion, it cannot be deduced from the existence of a legal monopoly alone that a distortion of competition is excluded. That may be the case only if there is evidence, first, that the activities of FSE are subject to a legal monopoly and that, consequently, there is no effective competition on the markets where FSE operates, but also, second, that there is no potential competition on those markets.

67.

In that respect, I note that, for instance, in ASM Brescia, ( 29 ) the General Court rejected the argument that aid granted to companies providing public services in the water, gas and electricity sectors could not distort competition because those companies did not operate in competitive markets. One reason why that argument was rejected was that the companies providing those services competed for the award of concessions to provide local public services in various municipalities, with the result that the markets for those concessions were open to competition. ( 30 )

68.

I also note that this approach is consistent with footnote 324 of the Notice on the notion of State aid, ( 31 ) which states that ‘if the operation of the infrastructure is subject to a legal monopoly and if competition for the market to operate the infrastructure is excluded, an advantage granted to the infrastructure operator by the State cannot distort competition’. That footnote refers to paragraph 188 of the notice, which provides that, where a service is subject to a legal monopoly, a distortion of competition is excluded if, in particular, ‘the legal monopoly not only excludes competition on the market, but also for the market, in that it excludes any possible competition to become the exclusive provider of the service in question’.

69.

In the present case, it seems to me that there is potential competition on the markets for the operation of the railway infrastructure entrusted to FSE and for the provision of passenger transport services on that infrastructure.

70.

In that regard, I note that, at the hearing, Arriva Italia explained that, when the concessions for the provision of local passenger transport services expire, competitive tenders may be held for the renewal of those concessions. ( 32 ) Where no tenders are held, and concessions are awarded directly by public authorities, as was the case for the eight railway lines operated by FSE, undertakings compete for the award of concessions. In my view, operators active in other parts of Apulia (namely Trenitalia, Ferrovie del Gargano, Ferrovie Apulo-Lucane and Ferrotramviaria) are to be regarded as potential competitors of FSE. Moreover, operators that expressed their interest in the acquisition of FSE (in particular, the appellants in the main proceedings) may be considered to be potential competitors. ( 33 )

71.

It follows that the allocation of EUR 70 million to FSE is liable to distort competition as it strengthens that undertaking’s position vis-à-vis potential competitors. As argued by the Commission, by allowing FSE to remain on the market, that allocation prevented the operation of the railway infrastructure at issue and the provision of passenger transport services on that infrastructure from being entrusted to other companies such as Arriva Italia.

72.

Second, should it be considered that the allocation of EUR 70 million can be used only to finance infrastructure, this would not, in my view, lead to the conclusion that a distortion of competition is excluded.

73.

In their written observations, neither FSI nor the Italian Government contend that the allocation of EUR 70 million can be used only for the construction of infrastructure. They simply contend that it must be used for the infrastructure. However, pursuant to paragraph 211 of the Notice on the notion of State aid, ‘a distortion of competition is normally excluded [when aid is granted for] the construction of … infrastructure’. ( 34 ) By contrast, when aid is granted for the operation of infrastructure, and, as is the case here, the operation of that infrastructure is subject to a legal monopoly, a distortion of competition is excluded only if competition for the market is excluded, pursuant to paragraph 188 of the same notice. Therefore, should it be considered that the allocation of EUR 70 million can be used only to finance the operation of railway infrastructure, this would not alter my conclusion in point 71 above.

74.

However, for the sake of completeness, I should specify that, although FSI did not contend in its written observations that the allocation of EUR 70 million was granted for the construction of infrastructure, at the hearing, it submitted that that allocation must be used ‘for the most part, maybe in its entirety’ for construction purposes. FSI argued that, in the area near Bari, track sleepers have to be changed and, in the other areas, electrification works need to be carried out, and that such improvement of the existing infrastructure is to be regarded as ‘construction’ of infrastructure.

75.

Even if it were considered that the activities mentioned in the preceding point are to be regarded as ‘construction’ of infrastructure for the purposes of paragraph 211 of the Notice on the notion of State aid, it would not necessarily follow that the allocation of EUR 70 million is not liable to distort competition.

76.

Indeed, paragraph 219 of the Notice on the notion of State aid provides that ‘the construction of railway infrastructure which is made available to potential users on equal and non-discriminatory terms … typically does not … distort competition’. Moreover, paragraph 212 of that notice requires Member States to ‘ensure that the funding provided for the construction of [infrastructure] … cannot be used to cross-subsidise … other economic activities, including the operation of … infrastructure’. That paragraph also states that cross-subsidisation can be excluded by ensuring that separate accounts are kept, which allocate costs and revenues in an appropriate way.

77.

I should emphasise that, in the present case, it is clear that the railway infrastructure at issue is not made available to potential users on equal and non-discriminatory terms, given that FSE is the only provider of passenger transport services on the eight railway lines which it operates. I should also note that cross-subsidisation may be excluded only if FSE keeps separate accounts for, on the one side, the construction of infrastructure, and, on the other side, the operation of infrastructure and the provision of transport services, which it is for the referring court to verify.

78.

I conclude that it cannot be excluded that the allocation of EUR 70 million is liable to distort competition.

79.

As mentioned above, the transfer of the 100 % shareholding held by the MIT in the capital of FSE to FSI, a company wholly owned by the MEF, was provided for by Decree No 264/2016 and carried out by the instrument of transfer. That transfer was made without a competitive tender and for no consideration. However, it was subject to the undertaking, by FSI, to remedy the situation of asset imbalance in FSE.

80.

As I did for the allocation of EUR 70 million, I will examine below whether the transfer of the shareholding in FSE meets each of the conditions listed in point 29 above.

81.

Reference is made to the case-law cited in points 31, 32 and 34 above.

82.

As regards, first, the condition regarding the commitment of State resources, FSE is endowed with public funds ( 35 ) and a ministry, namely the MIT, is the sole shareholder of that company. Consequently, the transfer of the MIT’s shareholding in the capital of FSE must be considered to be a transfer of State resources. ( 36 )

83.

As regards, second, the condition that the measure is attributable to the State, the public authorities were involved in the adoption of the measure providing for the transfer of the shareholding in FSE, given that that transfer was provided for by Decree No 264/2016 and carried out by way of notarial deed signed by the MIT.

84.

I should emphasise that I do not share the doubts of the referring court, which considers that classification as State aid should be precluded by the fact that the transfer of the shareholding in FSE passes between two entities wholly owned by the State that do not have independent budgets, but whose expenditure estimates are paid into the State budget. The referring court emphasises that that transfer is consistent with the principle of the neutrality of the European Union in relation to systems of property ownerships, as enshrined in Article 345 TFEU.

85.

While FSI and the Italian Government agree with that argument, Arriva Italia and the Commission do not. The Commission contends that, were that argument to be accepted, this would jeopardise the effectiveness of State aid rules and this would be inconsistent with Article 345 TFEU as it would result in unequal treatment of public and private recipients of aid.

86.

I note that, contrary to what FSI and the Italian Government argue, the transfer of the shareholding in FSE is not a simple reorganisation within the public sector. Indeed, the transfer of shareholding is accompanied by an obligation on FSI to restore the financial viability of FSE.

87.

Furthermore, I should emphasise that Article 345 TFEU in no way precludes the application of State aid rules to public undertakings such as FSI. Indeed, Article 345 TFEU, which states that the TEU and the TFEU ‘shall in no way prejudice the rules in Member States governing the systems of property ownership’, allows Member States to maintain or establish public ownership for certain undertakings. It does not exempt public ownership systems from State aid rules since, according to Article 106(1) TFEU, competition rules, including Article 107(1) TFEU, apply to public undertakings. Were this not the case, public and private owners of an undertaking would not be given identical treatment. ( 37 ) If it were accepted that, because FSI is wholly owned by a State body, it cannot be the recipient of State aid, Member States would be allowed to circumvent the rules on State aid by entrusting the performance of economic activities to State bodies, rather than to undertakings with legal personality.

88.

I conclude that the transfer to FSI of the shareholding in FSE meets the first condition mentioned in point 29 above.

89.

Reference is made to the case-law cited in points 45 and 46 above.

90.

I take the view that the transfer to FSI of the MIT’s shareholding in FSE affects trade between Member States, given that, as the Commission submits, FSI is active in other Member States, and that that transfer reduced the possibility for Arriva Italia, a subsidiary of the German group Deutsche Bahn, to operate on the markets entrusted to FSE.

91.

It must be determined whether the transfer to FSI of the MIT’s shareholding in FSE conferred an advantage on the recipient of that aid measure. For that purpose, I will examine, first, whether the transfer of shareholding conferred an advantage on the acquirer, namely FSI, given that FSI acquired a company in financial difficulties and undertook to restore the financial viability of that company. This would be the case if FSE had prospects of profitability. I will then consider, second, whether the transfer of shareholding conferred an advantage on FSE, given that FSI undertook to restore FSE’s viability.

92.

Reference is made to the case-law cited in points 49, 50 and 53 above.

93.

On the basis of the limited information provided by the referring court and the parties to the main proceedings, it seems to me that the private investor test is not applicable here. This is because there is no indication that any expert examination was carried out concerning the valuation of FSE and the profitability of the transfer before the Italian State decided, on 4 August 2016, to transfer to FSI the MIT’s shareholding in FSE.

94.

In that regard, FSI relies, first, on the report of the Special Commissioner which concludes that, if FSE was not transferred to FSI, it would most likely go bankrupt; second, on a ‘market survey’ conducted by FSI, which showed that only two undertakings were interested in the acquisition of FSE (but failed to submit firm offers); and, third, on the approval, by the Tribunale di Bari (District Court, Bari), of the arrangement with creditors in 2018, which, in FSI’s view, demonstrates that the transfer of FSE to FSI was the right choice. In addition, the Italian Government refers to a due diligence report prepared at the request of the Special Commissioner.

95.

In the view of Arriva Italia and the Commission, no prior economic evaluations of profitability were conducted.

96.

I note that no estimation of the future profitability of FSE appears to have been carried out either in the due diligence report, which was prepared by an independent auditing firm at the request of the Special Commissioner, or in the report of the Special Commissioner, whereby the latter proposed, on the basis of the due diligence report, that FSE be transferred to FSI. I also note that no evidence has been provided to the Court that the profitability of the transfer was estimated in other economic studies. In that respect, I should emphasise that, in its notification, the AGCM states that ‘no prior assessment was carried out in order to verify compliance with the so-called market economy operator test’ and that ‘no valid reference to the market value of FSE which could justify the economic terms provided for by [Decree No 264/2016] was identified in advance’.

97.

As regards the ‘market survey’ conducted by FSI, which, in its view, shows that no third party was interested in the acquisition of FSE, given that there were only two expressions of interest (one of which was from the three appellants in the main proceedings), and none resulted in a firm offer, I should point out that that survey cannot be regarded as an estimation of profitability of the investment. I should also point out that, at the hearing, Arriva Italia explained that the reason why it did not make a firm offer was that it had not been a part of the due diligence process and that it did not, therefore, have the financial data on the basis of which it could decide whether to make an offer.

98.

Moreover, as concerns the objective pursued by the Italian Government, which may be taken into account in order to determine whether the private investor test is applicable, ( 38 ) I note that the Italian Government submits that it sought to avoid layoffs and the interruption of transport services. The decision of the AGCM also mentions the intention to ‘ensure continuity of the transport services and to maintain employment levels’. ( 39 ) These do not appear to be objectives that a private investor would take into consideration. However, it seems that, as the Commission contends, another objective of the Italian Government was to enhance the value of its shareholding in FSE. It will be for the referring court to balance those objectives.

99.

Therefore, I find that, in failing to conduct economic evaluations of profitability before it decided on the transfer, the Italian State did not act in its capacity as shareholder, with the result that the private investor test is not applicable.

100.

However, should the referring court consider, in particular, on the basis of additional information, that the private investor test is applicable, I will make the following remarks concerning the application of that test.

101.

According to case-law, the conduct of a private investor with which the intervention of a public investor must be compared need not be the conduct of an ordinary investor laying out capital with a view to realising a profit in the relatively short term. That conduct must at least be the conduct of a private holding company or a private group of undertakings pursuing a structural policy — whether general or sectorial — and be guided by prospects of profitability in the longer term. ( 40 )

102.

It is true that, as FSI contends, it is settled case-law that a parent company may bear the losses of one of its subsidiaries. However, when contributions of capital by a public investor disregard any prospect of profitability, even in the long term, such contributions must be regarded as aid within the meaning of Article 107 TFEU. ( 41 )

103.

In that regard, I note that an obligation was imposed on FSI to restore the financial situation of FSE, which, by the end of 2015, had negative equity amounting to approximately EUR 200 million. Therefore, the referring court will have to examine whether FSE had any prospect of profitability, even in the long term.

104.

I should also note that, according to case-law, factors arising after the measure at issue is adopted cannot be taken into account for the assessment of the prudent private investor test. ( 42 ) Therefore, it is irrelevant that, by the end of 2016, FSE’s negative equity had decreased and amounted only to approximately EUR 140 million; that the procedure for an arrangement with creditors was completed in 2018 and that, upon completion of that procedure, unsecured debts were written off; ( 43 ) or that (according to FSI) the undertaking to remedy the situation of asset imbalance of FSE was met in October 2018.

105.

Therefore, it seems to me that a private investor would not have adopted the measure at issue, and that, consequently, an advantage was conferred on FSI. That advantage is selective since the MIT transferred its shareholding to one particular undertaking, namely FSI. I reiterate, however, that it is for the referring court to make that assessment, and that limited information was provided, in that regard, by that court.

106.

I will now consider whether an advantage was granted on FSE, given that FSI undertook to remedy the situation of asset imbalance of FSE.

107.

According to case-law, Article 107 TFEU prohibits aid granted by a State or through State resources in any form whatsoever, without drawing a distinction as to whether the aid-related advantages are granted directly or indirectly. ( 44 ) Therefore, an advantage directly granted to certain natural or legal persons may constitute an indirect advantage and, therefore, State aid for other natural or legal persons that are undertakings. ( 45 )

108.

In that regard, a question was sent to Arriva Italia and FSI to be answered at the hearing, whereby the Court asked whether, should the transfer to FSI of the MIT’s shareholding be regarded as conferring an advantage, that advantage was granted to FSI, FSE or both.

109.

Arriva Italia answered that, given the lack of any economic evaluation, it was difficult to determine the beneficiary of the transfer of shareholding. FSI submitted that no advantage was conferred either on FSI or on FSE. The Commission contended that it could not be excluded that an advantage was conferred on FSE since FSI undertook to remedy the latter’s situation of asset imbalance.

110.

I take the view that the obligation imposed on FSI to remedy the situation of asset imbalance of FSE may be regarded as an advantage for the latter.

111.

I note that, pursuant to Article 1(1)(c) of Decree No 264/2016, the removal of the asset imbalance of FSE is one of the criteria on the basis of which FSI was selected as the acquirer of that company; and that, pursuant to Article 2(4) of the same decree, the implementation of the transfer of shareholding is subject to the release, by FSI, of a declaration that it will remedy the situation of asset imbalance of FSE.

112.

I also note that both the instrument of transfer and the ministerial memorandum state that the declaration mentioned in the preceding point has been released by FSI. Therefore, it seems — subject to verification by the referring court — that FSE has acquired the right to have its situation of asset imbalance remedied by FSI, in accordance with the case-law mentioned in point 37 above. It follows that, contrary to what FSI contends, it is of no effect that FSI’s obligation to restore that situation was fulfilled only in October 2018, that is, after the decision was taken to transfer the MIT’s shareholding to FSI.

113.

Obviously, in order to determine whether an advantage was granted on FSE, account needs to be taken of the terms of the declaration whereby FSI undertook to remedy the asset imbalance of FSE. This will be for the referring court to assess as that declaration has not been provided to the Court.

114.

However, it seems to me that FSE was granted an advantage since FSI undertook to remove its asset imbalance. That advantage is distinct from that obtained by FSI, which consists in the acquisition of a company with prospects of profitability. That advantage stems from the transfer of shareholding, given that, as mentioned in point 111 above, FSI’s undertaking to remove the asset imbalance of FSE is a condition for the implementation of that transfer.

115.

It follows that the transfer to FSI of the MIT’s shareholding in FSE may have conferred an advantage on FSI and another one on FSE; or that it may have conferred an advantage on FSE but (if the transfer was not profitable) none on FSI. Whether such advantages were actually granted will be for the referring court to assess in the light of the declaration mentioned in point 111 above and of additional information.

116.

Reference is made to the case-law cited in points 45 and 57 above.

117.

Arriva Italia and the Commission contend that the transfer of shareholding may distort competition. The Commission, in particular, argues that FSE was one of the few operators providing transport services in Apulia that did not belong to FSI’s group; that FSI was already the main player on the market; and that other operators were interested in acquiring FSE. FSI, the Italian Government and the Polish Government are of the opposite opinion.

118.

I take the view that the transfer to FSI of the MIT’s shareholding in FSE is liable to distort competition within the meaning of Article 107(1) TFEU for the reason mentioned in point 71 above. The transfer of FSE to FSI prevented FSE’s and FSI’s potential competitors in Apulia, such as Arriva Italia, from being entrusted with the operation of the railway infrastructure at issue and the provision of passenger transport services on that infrastructure.

119.

That conclusion cannot be called into question by the fact that, in the decision mentioned in point 18 above, the AGCM cleared the transfer of shareholding and considered that it did not restrict competition.

120.

Indeed, the notion of distortion of competition is given an extremely broad definition in the context of Article 107(1) TFEU. ( 46 ) As mentioned in point 57 above, it is sufficient, for an advantage granted by the State to be regarded as distorting competition, that it strengthens the position of the beneficiary in a market where there is (effective or potential) competition. ( 47 ) According to case-law, the Commission is not required, for the purposes of classifying State intervention as State aid, to carry out an economic analysis of the actual situation on the relevant markets, of the market share of the undertakings in receipt of the aid, of the position of competing undertakings or of trade flows between Member States. ( 48 ) In other words, the notion of distortion of competition is given a broader definition in the context of Article 107(1) TFEU than in the context of Article 101 TFEU or merger control.

121.

Moreover, in the notification mentioned in point 16 above, whereby the AGCM notified the Italian Government that the transfer of the shareholding in FSE may constitute State aid, that transfer is considered to distort competition. The AGCM notes that alternative scenarios existed. For instance, the operation of the railway infrastructure could have been carved out and entrusted to Rete Ferroviaria SpA; or the provision of passenger transport services could have been tendered out so as to allow the selection of an operator that could achieve long-term objectives (such as the efficiency and quality of transport services and the minimisation of costs and, therefore, of fees paid by users).

122.

I conclude that the transfer of shareholding is liable to distort competition.

123.

In the light of the foregoing, I propose that the Court give the following reply to the first question referred by the Consiglio di Stato (Council of State, Italy):