C-205/99

I - 1274

ANALIR AND OTHERS

— additional transport services,

2. In imposing public service obligations, — transport services at specified rates and Member States shall be limited to require- subject to specified conditions, in ments concerning ports to be served, reg- particular for certain categories of ularity, continuity, frequency, capacity to passengers or on certain routes, provide the service, rates to be charged and manning of the vessel.

— adjustments of services to actual Where applicable, any compensation for requirements'. public service obligations must be available to all Community shipowners.'

4. Article 2(4) states that 'public service obligations' are to mean obligations which the Community shipowner in question, if he were considering his own commercial B — National law interest, would not assume or would not assume to the same extent or under the same conditions. 6. Royal Decree No 1466 declares all reg- ular lines between the peninsula and the islands, those connecting the peninsula with Ceuta or Melilla and those linking the non-peninsular territories to one another to be public-interest shipping. 5. Article 4 of the Regulation provides that:

— requirements concerning regularity, continuity, capacity to provide the (2) If so, may the grant and continuation service, manning and, where appropri- of such administrative authorisation be ate, the ports to be served, frequency made subject to conditions, such as and, where relevant, rates (Article 8). having no outstanding tax or social debts, other than those set out in Article 4(2) of the Regulation?

The questions referred for a preliminary ruling (3) May Article 4(1) of Regulation No 3577/92 be interpreted as permit- 9. The Asociación Profesional de Empresas ting public service obligations to be Navieras de Líneas Regulares (Analir) and imposed on some shipping companies Others (hereinafter 'Analir and Others') and public service contracts within the brought an action for annulment of Royal meaning of Article 1(3) of the Regula- Decree No 1466 on the grounds that it is tion to be concluded with others at the

I - 1276

ANALIR AND OTHERS

same time for the same line or route, in 12. It is not disputed that the Regulation order to ensure the same regular traffic seeks to implement the principle of freedom to, from or between islands?' to provide services in relation to maritime cabotage.

I - 1277

OPINION OF MR MISCHO — CASE C-205/99

16. The divergence of views between the tions in question are islands, citing in various parties involved concerns whether, particular in this regard Article 227(2) of and where relevant to what extent, a the EC Treaty (now, after amendment, restriction of that nature may be justified Article 299 EC) and Declaration No 30 by the public service needs to which the on island regions, annexed to the Final Act Regulation relates. of the Treaty of Amsterdam.

17. The applicants in the main proceedings accept that Member States may consider it necessary to impose public service obliga- 21. The Spanish Government infers that tions on operators, but do not believe that a 'the existence of islands gives rise to Member State is bound as a result to make characteristics and peculiarities which the provision of services conditional upon may, at the unfettered discretion of each prior authorisation. In the applicants' view, State, warrant special systems of protec- compliance with such obligations could be tion'. ensured by a system of licences granted by category of line and by declaration proce- dures.

22. Furthermore, Spanish law correctly considers that the cabotage in question is 18. The Kingdom of Spain and the Hellenic a public service. It satisfies the conditions Republic adopt a diametrically opposed set out by the case-law of the Court 4 in that position and contend that, quite evidently, it is universal, continuous, in the public a system of prior authorisation is necessary interest and regulated by the public autho- in order to guarantee the performance of rities. public service obligations.

25. The Commission, supported by the Norwegian Government, considers, on the 30. The proposition according to which contrary, that such a system may be used public service obligations must be used only only in well-defined circumstances. I share where market forces are insufficient to that view. provide adequate services is also articulated in Article 2(4) of the Regulation, from which it can be seen that 'public service obligations' are those which 'the Commu- nity shipowner in question, if he were considering his own commercial interest, 26. Indeed, systematic analysis of the pro- would not assume or would not assume to visions of the Regulation leaves scant room the same extent or under the same condi- for doubt as to the relationship between tions'. Article 1, which sets out the principle of freedom to provide services, and Article 4, which gives Member States power to conclude public service contracts or to impose public service obligations. This 31. The foregoing analysis of the provi- option is to be seen as the exception, and sions of the Regulation is furthermore freedom to provide services as the rule. confirmed by the case-law of the Court on freedom to provide services, from which it is discernible that this is one of the fundamental freedoms under Community law, and that any derogation from that 27. Nor, moreover, do the various parties freedom must be interpreted strictly and involved disagree on this point. must comply with the principles of propor- tionality and non-discrimination. 5

28. It follows that freedom to provide 32. In the circumstances of the present services can be restricted in the interests case, the effect of those principles is that of public-service needs only if, and to the extent that, it is clearly imperative to do so in order to ensure adequate transport 5 —Asan example or settled case-law, see Case C-55/94 services. Gebhard [1995] ECR I-4165.

33. That can be established only by analys- ing each of the services in question, in order 37. Nor can I see why the diversity of the to identify which of them are liable to be lines in question should be an obstacle to inadequately provided under free market each of those lines being analysed indivi- conditions. dually, as the Spanish Government seems to suggest. On the contrary, it is that very diversity which calls for examination on a case by case basis, since it means that a decision which is valid for one crossing will not necessarily be so for another. I would 34. Conversely, a Member State cannot also comment that the aforementioned lines stipulate, in advance and without analysis are not so numerous that a case by case on a case by case basis, that an entire analysis of that nature would be unfeasible. category of services, such as, in the present case, services with and between islands, if they are to be adequately provided, requires the adoption of measures which restrict freedom to provide services. 38. The Spanish Government draws an analogy between maritime cabotage and the telecommunications sector, which is in its view an example of another liberalised 35. It is possible, admittedly, that the economic sector in which the provision of competent authorities of a Member State services remains subject to a system of may reach the conclusion, on completion of authorisation. such an analysis, that none of the services in that category can be adequately provided in an environment of free competition.

39. The fact is, however, that such an analogy, confined as it is to the fact that both are economic sectors in the process of 36. In the present case, however, the Span- liberalisation, does not, in the light of what ish Government itself draws attention to has been said above, constitute a ground the great diversity of lines operating for concluding that a system of prior between the peninsula and the islands and authorisation is acceptable without restric- between islands. That statement suggests tion in relation to maritime cabotage.

41. That argument undoubtedly carries considerable weight, but it does not follow as a matter of course that compliance with those conditions must necessarily be 45. It adds that the purpose of the system checked beforehand. It is no less conceiva- of prior authorisation must not be to ble that the competent authorities could restrict access to the market, but exclu- make the necessary checks using a system sively to safeguard the public service. I fully of declaration. The case-law of the Court, share that view. It is, therefore, public- furthermore, contains examples of solu- service needs which constitute the only tions of that type relating to fundamental requirement which can justify such a sys- freedoms under Community law, such as tem. That system must, accordingly, have the free movement of capital. 6 no aim other than to maintain the public service, and competition must be impeded only in so far as is necessary for that end. Conversely, no restriction on access to the market can be justified which is not neces- sary in terms of the requirements of the public service.

42. Is it right to conclude, therefore, that it is permissible to require prior authorisation in relation to public service obligations provided it is confined to those services 46. It necessarily follows, as the Commis- which would not be adequately provided in sion moreover states, that the conditions an environment of free competition and for the grant of the authorisation must not provided it is applied in a non-discrimina- involve any discretion on the part of the tory manner? competent authorities. Any undertaking which satisfies the public service obliga- tions laid down, which obligations must, of 6—Joined Cases C-163/94, C-165/94 and C-250/94 Sanzde course, fall within the scope of what is Lera and Others [1995] ECR I-4821. permitted under Article 4(2) of the Regula-

49. It should be noted, however, that the national court has not asked the Court for a — operators who satisfy the public service preliminary ruling on whether Article 7 is obligations set by the Member State are applicable to the present case. automatically granted authorisation.'

I - 1282

ANALIR AND OTHERS

The second question 55. In their view, that is not so in the present case, since the obligation at issue has no direct connection with the maritime traffic subject to authorisation.

I - 1283

OPINION OF MR MISCHO — CASE C-205/99

60. The Spanish Government also con- 65. The Regulation states in Article 1(1), tends, in line with the Commission's view, cited above, that 'freedom to provide ... that an obligation to have no outstanding services ... shall apply to Community ship- tax or social security debts is essential in owners who have their ships registered in, order to ensure a degree of solvency on the and flying the flag of, a Member State, part of the undertakings called upon to provided that these ships comply with all provide public services and is therefore conditions for carrying out cabotage in that such as to ensure that provision of that Member State'.7 service will not be jeopardised by the provider's insolvency.

66. Similarly, Article 3(2) provides that '[f]or vessels carrying out island cabotage, 61. The Commission states, in that regard, all matters relating to manning shall be the that capacity to provide the service, within responsibility of the State in which the the meaning of Article 4(2) of the Regula- vessel is performing a maritime transport tion, must be understood to include eco- service (host State)'. 8 nomic and financial capacity.

67. It necessarily follows that a Member 62. It emerges both from the observations State may, under those two provisions, of the national court and from the argu- impose conditions relating to matters not ments put forward by the Spanish Govern- covered by Article 4(2). ment that a distinction must be made here between two types of consideration.

68. It follows in particular from Arti- cle 1(1) cited above that, where a ship- 63. First, the question arises whether, in owner wished to provide cabotage services general, Member States are entitled to in Spain using ships registered in, and flying make exercise of the activity in question the flag of, that State, those ships would be subject to conditions relating to matters not bound to comply with the conditions referred to in Article 4(2). required, under Spanish law, for carrying out cabotage in Spain. In such circum- stances, there would be nothing to prevent those conditions from including, where

75. I would also comment in this regard that, as the Spanish Government points 72. Accordingly, inclusion amongst the out, conditions of this sort are not conditions for authorisation of a criterion unknown in Community law. They are in

I - 1285

OPINION OF MR MISCHO — CASE C-205/99

fact explicitly laid down by the public 79. The Commission is likewise well-foun- procurement directives. 9 These, however, ded in pointing out that the conditions at relate primarily to more ad hoc relation- issue were already in existence, under other ships between economic operators and instruments, prior to Royal Decree authorities. No 1466, and are not therefore a new restriction and accordingly incompatible with the provisions of the Regulation.

76. There is all the more reason, therefore, 80. In the light of the foregoing, I propose to accept the imposition of such conditions that the Court reply as follows to the in the present case, which concerns public second question referred for a preliminary services which must be provided over a ruling: certain length of time, and not merely episodically.

'Article 4(2) of the Regulation does not preclude the grant or continuation of the authorisation referred to in the first ques- 77. It should also be made clear, as the tion from being made subject to the condi- Commission does, that application of those tion that the service provider have no conditions must be non-discriminatory. outstanding tax or social security debts, provided that this condition is applied on a non-discriminatory basis.'

86. Furthermore, the existence of a con- tract entails the grant of special rights and, 82. The applicants in the main proceedings accordingly, the need to comply with believe that the reply to the question should Article 90 of the EC Treaty (now Article 86 be in the negative. In their view, the EC). By granting such advantages to one authorities' intervention should be confined company whilst at the same time imposing to ensuring that the services in question are public service obligations on other service provided adequately, continuously and providers who might offer a competing satisfactorily. It follows from the case-law service, a Member State is acting in a of the Court that those authorities should disproportionate manner and infringing pursue that triple objective at the lowest Article 86 of the EC Treaty (now Article 82 possible cost to the public body. EC), which should be applied in conjunc- tion with Article 90.

83. Consequently, they assert, the adoption 87. The conditions for applying the dero- of measures such as concluding a public gation laid down in Article 90(2) are not service contract or imposing public service satisfied, since that derogation presupposes obligations would be possible only if the that the measures adopted are proportion- services offered did not meet those three ate to the objective relied on, and that is not criteria. so in the present case.

84. In such a situation, it would be appro- 88. On that point, Analir and Others cite a priate to impose public service obligations study which, according to them, shows that if the inadequacy of the services offered regular services to the islands are adequate. affected only one of those criteria. If, on the There is therefore no justification for other hand, none of those criteria was grouping all those services together to make satisfied, it would be appropriate to con- them the subject-matter of a single public clude a public service contract. service contract.

92. The French Government defends a diametrically opposed point of view. It distinguishes two possible situations. 96. Secondly, the French Government asserts that it is also possible to impose public service obligations where the route in question is already covered by a public service contract. Otherwise, it contends, the contract-holding operator might with- draw from the market as soon as it was 93. First, it maintains that a Member State faced with competition from other compa- is entitled to conclude a public service nies not subject to public service obliga-

I - 1288

ANALIR AND OTHERS

tions. Accordingly, the adequacy of the of a general system must in any event be service, supposedly guaranteed by conclu- less onerous than those required by a public sion of the contract, might be jeopardised. service contract, so as not to distort com- petition between operators.

103. The Spanish Government, for its part, considers public service contracts and pub- lic service obligations to be two comple- 100. The Commission considers it neces- mentary mechanisms. There is nothing, sary to invoke a further condition. Public therefore, to preclude using them concur- service obligations imposed in the context rently, although contracts should remain

I - 1289

OPINION OF MR MISCHO — CASE C-205/99

exceptional, given the environment of lib- 108. Nor is the definition of a 'public eralisation of which they form part. service contract' in Article 2 of the Regula- tion such as to lend absolute certainty. That definition makes it clear that such a con- tract is concluded 'in order to provide the public with adequate transport services'. The most one can infer from this, as the 104. In the view of the Spanish Govern- national court does, moreover, is that if, by ment, a contract gives the authority greater means of concluding a contract, adequate security in terms of public service provi- services are provided, further intervention sion, particularly since it generates recipro- by the authorities, such as the imposition of cal rights and obligations, or enables the public service obligations, is no longer authority to include terms which, if the necessary and is, therefore, an unjustified contract is terminated, ensure the provision restriction on the freedom to provide of services until a new contract is granted. services which the Regulation seeks to establish.

105. It may therefore be necessary, in respect of particularly important services, to conclude contracts in order better to safeguard the continuity, regularity and quality of the service. 109. The definition referred to does not imply, however, that the adequacy of the services provided arises from existence of the contract alone. Of itself, the definition in no way precludes the contract from being additional to public service obliga- 106. What should one make of those tions, in such a way that use of both arguments? mechanisms concurrently enables adequate services to be guaranteed.

115. The foregoing means first of all that, from the time the Member State concludes 112. One can deduce from that wording with a shipowner a contract ensuring that the aim pursued by the legislature, in adequate services on a specific route and permitting recourse to the public service giving rise to a subsidy, public service concept, is to ensure the adequacy of obligations can no longer be imposed on services, and that the only condition which maritime shipping companies serving the it imposes in that respect is that there be no same line. discrimination.

113. The wording of Article 4 also seems to me to confirm the fact that non-discri- 116. In other words, public service obliga- tions relating to the continuity, regularity, capacity and quality of transport cannot be 12 — Emphasis added. imposed on all companies, whilst only the 13 — Emphasis added- company with which a contract has been or

I - 1291

OPINION OF MR MISCHO — CASE C-205/99

118. None the less, a contract concluded 121. I propose, therefore, that the Court with one company alone in order to ensure reply to the third question as follows: certain additional services cannot give rise to subsidies giving that company a financial advantage such as to enable it to offer all its services at a price which would protect it from competition from other operators (cross-subsidies). 'Article 4(1) of the Regulation must be interpreted as permitting public service obligations to be imposed on some shipping companies and, at the same time, a public service contract within the meaning of 119. In other words, combined use of both Article 2(3) of the Regulation to be con- mechanisms on a single maritime route is cluded with another company for the same acceptable only if, first, the same public line or route, provided that the public service obligations are imposed on all service contract includes liabilities in addi- companies, including the contract-holder, tion to the public service obligations and, second, the contract-holder assumes, imposed on all companies, that the finan- additionally, supplementary liabilities for cial compensation granted is proportionate which it is remunerated in strict proportion to those liabilities and that it is not, to those liabilities. Such remuneration must accordingly, such as to distort competition not have the effect of giving it a competitive to the detriment of companies which are advantage in respect of all its activities. not parties to such a contract.'

I - 1292

ANALIR AND OTHERS

— operators who satisfy the public service obligations set by the Member State are automatically granted authorisation.

I - 1293

OPINION OF MR MISCHO — CASE C-205/99

(2) Article 4(2) of Regulation No 3577/92 does not preclude the grant or continuation of the authorisation referred to in the first question being made subject to the condition that the service provider have no outstanding tax or social security debts, provided that this condition is applied on a non- discriminatory basis.

(3) Article 4(1) of Regulation No 3577/92 must be interpreted as permitting public service obligations to be imposed on some shipping companies and, at the same time, a public service contract within the meaning of Article 2(3) of that regulation to be concluded with another company for the same line or route, provided that the public service contract includes liabilities in addition to the public service obligations imposed on all companies, that the financial compensation granted is proportionate to those liabilities and that it is not, accordingly, such as to distort competition to the detriment of companies which are not parties to such a contract.

I - 1294