C-181/00

FLIGHTLINE

OPINION OF ADVOCATE GENERAL ALBER delivered on 27 September 2001 1

I — Introduction I I — Legal framework

(1) Regulation No 2408/92

1. The Portuguese Supremo Tribunal 'Article 1(1): Administrativo (Supreme Administrative Court) has asked the Court of Justice for an interpretation of Council Regulation (EEC) No 2408/92 of 23 July 1992 on access for Community air carriers to intra- Community air routes (hereinafter 'Regu- 1. This regulation concerns access to routes lation No 2408/92'). 2 The reference for a within the Community for scheduled and preliminary ruling relates in particular to non-scheduled air services. whether the powers conferred on a Member State under Article 3(2) — namely the possibility of refusing cabotage rights — were restricted by an invitation to tender for an air route issued under ...' Article 4, and, if so, whether that was the case in a situation where such an invitation to tender, because of a condition of aid granted to Portugal by the Commission in 1994, was issued at a time (in this instance 1995) when, but for the aforementioned (Paragraphs 2 and 3 concern the appli- condition, there would have been no need cation of the regulation to Gibraltar.) for the invitation to tender because of an exception applicable until 1997 or 1998. Specifically, it concerns flights from the Portuguese mainland to Madeira and the Azores. '4. Airports in the Greek islands and in the Atlantic islands comprising the auton- 1 — Original language: German. omous region of the Azores shall be 2 — OJ 1992 L 240, p. 8. exempted from the application of this

2. Notwithstanding paragraph 1, before 1 April 1997 5a Member State shall not be required to authorise cabotage traffic '1. (a) A Member State, following con- rights within its territory by Community air sultations with the other Member carriers licensed by another Member State, States concerned and after having unless: informed the Commission and air carriers operating on the route, may impose a public service obli- gation in respect of scheduled air services to an airport serving a peripheral or development region (i) the traffic rights are exercised on a in its territory or on a thin route to service which constitutes and is sched- any regional airport in its territory, uled as an extension of a service from, any such route being considered vital for the economic development of the region in which the airport is 3 — The regulation as such entered into force on 1 January 1993, in accordance with Article 16. located, to the extent necessary to 4 — The exemption therefore applied to the Azores until 30 June ensure on that route the adequate 1998, the Council not having decided otherwise; there was no decision to continue the exemption, although, in theory, provision of scheduled air services there could have been. satisfying fixed standards of con- 5 — That date accordingly applied to flights to and from tinuity, regularity, capacity and Madeira.

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pricing, which standards air car- (h) A Member State may reimburse an air riers would not assume if they were carrier, which has been selected under solely considering their commercial subparagraph (f), for satisfying stan- interest. The Commission shall dards required by a public service publish the existence of this public obligation imposed under this para- service obligation in the Official graph; such reimbursement shall take Journal of the European Commu- into account the costs and revenue nities. generated by the service.'

'The aid in favour of TAP... [is]... com- 5

patible with the common market provided that:

2. By way of grounds, Chapter VIII, point 3, of the aid decision states the following:

'The Commission takes du[e] note of the (e) the Portuguese Government fulfils its assurances and commitments given by the commitment to apply Article 4 of Portuguese Government regarding the Council Regulation (EEC) No 2408/92 implementation of the rules on access to to the Atlantic Islands of Madeira and the common aviation market and the inter- the Azores as of 1 January 1996 7at pretation to be given to certain provisions. the latest, publishing public service The Commission is of the opinion that the obligations for the individual routes in removal of constraints protecting TAP question (see Chapter VIII, point 3); from competition represents an appropriate compensatory justification for the granting of the aid, which serves the common inter- est pursuant to Article 92(3)(c) of the Treaty and Article 61(3)(c) of the Agree- ment. In particular, the Portuguese Govern- ment has: (f) the Portuguese Government honours its commitments that the liberalisation of non-scheduled transports between all Community airports and the Azores refers to all services, as expressed in — confirmed that the liberalisation of the non-scheduled transport between all 6 — OJ 1994 L 279, p. 29. 7 — The exception for Madeira applied until 1 April 1997 (see Community airports and the Archipel- Article 3(2)) — and the exception for the Azores until ago of the Azores refers to all the 30 June 1998 (see Article 1(4) of Regulation No 2408/92 and footnote 5). services, as expressed in Regulation

— reaffirmed its determination and will- ingness to follow in 1995 a public tender procedure for the connections between the Portuguese mainland and the islands of Madeira and the Azores in accordance with Article 4 of Regu- '3. Eligibility to tender lation (EEC) No 2408/92. Moreover, it is the intention of Portugal to inform the Commission during the first half of 1995 about the contents of the obli- gations of these public services, in order that they may be published in the Official Journal of the European Communities. In that respect the Com- mission recalls that Article 4 of that All air carriers holding a valid operating regulation means that the contents of licence issued by a Member State pursuant the public service obligations are to be to Council Regulation (EEC) No 2407/92 separately published in the Official of 23.7.1992 on licensing of air carriers, as journal of the European Communities. well as an adequate air-operator certificate, Following publication, should no Euro- are eligible to tender. pean carrier declare its readiness to fulfil these public service obligations, the right to operate such services shall be offered by public tender either singly or for a group of such routes to any European air carrier entitled to operate such air services. However, as Portugal is applying the provision of Article 3(2) of Regulation (EEC) No 2408/92, carriers licensed by a Member State other than Portugal may not, until 1.4.1997, use for the cabotage service

8 — OJ 1995 C 223, p. 16.

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with Portugal more than 50% of their …' seasonal capacity on the same service of which the cabotage service must be the extension or the preliminary.

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in accordance with Article 4(1)(a) of Regu- Transport and Communications of 22 De- lation No 2408/92. 9 cember 1995, that application was rejected on the ground that the tender related to cabotage services and the conditions laid down in Article 3(2) of the regulation were therefore not fulfilled.

7. On 29 August 1995, an invitation to tender for those air routes was issued pursuant to Article 4(1)(d) of Regulation 9. The action brought against the refusal No 2408/92. The purpose of the invitation was unsuccessful. The judgment dismissing to tender was to select a single air carrier to the action stated that neither the aid operate all nine routes in accordance with decision nor Article 4 of Regulation the relevant public service obligations from No 2408/92 precluded the application of 1 January 1996 to 31 December 1998 in Article 3(2). Otherwise, Article 3(2) would return for financial compensation. Eligibil- be largely emptied of its meaning. The aid ity to tender was expressly made subject to decision merely referred to Article 4 of the the reservation in Article 3(2) of Regu- regulation, in connection with which — lation No 2408/92. It was a condition of according to the order for reference — an the invitation to tender that, before 1 No- autonomous interpretation of the regu- vember 1995, no carrier capable of obtain- lation would be sufficient. ing authorisation to operate some or all of the air services should have applied to do so without seeking financial compensation. The only airline to take part in the tender procedure was TAP, which was already exclusively entitled to operate the routes concerned until the end of 1995. IV — The reference for a preliminary ruling

11. Flightline complains that the questions referred are not the ones that need to be (2) May a Member State in a public tender answered in the main proceedings. The procedure organised in 1995 for the issue is in fact whether it was permissible provision of scheduled air services on a for Portugal to reject Flightline's tender on route subject to public service obli- the ground that it did not fulfil the con- gations imposed on such a route under ditions laid down in Article 3(2). Article 4 of the regulation require air carriers licensed by another Member State which submit bids to meet the conditions laid down in Article 3(2) of that same regulation? 12. In Flightline's opinion, it was not. The Commission approved measures to restruc- ture TAP only on certain conditions, one of which being compliance with the require- ment in Article 1(e) of the aid decision to issue a public invitation to tender and to publish the relevant public service obli- gations in the Official Journal of the European Communities. In return for the (3) Must Article 1(e) of Commission granting of aid, the Commission imposed Decision No 94/698/EC be interpreted on Portugal the condition that the con- as meaning that, by making approval straints protecting TAP against competition of the aid for which it provides subject should be removed. That makes it imposs- to the condition that Portugal honour ible for the invitation to tender to be made the undertaking to apply Article 4 of subject to the conditions laid down in Regulation (EEC) No 2408/92 to the Article 3(2). Autonomous Regions, with effect from 1 January 1996, by publishing the public service obligations for the indi- vidual routes in question ('in accord- ance with Chapter VIII, point 3'), Por- tugal is precluded from exercising the power granted to Member States by 13. Read together, it contends, Article 4 of Article 3(2)? the regulation and Article 1(e) of the aid

19. On the substance of the case, TAP submits that the issue is essentially whether Portugal was obliged, on the basis of Articles 3(2) and 4(1)(d) of Regulation 16. Moreover, Article 3(2) does not No 2408/92, and the invitation to tender require, but merely entitles, Member States published in the Official Journal, to accept to refuse cabotage. Flightline's tender.

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20. In TAP's view, it does not follow either gations under Article 4. Other Member from Article 4 of the regulation or from the States, such as France, which imposed aid decision that Portugal waived the rights similar obligations, have also applied provided for in Article 3(2). The wording Article 3(2) of the regulation. The process and the scheme of Article 3(2) and by which Regulation No 2408/92 was Article 4 do not indicate that there is any adopted shows that Article 3(2) reflects a connection between those provisions. Con- balance between the liberalisation of air sequently, reliance on the rights available transport and protection of the specific under Article 3 when applying Article 4 is situations of the national airlines of each not precluded. Member State.

27. Like TAP, the Portuguese Government points out that the Commission has not objected to the implementation of the aid 30. The expression 'any Community air decision and has therefore accepted the carrier entitled to operate such air services' content of the invitation to tender. contained in Article 4 is used with the same meaning in Article 5(3)(c) of Council Regu- lation (EEC) No 2343/90 of 24 July 1990 on access for air carriers to scheduled intra-Community air service routes and on the sharing of passenger capacity between air carriers on scheduled air services between Member States. 10 In this context, regard must be had to Article 4(1), which limits access to routes subject to public (4) The Commission service obligations to one carrier for a period of up to three years. Article 4, on the other hand, is not subject to any time-limit. The only requirement is that the public service obligations imposed must be periodically reviewed. 28. On the first and second questions, the Commission submits that the application of Articles 4 and 5 of Regulation No 2408/92 does not mean that the protective measures laid down in Article 3(2) must be waived first. Even though that provision contains an exception to the general principle of free access to Community routes enshrined in 31. For the period from 1 January 1993 to paragraph 1, it is clear from the recitals in 1 April 1997, a Member State can avail the preamble that cabotage rights were to itself of the possibilities provided for in be introduced only gradually. Article 5 of Article 4, even if it exercises its rights under the regulation also shows that air transport within the Member States was to be liberalised step by step. 10 — OJ 1990 L 217, p. 8.

34. Making flights subject to the regulation makes the financial compensation which Portugal pays for the public service obli- gations imposed more transparent. In par- ticular, this ensures that the payments do not exceed the deficit found to exist on those routes. 32. On the third question, the Commission submits that it cannot be inferred from the general scheme of the decision or the circumstances in which it was adopted that the undertaking given by Portugal to apply Article 4 to the Autonomous Regions of the 35. Finally, the Commission points out Azores and Madeira must be understood as that, in other decisions concerning com- meaning that the possibility provided for in patibility with the common market, it has Article 3(2) cannot be exercised. The never required Member States to waive the expression 'entitled to operate such air possibilities under Article 3(2) pre- services', which appears in both the regu- maturely. lation and the aid decision, must be inter- preted in the same way in both cases. The interpretation given in points 3 and 11 of the public invitation to tender is correct.

VI — Assessment

(1) Admissibility 33. The aid decision makes flights to the Autonomous Regions subject to Regulation No 2408/92. Any airline holding an oper- ating licence issued by Portugal can apply 36. The objections raised against the for those routes, in particular Portugalia. admissibility of the reference for a prelimi-

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41. Nor does the concept of entitlement necessarily refer to entitlement for the 39. The Commission points out that, under purposes of Article 3(2). It can also be read Article 4(1 )(d), an exclusive right which is in conjunction with Article 2(b), which

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defines the term 'Community air carrier' as 44. In this respect, the Commission refers 'an air carrier with a valid operating licence to Article 5, which concerns the temporary granted by a Member State in accordance maintenance of exclusive transport rights. w i t h C o u n c i l R e g u l a t i o n (EEC) If such rights existed at the time when the No 2407/92 of 23 July 1992 on licensing regulation entered into force, i.e. on of air carriers'. 11 Consequently, the term 1 January 1993 (see Article 16 of the ' e n t i t l e d ' within the meaning of regulation), they may continue to be exer- Article 4(1)(d) could also be understood cised until they expire or for three years, i.e. as meaning 'in possession of a valid oper- until no later than 1 January 1996. Like ating licence within the meaning of Regu- Article 3(2), Article 5 provides for a tem- lation No 2407/92'. In that case, any porary exception to the principle of free- Community air carrier would be able to dom to provide air services which was take part in the tender procedure and could introduced by Article 3(1). 12 In the Com- not be subjected to the restriction contained mission's view, it is 'clear' that the appli- in Article 3(2). That solution has the cation of Article 5 does not preclude the advantage that it takes into account the application of Article 3(2). Consequently, fundamental idea of liberalisation it submits, Article 4(1) may likewise not enshrined in Article 3(1). mean that the application of Article 3(2) is waived.

stantively, they differ inasmuch as Article 5 in the procedure for granting those exclus- protects the continued existence of exclus- ive rights. Moreover, that interpretation ive rights granted before liberalisation on finds support in the fact that Article 3(2) 1 January 1993, whereas Article 4 con- represents an exception to the principle cerns the creation of new exclusive rights established in paragraph 1. As a provision after that date. Old exclusive rights do not creating an exception, Article 3(2) is to be necessarily have to be treated in exactly the interpreted restrictively. same way as new rights granted after the entry into force of the regulation. They also differ in terms of their temporal scope. There was little likelihood of conflict between Article 3(2) and Article 5. After all, exclusive rights could be maintained only until 1 January 1996 and until then at least there was no right of cabotage any- way. Consequently, any conflicts that did arise could only have done so between 48. In accordance with Article 4(1)(a), 1 January 1996 and 1 April 1997. In the public service obligations are imposed case of Article 4, on the other hand, con- primarily without any compensation for flicts could arise throughout the entire the air carrier. Accordingly, the text of the period of application of Article 3(2), that communication from the Commission is to say from 1 January 1993 to 1 April under Article 4(1)(a) on public service 1997. In view of those differences, it there- obligations on scheduled air services within fore seems questionable to what extent an Portugal, published in the Official Jour- argument for the interpretation of Article 4 nal, 13 expressly provided that 'carriers can be derived from Article 5. [were required] to apply to operate one or more services in accordance with the con- ditions laid down and without seeking compensation by 31 October 1995'. Com- pensation was thus expressly excluded.

air carrier operating the routes a certain not exceed the amount of deficit as laid revenue. Furthermore, an air carrier which down in the bid'. 17 has been selected in such a tender pro- cedure may be granted compensation in accordance with Article 4(1)(h). Such com- pensation offsets the difference between the costs incurred in complying with the stan- dards laid down and the revenue raised from operating the service.14 In accordance 51. As Commission Decision 94/666/EC of with that provision, paragraph 6 of the 6 July 1994 18 shows, an air carrier, as well invitation to tender published in the Offi- as benefiting from the compensation mech- cial Journal, on which TAP's application anism under Regulation No 2408/92, may for the nine routes in question was based, also be granted aid. In that decision, which expressly provided that financial compen- concerned compensation in respect of the sation was to be granted and that the deficit incurred by TAP on the routes to the tenders submitted should therefore Autonomous Regions of the Azores and explicitly mention the sum required by Madeira, in other words the same routes as way of compensation.15 those to which the questions relate, the Commission stated that compensation in respect of public service obligations is to be regarded as aid in so far as it is not paid to an undertaking which has been selected by tender procedure.19 However, since the liberalisation of air transport had been implemented only to a limited extent, the Commission declared the aid at the time to be regional and, as such, compatible with the Treaty. Consequently, even though aid 50. According to Communication 94/C for air transport is regarded by the Com- 350/07 from the Commission on the appli- mission as being contrary to the Treaty, cation of Articles 92 and 93 of the EC that decision shows that, in principle, Treaty and Article 61 of the EEA Agree- compensation is possible even in the form ment to state aids in the aviation sector,16 of aid. compensation for the deficit is 'a neutral commercial operation between the relevant State and the airline'. Such 'compensation for public service obligations does not involve aid provided that: the carrier has been correctly selected through a call for tender, on the basis of the limitation of 52. If the fulfilment of public service obli- access to the route to one single carrier, and gations is offset by the application of the maximum level of compensation does Article 4(1)(d) and (h), the question arises

(c) Meaning and purpose of Articles 3 56. The situation under Article 4(1)(a) is and 4 entirely different. That provision grants Member States the power to impose mini- mum conditions under which an air carrier can apply for traffic rights. In the context of the competition opened up by Article 3(1), air carriers applying for auth- orisation to operate a particular route are 54. Finally, it must be considered whether required to ensure that the service they the application of Article 3 in the context offer meets certain conditions in regard to of Article 4 is precluded by the meaning frequency, scheduling, capacity offered, and purpose of the provisions. pricing, etc. Such a provision guarantees that particular routes enjoy an appropriate level of service which the market alone does not offer, or at least not to a sufficient extent. Since Article 3 and Article 4(1 )(a) serve different purposes, it can therefore be said in principle that the two provisions 55. Article 3(1) introduces freedom to pro- stand alongside each other and are con- vide services throughout the air transport sequently neither mutually exclusive nor sector. Article 3(2) postpones the appli- mutually dependent. To that extent, there

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58. The notices published in the Official Journal in this case show how useful the 60. However, it must be borne in mind that possibility of restricting competition can Article 3(2) is only a transitional provision. also be for the Member State issuing the It is a deliberate decision by the legislature

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to make an exception to the principle of lature deliberately granted Member States freedom to provide services in air transport. the possibility of postponing liberalisation As is clear from the 10th recital in the from 1 January 1993 to 1 April 1997 at the preamble to the regulation, cabotage rights latest. Such an intention on the part of the were to be phased in in order to encourage legislature should not be disregarded with- the development of the Community air out good reason. Indeed every effort should transport sector and improve services for be made to take that exception into users. account as much as possible when applying the other provisions of the regulation. That is particularly so given that liberalisation at Community level is more extensive than under international law. That consider- ation suggests that Article 3(2) is to be regarded as also being applicable in prin- ciple in invitations to tender under Article 4(1)(d).

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opposition to that fact the further fact that competitors are given precedence over Article 4 concerns only cases in which no monopoly holders, even subsidised ones if tenderer offers the air services in question. there are any. The tender at issue was thus Public service obligations may be imposed successful only in so far as no air carrier because it is found that the market alone had applied for authorisation to operate does not adequately offer the services in one or more of the routes put out to tender question. However, that still does not mean by 1 November 1995. Only the remaining that there is no competition. Furthermore, routes for which no independent competi- even if the restriction in Article 3(2) is tors had applied could then be allocated in applicable, Article 4(1)(d) actually creates accordance with Article 4(1)(d). competition by providing that the invi- tation to tender is to be re-issued at least every three years. The very obligation to re-issue the invitation to tender every so often guarantees competition and restricts any c o m p e n s a t i o n p a i d u n d e r Article 4(1)(h) to the smallest deficit achievable on the market. There is no legal reason why the deliberate decision of the legislature to liberalise the sector gradually, 66. The meaning and purpose of the provi- including by providing for the possibility of sions do not preclude the application of delaying the introduction of cabotage, Article 3(2) in the context of Article 4. One should not be taken into account in the must therefore follow the deliberate context of Article 4(1). It can therefore be decision of the legislature to introduce the assumed that the application of Article 4(1) liberalisation of air transport gradually and does not necessarily mean that the right not to liberalise cabotage until 1 April under Article 3(2) must be waived. 1997, and allow Article 3(2) to be applied in the context of Article 4.

regulation states that discrimination on the considerations relating to the first. grounds of nationality, in this case the Since the invitation to tender under registration of an air carrier in another Article 4(1) does not mean that the possi- Member State, was admissible up to bility of restricting the grant of cabotage 1 April 1997, such discrimination is there- rights under Article 3(2) must be waived, it fore compatible with the Treaty. Moreover, is not contrary to Community law for a at the hearing, the agents for Flightline Member State, in an invitation to tender, to expressly abandoned the claim that Regu- require air carriers to apply in accordance lation No 2408/92, or at least Article 3(2) with the conditions laid down in thereof, was incompatible with Article 12 Article 3(2). In fact, in such circumstances, EC. the Member State is actually exercising its rights under Article 3(2) of the regulation.

72. Flightline takes the view that the restrictions should not in any event go further than indicated in the regulation. 75. It is true that Article 4(1)(d) is of TAP and the Portuguese Government have unlimited temporal application. However, not commented on this point. The Com- there is nothing in it to indicate that it mission merely points out that exclusive provides a means of preventing or delaying rights may be granted for a maximum of the application of other provisions in the three years. regulation. Only an interpretation which does not extend the possibility of restricting cabotage beyond 1 April 1997, even when such a restriction occurs in the context of an i n v i t a t i o n to t e n d e r u n d e r Article 4(1)(d), is consistent with the rationale of liberalisation as established in Article 3(1).

80. Since, however (as stated in connection with the first and second questions), the (4) Third question application of Article 4 does not preclude a Member State's power under Article 3(2), it must now be considered to what extent the aid decision means that exercise of the rights under Article 3(2) is waived from 1 January 1996. 77. By the third question, the referring court seeks to ascertain whether the aid decision, Commission Decision 94/698/EEC, in particular Article 1(e) thereof, under which Portugal undertook to apply Article 4 of Regulation No 2408/92 to the Autonomous Regions 81. The wording of Article 1(e) of the aid of the Azores and Madeira as of 1 January decision contains no express reference to 1996, means that Portugal has no power to Article 3(2) of the regulation. It must restrict cabotage in accordance with therefore be examined whether the grounds Article 3(2). on which the aid decision is based show that the application of that provision was to be precluded.

78. While Regulation No 2408/92 has been applicable to the Autonomous Region of Madeira since it entered into force, 82. Flightline points to the obligation Article 1(4) excludes the Autonomous incumbent on Portugal generally to remove Region of the Azores from the scope of the constraints protecting TAP from com- the regulation until 1 July 1993, which petition in return for the restructuring aid. exclusion was later extended to 30 June That view finds support in Chapter VIII, 1998. point 3, of the grounds of the aid decision,

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84. However, the measures mentioned in Chapter VIII, point 3, of the aid decision as examples of the steps Portugal needed to 87. Against such an understanding of the take in order, inter alia, to remove the aid decision, however, is the fact that this protection against competition refer only, would lead to an inconsistency between like Article 1(e) of the aid decision, to the Article 4(l)(a) and (d). Some carriers issue of an invitation to tender in accord- would be permitted to apply for auth- ance with Article 4. Article 3(2), on the orisation to operate routes in respect of other hand, is not discussed (see Chapter which public service obligations have been VIII, point 3, second indent, of the aid imposed in accordance with Article 4(l)(a), decision). Nor is there any mention of but not to take part in a subsequent Portugal's waiving the power to restrict invitation to tender under Article 4(l)(d) cabotage provided for in Article 3(2). in so far as they do not fulfil the conditions

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90. Moreover, contrary to Flightline's view, the application of Article 3(2) cannot be ruled out on the ground that the obligation under the aid decision to apply Article 4 would then be meaningless. The rebuttal against that view is that, if it had not been for the aid decision, Portugal would not have had to apply Article 4 to the Autonomous Region of the Azores until 88. Moreover, no other conclusion can be after 30 June 1998. Until then, neither drawn from Article 1(f) of the aid decision Article 3 nor Article 4 would have been or Chapter VIII, point 3, first indent, of the applicable to the Azores if it had not been grounds thereof. They do state that Por- for the aid decision. In that sense the aid tugal has confirmed that the liberalisation decision contains provisions which encour- of non-scheduled air-transport between age competition. Community airports and the Azores includes 'all services' within the meaning of the regulation and that these types of air services are therefore authorised, notwith- standing that the Azores are temporarily excluded from the application of the regu- 91. With regard to the Azores, the obli- lation. However, that passage does not gation to invite tenders is significant in so concern the scope of Article 4 of the far as Portugalia, in particular, was able to

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93. The interim conclusion must therefore be that it does not follow from Article 1(e) Article 1(e) and (f) of Commission Decision and (f) of the aid decision that Portugal has 94/69 8/EC, which make approval of the aid waived its rights under Article 3(2). for which they provide subject to the condition that Portugal fulfils the commit- ment to apply Article 4 of Regulation (EEC) No 2408/92 to the Autonomous Regions as of 1 January 1996 at the latest, by publishing the public service obligations imposed on the routes in question from that 94. However, it must again be borne in date, do not mean that Portugal was mind within the context of the third ques- precluded from exercising the power tion that the restrictions imposed on granted to Member States by Article 3(2) Article 4(1)(d) by the application of of the regulation to refuse cabotage. How- Article 3(2) must not extend beyond the ever, the restriction on cabotage could be limit laid down in the latter provision, i.e. applied to Madeira only until 1 April 1997 1 April 1997. The possibility of granting and to the Azores only until 1 July 1998.

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V I I— Conclusion

96. I therefore propose that the questions referred should be answered as follows:

(1) The exercise of the right conferred on a Member State by Article 4(1 )(d) of Council Regulation (EEC) No 2408/92 of 23 July 1992 does not necessarily presuppose or mean that the power provided for in Article 3(2) of the regulation to restrict competition in cabotage services in its territory until 1 April 1997 is waived.