Ferring Revisited: the Altmark Case and State Financing of Public Service Obligations

Abstract

On 24 July 2003, the Court of Justice of the European Communities (``the Court of Justice'') rendered its eagerly awaited judgment in the Altmark case, ending the controversy surrounding the application of the EC State Aid control regime to compensation granted to undertakings in consideration for public service obligations imposed on them, which had divided the Court of Justice and the Court of First Instance of the European Communities, and sparked a wide debate between four of the Court of Justice's Advocates General. The Court held that State compensation for public service obligations does not confer an advantage on the undertakings concerned, and hence does not constitute State Aid within the meaning of the EC Treaty (``EC''), provided four stringent conditions are satisfied, which will serve as safeguards to make sure that its ruling is not used by Member States to favour certain undertakings under the guise of compensating them for the costs incurred in discharging public service obligations. This judgment is meant to enable Member States to organise public services without having to submit their financing mechanisms to prior European Commission scrutiny under the State Aid control rules. However, the conditions determined by the Court of Justice will ensure that only the most clear-cut cases will benefit from the generous treatment provided for by the Altmark ruling. A number of issues remain unresolved and it is to be hoped that the Commission will now act quickly to provide Member States with the necessary guidance in this important field.