Case C-327/15, TDC – SOS! An illegal cross-financing mechanism [judgment 2016, ECLI:EU:C:2016:974]

Ships in difficulty at sea can radio for help. In Denmark and Greenland, the Danish telecoms giant ‘TDC’ will organise the maritime emergency services. However, TDC believes that new ‘cross-financing’ rules introduced by the Danish State will mean it will not be reimbursed for the full costs of organising the emergency services. TDC wonders if the organisation of maritime emergency services really falls within the scope of its universal service obligations.

Background
If ships get into difficulties in Danish waters, then they can radio for help. Before 2012, the Danish telecoms giant TDC would then organise the supply of maritime emergency services as part of its universal service provider obligations. Because of Denmark’s legal relations with Greenland, the same applied to ships off Greenland’s waters too.

This service is costly but TDC was reimbursed by the Danish State. However, in 2012 the laws regulating TDC changed. Under the new rules, TDC would no longer be able to claim money from the Danish State for providing maritime emergency services in Denmark and Greenland if TDC were making a profit from the provision of its universal service provider obligations.

This ‘cross-financing mechanism’ did not please TDC, which then challenged the rules of the Danish state before the Danish telecoms regulatory authority.

In essence, TDC believes that the provision of maritime emergency services does not fall within the Universal Service Directive so it has a right to compensation from the Danish State in respect of the net costs it incurs organising maritime emergency services. Furthermore, the company notes that its maritime emergency services are provided in Greenland, a country which is not even part of the EU.

Questions Referred
According to the Curia website, the Østre Landsret has asked:

1 Does Directive 2002/22/EC of 7 March 2002 on universal service and users’ rights relating to electronic communications networks and services (‘the Universal Service Directive’), […] including Article 32, preclude a Member State from laying down rules which do not allow an undertaking to lodge a claim against the Member State for separate recovery of the net costs of providing additional mandatory services not covered by Chapter II of that Directive, where the undertaking’s profits from other services which are covered by the undertaking’s universal service obligations under Chapter II of that Directive exceed the losses associated with the provision of the additional mandatory services?

2 Does the Universal Service Directive preclude a Member State from laying down rules allowing undertakings to lodge a claim against the Member State for recovery of the net costs of providing additional mandatory services which are not covered by Chapter II of that Directive, only if the net costs amount to an unreasonable burden for the undertakings?

3 If Question 2 is answered in the negative, may the Member State decide that there is no unreasonable burden associated with the provision of additional mandatory services not covered by Chapter II of that directive, if the undertaking as a whole has achieved profits from the provision of all those services where that undertaking has a universal service obligation, including the provision of services which the undertaking would have provided even without having the universal service obligation?

4 Does the Universal Service Directive preclude a Member State from laying down rules that a designated undertaking’s net costs associated with the provision of universal service pursuant to Chapter II of that directive are to be calculated on the basis of all income and costs associated with the provision of the service in question, including that income and those costs which the undertaking also would have had without having the universal service obligation?

5 If the national rules in question (see Questions 1 to 4) are applied to an additional mandatory service that has to be provided not only in Denmark but in both Denmark and Greenland, which by virtue of Annex II to the TFEU is an overseas country or territory, do the answers to Questions 1 to 4 then also apply to that part of the requirement that relates to Greenland, where the service is entrusted by the Danish authorities to an undertaking established in Denmark and that undertaking has no other activities in Greenland?

6 Of what relevance are Articles 107(1) TFEU and 108(3) TFEU and the Commission Decision of 20 December 2011 on the application of Article 106(2) TFEU to State aid in the form of public service compensation granted to certain undertakings entrusted with the operation of services of general economic interest […] for the answers to Questions 1 to 5?

7 Of what relevance is the principle of minimum distortion of competition in inter alia Article 1(2) and Article 3(2) of and recitals 4, 18, 23 and 26 in the preamble and Part B of Annex IV to the Universal Service Directive for the answers to Questions 1 to 5?

8 If the provisions of the Universal Service Directive preclude national schemes as referred to in Questions 1, 2 and 4, do those provisions or preclusions have direct effect?

9 What more specific factors should be considered when assessing whether a national time limit for applications as described in point 3.17, and its application, are consistent with the principles of cooperation in good faith, equivalence and effectiveness in EU law?

Update – 3 May 2016
The Second Chamber is due to hear this case on 1 June 2016.