EU member states must tread carefully when awarding public service contracts for maritime cabotage to an operator to the exclusion of others. Such a decision may be in breach of the EU’s state aid rules and hence illegal.

The recent decision by the European Commission to launch an in-depth investigation in order to ascertain whether the public service delegation contracts for maritime services to Corsica awarded to a specific operator by the French government are in breach of EU state aid rules, clearly proves this.

EU law prohibits, as a rule, any form of state aid, unless such aid is covered by a specific exemption. State aid may be said to be an advantage, in any form whatsoever, conferred on a selective basis to undertakings by national public authorities. However, an advantage given to a specific operator by way of compensation for rendering services to discharge public service obligations, is not as a rule considered to be a form of state aid. This would be the case provided that such operator is not enjoying a real financial advantage and thus the measure does not have the effect of putting it in a more favourable competitive position than the undertakings competing with it. 

Member states are largely free to define which services are of general interest. However, the Commission will ensure that public funding granted for the provision of such services does not unduly distort competition in the single market. The compensation granted under public service contracts for maritime cabotage is therefore assessed in the light of the EU rules on services of general economic interest, as interpreted by the European courts.

Maritime services between Corsica and mainland France run between three mainland ports – Marseille, Toulon and Nice – and five ports in Corsica – Ajaccio, Bastia, Porto-Vecchio, Propriano and Ile Rousse. The French authorities awarded Corsica Linea three public service contracts for the routes between Marseille and Ajaccio, Bastia and Ile Rousse, for the period October 1, 2019 to December 31, 2020. The Commission claims the criteria laid down in these three contracts constitute state aid since they do not comply with established jurisprudential criteria for excluding this type of aid from breaching state aid rules.

Furthermore, the Commission is also assessing whether the public service compensation received by Corsica Linea may give it an undue advantage over its competitors, in breach of the EU rules on services of general economic interest.

The primary focus of the Commission seems to be on whether the scope of the three contracts awarded meets a genuine public service requirement. In particular, the Commission doubts the necessity of including passenger transport in the public service contracts, given the presence on the market of a significant source of commercial supply from the neighbouring port of Toulon.

Also, the obligations in the public service contract do not appear to be necessary or proportionate to the provision of public maritime services in the eyes of the Commission. These obligations, namely, relate to the requirement for a specific type of fleet to be used on certain routes and the automatic exclusion of Toulon and Nice as possible mainland home ports for public service.

The Commission is also concerned that the compensation parameters could lead to the overcompensation of Corsica Linea as a result of a misallocation of costs between the company’s public service and commercial activities.

The focus of the Commission also rests on whether the award procedure for the three contracts complied with EU rules on public procurement, since France applied different selection criteria and technical specifications to the various bidders.

In the course of this investigation, the French government as well as all interested parties will have the opportunity to put forward their views.

The outcome of this investigation will surely be of interest to local authorities and local operators in the industry. This, particularly, in view of the fact, that the Maltese authorities too have just recently decided to award a contract to an operator for maritime cabotage covering the Malta–Comino route, to the exclusion of others. Though the facts of each case might differ, pointers as to what could be considered as a form of illegal state aid when a national government concludes public service contracts for maritime cabotage will surely be divulged by the Commission in the course of this investigation and more importantly, in its final decision.

Mariosa Vella Cardona is freelance legal consultant