Can the construction of toll-free roads involve the granting of public aid?

The question of the compatibility with state aid rules of the financing of public infrastructure intended for commercial exploitation is increasingly recognised. According to the position of the European Commission and the CJEU, the question of possible financing of such infrastructure may involve state aid. However, still few entities are aware that also the financing of public infrastructure projects for the use of which no or only symbolic payment is provided for (e.g. roads, bridges, tracks, etc.) may in certain cases involve the granting of state aid to a specific entrepreneur.

Free roads vs. aid?
When can the construction of non-commercial infrastructure involve public aid? The above question is analysed by the European Commission in its latest decision of 8.01.2016. (SA.36019) concerning alleged aid to the property holding company, the Uplace Group. The case, initiated by a complaint from the city of Leuven, concerned the public financing of the construction of road infrastructure in the Vilvoorde-Machel district, which, according to the complainant, would exclusively favour the Uplace group by connecting the investment land it owned to the public road network. The project envisaged that the construction of the road network on the public land would be carried out by the public entity, while the roads on the investor’s land would be built at the investor’s sole expense.
The European Commission did not find that there was public aid in the project. At the same time, in the Commission’s view, this was determined by the fact that the constructed infrastructure could not be treated as dedicated (’tailor-made’) exclusively for a specific entity known before the work was undertaken. The Commission noted that the constructed road network is not only available to the Uplace group, but also to other entities including individuals and businesses, which can use it on an open and non-discriminatory basis. In addition, and also importantly, when assessing whether the infrastructure in question would serve only one user, the Commission found convincing the arguments of the Belgian government that the road network would have been built independently of the project carried out by the Uplace group.
The above decision shows that the problem of state aid in the financing of public infrastructure is not only closed within the framework of assessing whether it is used for commercial purposes, but requires examining whether the infrastructure in question does not serve only a specific user – thus constituting a selective advantage for the user financed from public sources.

At the crossroads…
It is worth noting that the issue of state aid is not solved by declaring that an infrastructure will be open to all users on an „open and non-discriminatory basis” if, in practice, it is known in advance that only one or a few users will use the infrastructure. An example of such 'tailor-made’ infrastructure is the case of the construction of the railway infrastructure leading to the Mercedes factory located in Hungary. In its decision N 671/2008, the European Commission concluded, when examining the proposed support instruments notified by the Hungarian authorities in favour of Mercedes, that the financial support for the construction of infrastructure in the form of a railway track on public land constituted State aid – since the sole beneficiary of this infrastructure would be Mercedes. This finding of the Commission was not altered by the arguments of the Hungarian authorities to the effect that Mercedes would not own the infrastructure and would have to pay for its use under market conditions. Similarly, the argument that access to the infrastructure would be open to all operators on an equal and non-discriminatory basis was considered unconvincing. Indeed, the Commission pointed out that at the project evaluation stage, the only entity that could benefit from the built infrastructure would be Mercedes, and thus the projected support for the construction of the infrastructure is of a selective advantage.

The port is poetry…
Another interesting case dealt with by the European Commission is that of a port in the Canary Islands, Puerto de las Nieves, whose sole user was the express ferry operator Fred Olsen. According to rival company Naviera Armas, such a situation, where the port was essentially dedicated to a single user, constituted unauthorised state aid – something the company raised in its complaint to the Commission. According to the applicant company, public aid in this case took several forms: firstly, the exclusive use of the port by the operator Fred Olsen, on the basis of a decision of the Directorate General for Canary Islands Ports, secondly, a partial exemption from payment of port dues, and thirdly, public financing of the port infrastructures used by Fred Olsen.
The European Commission did not find that the measures in question constituted public aid, stating, inter alia, that the port of Puerto de las Armas was dedicated to a single user.The European Commission did not find that the measures in question constituted State aid, stating, inter alia, that the port of Puerto de las Nieves, which was previously a fishing port, was adapted for commercial purposes between 1994 and 1995 and for express ferry traffic between 1999 and 2000, and that during this period Member States could legitimately consider that the construction of the infrastructure did not constitute State aid, as this position was only changed by the judgment of the Court of First Instance of 12.12.2000 in the Aéroports de Paris case. In addition, the Commission pointed out that Fred Olsen’s share of the use of the port had increased gradually from 1994 onwards until it had in practice used the full capacity of the port. This, in the Commission’s view, would show that the redevelopment of Puerto de las Nieves was not originally intended to serve only this particular operator and that, therefore, there can be no question of a tailor-made infrastructure.
As regards, on the other hand, the charges for the use of the infrastructure, the Commission considers that the complainant has not proven that they were charged at a non-market level. In addition, the Commission noted that although Fred Olsen was the sole user of the port, until 2013 none of the competing carriers had expressed a formal interest in using the port infrastructure. It was only in July 2013 that. Naviera Armas expressed a formal interest in the use of the port – as a result of which the Directorate General for Ports of the Canary Islands decided to rebuild the port, allowing it to serve two carriers. In the view of the European Commission, the circumstances of the case would show that access to the port was based on an open and non-discriminatory procedure, since, until 2013, no competitor had declared a formal interest in using the port, the actual exclusive use of the port by Fred Olsen could not lead to a contrary conclusion.
The Commission’s reasoning described above is surprising, as the Commission has emphasised on many occasions in a number of other decisions that the mere state of risk of distortion of competition through the use of a given support measure can indicate the presence of state aid. However, as the present case shows, sometimes these principles are interpreted flexibly.

Summary
The above cases show that the mere fact of lack of commercial purpose of the constructed public infrastructure does not exclude the possibility that such a project may involve granting public aid to a particular entrepreneur. Obviously, it is the potential beneficiaries of such aid who should remember about it in the first place, because it is them who, in the case of such a determination of this issue, will be burdened with a possible obligation of returning the prohibited state aid. However, the analysed cases show that other entities – including direct competitors of entrepreneurs receiving such aid – may also be interested in initiating proceedings concerning the alleged state aid. At the same time, there is no doubt that the mere initiation of such proceedings – as the Puerto de las Nieves case shows – can lead to the restoration of healthy competition rules.