On the Right Track Towards a Competition Neutral Compensation

Abstract

Probably the most harmful way to distort trade is by grant of State aid. The legal definition of State aid is stipulated in Article 107(1) TFEU. A State aid measure is a financial support granted by the State to certain undertakings. This support implies an advantage for the beneficiary and has a distortive impact on the internal market. All financial measures that satisfy the cumulative conditions in the Article 107(1) TFEU are illegal, unless notified by the government to the Commission and approved by it. The rule imposing the obligation of notification is known as the stand-still clause.During the period of implementation of a public service contract, the public authorities may grant financial benefits to the track-based operator in order to guarantee high quality passenger transport. These benefits can either constitute State aid or can be treated as representing a remuneration paid by the State to the track-based operators entrusted with public service obligations. In this context, a correct definition of the financial measure is absolutely essential in order to insure that no undue distortion of competition will incur as a result of an unnecessary or disproportional large reward. The contracts should be awarded by tender only where there is no interest from the free competition sector.