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SNCM must repay €220 million in state aid to France

French ferry company Société Nationale Corse Méditerranée (SNCM) must repay €220 million in illegal state aid to the French government, the General Court has said.02 Mar 2017

The General Court confirmed a European Commission decision of May 2013 that compensation paid to SNCM and to CMN (Compagnie Méridionale de Navigation) for ferry services run between Marseille and Corsica from 2007 to 2013 was incompatible state aid and must be repaid.

While compensation paid to the two companies for year-round ferry services was compatible with the internal market, compensation paid for an additional service in the high season was incompatible with the internal market, the Commission said.

The Commission ordered that the part of the state aid that was incompatible be repaid by 3 September 2013. France and SNCM, however, sought the annulment of that decision to the General Court.  In parallel to that action, the Commission brought an infringement action against France for failure to fulfil its obligation to claw back the aid by the deadline. In 2015, the Court of Justice confirmed that France had failed to fulfil its obligation to recover the aid, rejecting the argument that the repayment would cause SNCM to go into liquidation. The Court did not however assess the merits of the action for annulment.

The General Court confirmed the Commission's decision that part of the aid was incompatible with the internal market and, accordingly, confirmed that France must recover the €220 million aid.

The General Court restated the four cumulative conditions that must be met in order in order for compensation for public service costs not to count as state aid. The recipient of the aid must have public service obligations to discharge and these obligations must be clearly defined; the parameters for calculating the compensation must be objective, transparent and established in advance; the compensation cannot exceed what is necessary to cover all or part of the costs incurred in meeting the public service obligations; and, where the recipient is not chosen through a public procurement procedure which would allow for the selection of the candidate who could provide the services at the least cost to the community, the level of compensation needed must be determined on the basis of an analysis of the costs of a typical well-run company.

The Court confirmed the Commission finding that the first condition was not satisfied for the additional ferry services, and the fourth was not satisfied for any services.

On the first condition, the Court held that for a maritime cabotage service of this sort to be entrusted with running services of general economic interest (SGEI), and therefore public service obligations, the service must meet a real public service need. This would be shown by the lack of regular transport services in a situation where there was free competition, it said. The scope of the service must also be necessary, and proportionate to the need. The French authorities failed to show that this is so, it said.

The Court also said that the Commission was correct to classify extra capacity provided during peak periods as an additional service and to assess it separately.

The Court said the Commission had also assessed the situation regarding the fourth condition correctly. There is consistent evidence that the tendering procedure carried out failed to ensure adequate open and effective competition allowing the selection of the candidate who could provide the service at the lowest cost for the community, it said.

Finally, the Court agreed with the amount of aid that the Commission calculated had to be recovered.