Coronavirus – European Commission’s Overview of State aid rules in the land transport sector

The Commission has published its overview, designed to recall the State aid rules applicable to public funding opportunities in the land transport sector during the COVID-19 outbreak.

First of all, the Commission points out that certain public interventions do not constitute State aid and are not subject to the procedural constraints and conditions of compatibility relating thereto. These include measures applicable to all economic actors, such as wage subsidies, suspension of corporate tax, VAT or social contributions payments.

The same applies to public funding of emergency activities related to COVID-19 that fall within the scope of public remit (activities that the State normally performs in the exercise of its public prerogatives). These activities may include, in particular, the transportation of passengers or goods for medical reasons.

Finally, aid granted in accordance with the conditions laid down in the European Regulation on de minimis aid (i.e. 200.000 EUR per company per country over three fiscal years) is not subject to notification to the European Commission.

The document also addresses public service obligations or contracts that do not require notification to the Commission.

Under Article 5, §5 of Regulation n° 1370/2007 of the European Parliament and of the Council of 23 October 2007 on public passenger transport services by rail and by road, Member States may take emergency measures for public service contracts awarded in accordance with article 5, §2 to 6 of this same regulation. Indeed, in the event of an immediate risk of disruption or imminent disruption of the service, the competent authority may take an emergency measure which takes the form of a direct award or a formal agreement to extend a public service contract or a requirement to provide certain public service obligations. The Commission services recognize that the severe reduction in passenger traffic due to the COVID-19 outbreak and the resulting loss of income can lead to such disruptions.

The period for which a public service contract is awarded, extended or imposed by emergency measures may not exceed the maximum period of two years.

In addition, the general rules on services of general economic interest (SGEI) apply. In accordance with the Altmark judgment, so that public service compensation does not constitute State aid, the public service obligation must be defined in a mandate, which must establish ex ante the cost parameters and the mechanism for controlling the absence of overcompensation and the company must have been chosen as part of a selection procedure or the compensation was determined according to the average costs (plus a reasonable profit) of a well-managed company.

Thirdly, Directives 2014/24 / EU and 2014/25 / EU on public procurement provide that in cases of emergency, Member States may use a restricted procedure and may fix a deadline of at least 15 days for the receipt of the request to participate and a deadline for receipt of tenders of at least 10 days. In case of extreme urgency, national authorities can even proceed with a de facto direct award in duly justified circumstances.

Existing public service contracts can be modified without a new procurement procedure.

The Commission also emphasizes that certain support measures, specifically targeting the COVID-19 outbreak, must be notified, such as the measures granted under the temporary framework for State aid intended to support the economy during the COVID-19 outbreak. Aid can go up to 800.000 EUR per company in the form of direct grants, loans, tax and payment advantages, guarantees, interest rate subsidies, etc., and must satisfy the conditions set out in this framework. This state support can be combined with de minimis aid and other types of aid while respecting the cumulation rules set out in the framework.

In addition, States may grant aid to companies to compensate the damage caused by an exceptional occurrence in accordance with Article 107, §2, b), TFEU. The Commission described the COVID-19 outbreak as such an “exceptional occurrence” within the meaning of this article. Member States can thus compensate companies for damage caused by the COVID-19 crisis, including for loss of income, when there is a direct causal link between the exceptional occurrence and the damage. This aid must also be notified to the Commission before it is granted. Information to be provided for aid notifications under this article can be found on the Commission's website.

It should be noted that, to date, the Commission has not adopted any decision authorizing aid for an undertaking active in the land transport sector, unlike the air sector, which has been the subject of several decisions authorizing aid for airlines or airports.

Finally, the Commission's guidelines call to mind the application of the European framework currently in force in this sector, namely:

• the State aid guidelines for railway undertakings, which provide a toolbox of public support measures for the railway sector and
• Article 93 TFEU which allows the Commission to authorize aid which meets the needs of coordination of transport or if they represent reimbursement for the discharge of certain obligations inherent in the concept of a public service.

This overview therefore does not aim to create new public support measures to deal with the crisis, contrary to the aforementioned temporary framework, but does have the merit of clarity.