Case C-516/12, CTP – getting around Naples and EU state aid law [judgment 2014, ECLI:EU:C:2014:220]

Where a company provides public transport around Naples at a loss and claims public monies as compensation, should the EU’s public transport Regulation No 1191/69 be interpreted teleologically in order to deny the claim, or should it be interpreted systematically in order to allow it?

Facts
The Italian Region of Campania regulates public transport on its territory – a territory that includes the Province of Naples.

The claimant in this case is, CTP (Compagnia Trasporti Pubblici). This company provides public transport in and around the city of Naples. Over the years, CTP racked up a debt doing this. Therefore, CTP asked the Region to stump up some compensation. It was a request that failed when the Region decided not to pay up.

CTP challenged the Region’s decision before the local administrative court – the TAR Campania Napoli. The TAR identified that the dispute really turned on a piece of EU legislation known as Regulation (EEC) No 1191/69 of the Council of 26 June 1969 on action by Member States concerning the obligations inherent in the concept of a public service in transport by rail, road and inland waterway.

In particular, the TAR noted that Article 4 of Regulation stated:

1. It shall be for transport undertakings to apply to the competent authorities of the Member States for the termination in whole or in part of any public service obligation where such obligation entails economic disadvantages for them.
2. In their applications, transport undertakings may propose the substitution of some other form for the forms of transport being used. Undertakings shall apply the provisions of Article 5 to calculate what savings could be made as a means of improving their financial position.

In less technical terms, the TAR interpreted this to mean that compensation could only be paid where the Region had rejected an application from a company wishing to be relieved either entirely or in part from the public service obligation placed upon it where that obligation entailed economic disadvantages to the company.

In the case before the TAR, CTP had not put in such a request to the Region. Therefore, the TAR rejected CTP’s claim.

CTP duly appealed the Neapolitan court’s decision and the matter eventually arrived at Italy’s Council of State in Rome.

The Council of State was faced with a legal dilemma. If the EU Regulation was interpreted one way, then the Council would arrive at one result and the claim would be denied. If it was interpreted another way, then the conclusion would be to the contrary.

A teleological interpretation
The Council of State noted that at first blush, the principle laid down in the Regulation was clear. Compensation was for commercial transport companies that suffered as a result of the obligations imposed on them by public authorities. These companies could request to be relieved from the obligation. If companies did not follow the procedures set down in Community law, then they could bring no claim for compensation. The Community law system was new and different to the old system of concessions which underpinned the regulation of public transport in Italy. This new system was designed to work out in great detail what the costs to public finances would be for discharging obligations to provide services without there being ‘over compensation’. Community law procedures had to be followed if the compensation was not to be higher than necessary, and compliance with EU state aid law ensured (Case C-280/00, Altmark Trans).

A systematic interpretation
However, the regulatory system could also be interpreted in a systematic way. The trick here was to read the obligation contained in Article 4 in light of Article 1(3), which terminates Member States’ obligations inherent in the concept of a public service imposed on public transport. Then attention could turn to Article 2(2), which includes within ‘public service obligations’ so-called tariff obligations. This mention of tariff obligations could be connected to Article 2(5), because that provision includes rates that are fixed or approved by any public authority in respect of specific categories of passengers.

From this web of provisions, the inference could be drawn that EU law could still allow authorities to make an exception in relation to special tariffs – even though the general rule was that public service obligations had been ended. The Council of State noted that this inference received further support from the wording of Article 6(2) of the Regulation. That plank of legislation not only allows for compensation in respect of financial burdens, but it also stipulates that ‘the amount of such compensation shall be determined in accordance with the common procedures laid down in Articles 10 to 13.’ In this way, a service obligation could be maintained, or even introduced after the Regulation came into force. As a result, it could be said that there was no need for the company to make a request to the Province asking for its public service obligation be ended before compensation could be granted.

In light of these two alternative interpretations of EU law, the Council of State did however go on to note a problem. If the second method of interpretation of the Regulation would be favoured, then the systematic approach would result in TCP getting around the EU’s ban on state aid because there would be no evidence of the real costs being borne by CTP, which they otherwise have to provide by dint of Article 4 of the Regulation.

Question Referred
According to the Curia website, the Consiglio di Stato has asked:

Does the right to compensation arise, for the purposes of Article 4 of Regulation No 1191/69, only where, following the submission of an appropriate application, the competent authorities have not terminated the public service obligation which imposes an economic disadvantage on the transport undertaking, or is that provision applicable only in respect of service obligations which are to be terminated and cannot be maintained under the regulation?