BRX Update: State aid December 2018
State aid for inland ports – an introduction
Inland ports are of significant importance for handling of freight. Most inland ports are trimodal (road, railways and waterways) and have the necessary infrastructure to handle freight coming from all over the world. Recent State aid measures address the increasing importance of inland ports and allow subsidisation predominantly for constructing infrastructure.
Waterway transport has significant importance
The current low tides of German rivers represent a problem for the inland waterways transport system and show the significance of inland ports and inland waterways for the transport and logistics handling of freight. As a surge in freight volumes is expected in the coming years, road infrastructure will not be able to handle such volume. The German Ministry of Transport and Digital Infrastructure regards inland waterways transportation as a cost-efficient mode of transport ideal to reduce freight transport on the roads.
Separate State aid assessment for infrastructure construction and port operation
When assessing State aid issues linked to inland ports, one should distinguish between (i) the commercial and non-commercial use of infrastructure and (ii) between the construction of infrastructure meant for commercial purposes and the operation of a port. The construction of port infrastructure and its subsequent use are assessed independently from a State aid perspective.
Economic activity triggers State aid rules application
With regard to the construction of infrastructure in inland ports, State aid questions only arise in case an economic activity is present. An economic activity is required to fulfil the prerequisites of Article 107 (1) TFEU. If no economic activity is present, no State aid questions arise.
Public funding for non-commercial infrastructure does not represent State aid
State funding for non-commercial infrastructure is always possible. Therefore, the infrastructure used for the exercise of public powers (e.g. traffic control, police, customs, control and security of navigation or the protection against flooding or erosion) is non-commercial. Also, access infrastructure (e.g. public roads, railways or channels) benefit the general public and thus can be paid for through public funds. However, this does not include access infrastructure which only serves the port or access infrastructure within the premises of the port which are used for commercial purposes. In this latter case, State aid rules might apply and a more in-depth analysis is necessary.
Allocation of costs for commercial and non-commercial infrastructure necessary
Where port infrastructure has both commercial and non-commercial purposes, public funding represents State aid in respect of costs attributed to the commercial use of the infrastructure since cross-subsidising commercial activities by non-commercial activities is prohibited. Therefore, it seems imperative to distinguish between the costs allotted to each category.
State aid for the owner/developer
If there is State aid, one has to check whether the owner/developer of the port infrastructure acted like a private investor undertaking the same risks and benefits – it had a business plan developed ex ante that provides for a return on the investments made in a reasonable timeframe. If the state acted like a private investor in funding an infrastructure, no State aid is present.
If the private investor test is not fulfilled, public funding could still be considered compatible with TFEU State aid rules provided that it was meant “to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest” (Art. 107 para. 3 lit. c) TFEU). Furthermore, in a communication issued by the Commission it is acknowledged that the construction of new port infrastructure and better use of the existing ports’ capacities is a key element for the future logistics of freight handling in Europe. Also this regulation indicates that further development of these ports is a goal of common interest of the EU and contributes to the development of certain economic areas as required by Art. 107 para. 3 lit. c) TFEU.
In a final step, the possible distortion of competition and effect on intra-EU trade has to be assessed in order to weigh up the consequences for competition and the importance of pursuing a common interest of the EU.
State aid for the operator
A port infrastructure operator benefits from public funding if he obtains an advantage that he would not have been able to receive under normal market conditions. Where the operator wins a contract based on a competitive, transparent, non-discriminatory and unconditional tender under EU procurement rules, the public funding does not represent State aid.
Where there was no tender procedure, the operator can still prove that the costs incurred in operating the infrastructure are at market level e.g. by benchmarking or a generally accepted method of assessing operating fee. However, it is more difficult to prove compatibility with State aid rules if no tender has been carried out.
Lately, the Commission has been looking more closely into the compatibility of State aid rules in the financing of infrastructure. However, one should bear in mind that the EU aims at strengthening inland ports as logistics hubs and freight handling via inland waterways as an alternative mode of transportation to decrease the road transport of freight.