The Special Report of European Courts of Auditors on maritime transport in the UE and its impact on Italy
The European Court of Auditors has recently published its special report regarding the maritime transport in the EU.
In particular, the Court assessed the Commission and Member States maritime freight transport strategies and the value for money delivered by EU-funded investments in ports. The starting point is that the investments in port infrastructure are very costly and require long-term planning to ensure profitability. As a consequence, the Member States have to put in place a coherent long term strategy to develop their ports.
The Court found that (i) the strategies put in place by the Member States failed to provide a coherent basis for planning the capacity needed in EU ports, and (ii) funding in similar port infrastructure in neighbouring ports has led to ineffective and unsustainable investments.
Having considered the Italian scenario, we had already made similar comments in a previous issue of Across the EUniverse. In Italy, terminals are far from reaching their optimal level of utilization. In light of this, we had highlighted (i) the need of coordination among the different Italian Port Authorities in relation to their tender procedures for the awarding of concessions for the construction and operation of container terminals and (ii) that any project in European ports have to be subject to the prior notification to the EU Commission pursuant to Article 108 TFEU.
The Court of Auditors recommended, amongst other things, (i) to increase the number of desk-based state aid investigations on ports, (ii) to follow up earlier state aid decisions to ensure the conditions present at the outset remain, and (iii) to notify the Commission of all public financial support to ports in accordance with EU state aid rules
In our view, the crucial point here is the following: the Court highlighted that public funding of port infrastructure is not the only factor that distorts the competition in this industry. In fact, the financial support made available to the economic operators (i.e. terminal operators) or the funding of infrastructure – either with a specific user in mind or for the benefit of a particular concessionaire – also have to be considered state aid which, by providing a specific undertaking with a clear economic advantage, may affect competition.
In Italy, one situation is more typical than others. This is the case of two or more terminal operators – working in the same port – who apply for state support to perform extraordinary maintenance works or to carry out modernization works in the areas granted by means of a concession. In such case, the Port System Authority has to make a choice as to which works are to be funded and – consequently – which operator or operators will be favoured by the improvement of their relevant area. We wonder whether such a choice is completely free and subject only to the discretion of the Port Authority, or whether it is in any way subject to legal restrictions.
According to Italian and European case-law, the function of granting of authority over state-owned areas can be considered an activity of a private and economic nature. As a result, the Port Authority could be regarded as a active undertakings, subject to domestic and European provisions concerning, in particular, the protection of competition.
In addition, Port Authorities are not merely undertakings managing the granting of ports and docks, but, have exclusive concessions to operate in the so-called «upstream market» (that is the market relating to the availability and modernization of port infrastructure), they could be considered companies holding a dominant position in the port market.
The fact that Port Authorities may be considered to be in a dominant position, requires them, to behave in such a way so as not to jeopardize competition in the so-called «downstream» market in which terminal operators perform port operations and act like competitors.
We have so clarified that the Port Authority is subject to domestic and European antitrust law and must allow the different operators to access port infrastructure on equal conditions. In fact, Italian and European law have carefully regulated the activity of concession of state-owned areas on the basis, first of all, of the principles of transparency and non-discrimination.
In the light of above, the application of the aforesaid principles, which characterizes the issue of concessions, cannot but be extended also to the subsequent relationship that is established with the various concessionaires (all competitors and all interested in modernization and improvements in the areas granted in concession). This is not only logical but, in Italy, a direct consequence of a clear rule of law.
This derives from Article 12 of the Italian Law no. 241/90, pursuant to which «the grant of subsidies, contributions, subventions and financial aids and the assignment of any kind of economic benefits to persons and public or private entities are subject to the predetermination, by the relevant authorities (…), of the criteria and methods to be complied with by said authorities».
In light of the above, the Port Authorities’ decision as to which activities to fund (and therefore, de facto, of which concessionaires to favour) cannot be at the mere discretion of the Authority but is subject to specific rules and obligations.
Thus in Italy, Port Authorities have to pre-determine and make public in advance the objective criteria that they are going to adopt for the allocation of available funds, as well as defining a «minimum level» of the activities to be financed that will be the parameter for a possible comparison between requests coming from different entities and exceeding the budgeted amount.
Then there is the further question pointed out by the European Court of Auditors in its report: the Port Authorities must give notice of their financing projects (to be chosen according to the aforementioned procedure established by law) to the EU Commission as provided for by Articles 107 and 108 TFEU.
In this regard, reference is made to a landmark case that was decided by the European Commission in 2015 concerning an investment project submitted by Germany to upgrade the existing cruise ship terminal in the port of Wismar. The project involved the public financing of the construction of a road to be granted under a concession – together with the adjacent State property – to a terminal operator operating in the cruise market.
The Commission found that whenever a Member State intends to finance a given work in favour of a single concession holder in a port, such State (or rather, the authority managing the port concerned) must previously submit its funding project for review by the European Commission in order to assess its compatibility with the internal market.
This finding by the Commission confirms that any Port Authority wishing to allocate funds for extraordinary or upgrade work to a concessionaire shall be required to draft a funding project and notify the EU Commission thereof pursuant to Articles 107 and 108 TFEU.
Finally, we note that the Italian legislator has recently institutionalized the so-called Project Review under Article 202 of the Italian Legislative Decree No. 50 of 2016. The Project Review aims at a virtuous reallocation of available resources, providing the State’s power to revoke funds granted for projects which, despite being provided for by previous planning, appear no longer to meet the cost-effectiveness ratio requirements.
The new Italian approach appears consistent with the recommendation of the European Court of Auditors to increase the number of desk-based state aid investigations and – especially -to follow up earlier state aid decisions to ensure the conditions present at the outset remain.
 “Maritime transport in the EU: in troubled waters – much ineffective and unsustainable investment” (special report pursuant to Article 287(4), second subparagraph, TFEU).
 Number Ten – February 2016 – “State aids in European ports”.
 In particular, the percentage utilization of the overall capacity of the Italian terminals amounts to about 57%.
 We note that Italy has recently adopted a new port governance system providing the reduction in the number of locally-based governing bodies from 24 to 15, no longer called Port Authorities, but now Port System Authorities, headquartered in the ports that are strategically relevant at the EU-level (core-ports). This reform should ensure more coordination in connection with the Italian funding projects in port infrastructures.
 It is worth to mention, inter alia, decision no. 30175 of 30.12.2011 of the Italian Supreme Court and, at European level, (ii) the Aéroports de Paris judgements (T – 128/98 and C – 82/01 P) and (iii) the Leipzig-Halle judgement (decisions of the court of first instance of 24.3.2011, T‑443/08 and T‑455/08 and decision of the ECJ of 19.12.12, C‑288/11 P).
 As known, the denial of access, or access granted on unfair and/or discriminatory conditions, compared to those granted to competitors, represents a breach of competition law pursuant to Article 102 TFEU and Article 3 of the Italian Law no. 287/90.
 According to the Italian Council of State, the rule at issue «has to be considered a general principle of the legal system and, in particular, of the legislation on public aids, whose allocation must be governed at least by rules defining a minimum level of activities to be funded, which will then become the criteria for a potential comparison of a number of requests exceeding the allocated funds». (Italian Council of State, no. 1552 of 23/3/2015).
 Decision of 30 April 2015, proceeding C (2015) 2824.