State aid: Commission clears public support for several ferry services in Italy; finds other measures to the former Tirrenia Group to be incompatible aid

The European Commission has concluded that the public service compensation granted since 2009 to Tirrenia di Navigazione (‘Tirrenia’) and later to its acquirer Compagnia Italiana di Navigazione (‘CIN’) for the operation of ferry services in Italy is in line with EU State aid rules. However, it found that other measures in favour of Tirrenia are incompatible with EU State aid rules. The Commission also concluded that the public service compensation granted between 1992 and 2008 to companies of the former Tirrenia Group (Adriatica, Caremar, Saremar, Siremar and Toremar) is in line with EU State aid rules, with the exception of aid for one specific route, which is incompatible. Italy must now recover €15 million of illegal aid.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “Regular and reliable maritime transport services are crucial to meet the mobility needs of the residents of the Italian islands, as well as to contribute to the economic and social development of these regions. With these decisions we want to ensure that Italy can continue to provide these services on a regular basis throughout the year, and not only during the peak tourist season in the summer”.

Measures since 2009 in favour of Tirrenia and CIN

Following a series of complaints, the Commission launched in October 2011 an in-depth investigation into a number of public support measures in favour of companies of the former Tirrenia Group and their respective acquirers. The Commission had concerns that these measures may have given the companies an unfair competitive advantage over their competitors, in breach of EU State aid rules.

On the basis of its in-depth assessment, the Commission has concluded the following for the measures concerning Tirrenia and its acquirer CIN:

• the public service compensation (approximately EUR 265 million) granted to Tirrenia for the operation of twelve maritime routes from 1 January 2009 until 18 July 2012 is compatible with the 2011 SGEI Framework for some routes and the 2005 SGEI Decision for the other ones, as it addressed a real public service need by ensuring connections on a regular basis throught the year. Furthermore, the aid granted did not result in overcompensation for Tirrenia;
• the public service compensation (approximately EUR 581 million) granted to CIN for the period 18 July 2012 until 18 July 2020, as well as the tender procedure for the sale of the Tirrenia business branch to CIN do not qualify as State aid because the criteria laid out in case C-280/00, Altmark Trans are met;
• the illegal prolongation of the rescue aid to Tirrenia for one year beyond the six months duration foreseen is incompatible with the 2004 Guidelines on State aid for the rescue and restructuring of companies and has to be recovered;
• the use of funds, earmarked to upgrade ships, for liquidity purposes constitutes operating aid to Tirrenia as the company neither repaid those funds to the State nor used them for their original purpose (i.e. upgrading its ships). This aid is incompatible with the 2014 rescuing and restructuring Guidelines and therefore has to be recovered by Italy;
• the exemptions from certain taxes granted to Tirrenia in the context of the privatisation process, reducing the costs that Tirrenia would otherwise have had to bear itself, constitute aid incompatible with the Treaty on the Functioning of the European Union and has to be recovered by Italy.

The amount to be recovered is approximately EUR 14 million (including interest). As the Commission has concluded that there is no economic continuity between Tirrenia and its acquirer CIN, recovery of the incompatible aid will be limited to Tirrenia, which is already in liquidation.

Measures for the period 1992-2008 in favour of companies of the former Tirrenia Group

In a separate decision, the Commission today also concluded its in-depth investigation into the public service compensation, for a total amount of more than EUR 1.5 billion, granted between 1 January 1992 and 31 December 2008 to companies of the former Tirrenia Group (Adriatica, Caremar, Saremar, Siremar and Toremar).

After the EU General Court in 2009 annulled a Commission decision of 2004 approving the aid, the Commission has reassessed these measures. The Commission has found that:

• the aid granted for the provision of maritime cabotage transport services and the fiscal treatment of mineral oils used as fuel for shipping both constitute existing aid;
• the aid granted for the provision of international maritime transport services is compatible with EU 2011 SGEI Framework as it covered connections meeting public transport needs and did not distort competition to an extent contrary to the interests of the Union. However, aid granted to Adriatica for the operation of a route to/from Greece for the period January 1992 to July 1994 is incompatible with EU State aid rules as at that time Adriatica was involved in a price fixing cartel for the tariffs for commercial vehicles on that specific route. This aid will thus have to be recovered by Italy.

As Adriatica was acquired by Tirrenia in 2004 and, as mentioned, as the Commission has concluded that there is no economic continuity between Tirrenia and its acquirer CIN, Italy will have to recover the incompatible aid from Tirrenia, which is in liquidation. This amounts to approximately EUR 1 million (including interest).

Background

Tirrenia was part of the formerly State–owned Tirrenia Group, and provided maritime transport services mostly between mainland Italy and respectively Sardinia and Sicily. Since 1992, these services were compensated by the Italian State on the basis of a public service contract (‘the Initial Convention’), which was due to expire at the end of 2008. Because at that time Italy wanted to privatise Tirrenia and conclude a new public service contract (‘the new Convention’) with its acquirer, it prolonged Tirrenia’s Initial Convention until the privatisation was completed. Following a public procurement procedure, CIN became Tirrenia’s new owner and started operating the public service routes in July 2012. The new Convention has a duration of eight-years and will expire in July 2020.

In October 2011 the Commission launched an in-depth investigation into public support measures in favour of companies of the former Tirrenia Group, namely Tirrenia, Caremar, Laziomar, Saremar, Siremar and Toremar. The Commission extended the scope of this investigation in November 2012, to take account of additional measures. In January 2014, the Commission concluded that certain support measures to Saremar were incompatible with EU State aid rules. Today’s decisions conclude the investigation on Tirrenia. The investigation concerning Caremar, Laziomar, Siremar, Toremar and the remaining support measures for Saremar is still ongoing and will be concluded by means of separate decisions.

EU Member States enjoy a wide margin of discretion in the definition of services of general interest (‘SGEI’). The Commission must, however, ensure that public funding granted for the provision of such services does not unduly distort competition in the EU single market. In 2003, the European Court of Justice (ECJ) ruled on the assessment of public service compensation in the context of EU State aid rules (case C-280/00, Altmark Trans). The ruling set out the four conditions that compensation granted by a Member State to SGEI providers must meet in order not to constitute State aid within the meaning of EU competition law. These criteria are: (i) explicit entrustment of the public service obligation, (ii) objective, transparent and pre-defined conditions for compensation, (iii) no over-compensation and (iv) choice of the least costly provider through an open tender or a level of compensation based on the costs of a typical, well-run company. In December 2011, the Commission adopted new rules specifying how EU State aid rules apply to SGEI.

The non-confidential version of the two decisions will be made available in the State Aid Register under the case numbers SA.15631 (concerning the Tirrenia Group), and SA.32014, SA.32015 and SA.32016 (concerning Tirrenia and CIN) on the Commission’s competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.