Introduction
State assets which are put at the disposal of undertakings must be made available at a market rate. Free use or use at a price below the market rate means that the state forfeits potential revenue that constitutes transfer of state resources. If all the other criteria of Article 107(1) TFEU are satisfied, the free or preferential use of a state asset constitutes State aid. However, when the use of a state asset is regulated rather than managed commercially, free or preferential use may not be State aid.
When the Commission examines such cases, it must determine in which mode the state acts: as a regulator or as a manager of a commercially exploitable asset. A case in point is decision SA.109742 in which the Commission found that the granting of free parking permits to taxis to transport handicapped persons during the 2024 Olympics in Paris was not State aid.[1]
The 2016 Commission Notice on the Notion of State aid [NoA], explains that:
“53. Granting access to a public domain or natural resources, or granting special or exclusive rights without adequate remuneration in line with market rates, can constitute foregoing State revenues (as well as the granting of an advantage).”
“54. In these cases it needs to be established whether the State, in addition to its role of manager of the public assets in question, acts as a regulator that pursues policy objectives by making the selection process of the undertakings concerned subject to qualitative criteria (established ex ante in a transparent and non-discriminatory manner). When the State acts as a regulator, it can decide legitimately not to maximise the revenues which could otherwise have been achieved without falling under the scope of State aid rules, provided that all the operators concerned are treated in line with the principle of non-discrimination, and that there is an inherent link between achieving the regulatory purpose and the foregoing of revenue.”
“55. In any event, a transfer of State resources is present if, in a given case, the public authorities do not charge the normal amount under their general system for access to the public domain or natural resources, or for granting certain special or exclusive rights.”
Therefore, free or preferential use of a state asset [e.g. public land or building, radio spectrum, minerals, etc] results in loss of revenue which is equivalent to the transfer of state resources to the user of the asset. However, as explained, when the state acts as a regulator of an asset, the free or preferential use does not constitute State aid. It is not always easy to distinguish between the behaviour of the state as a manager and as a regulator.
In the case of the Paris permits, the direct recipients were taxi companies that would use them for the purpose of transporting persons with limited mobility. The passengers were not undertakings. Therefore, the question was whether the taxi companies obtained an advantage by not having to pay for the permits. The Commission in its decision examined only whether there was a transfer of state resources. If the answer was negative, there was no need to examine the other criteria of Article 107(1) TFEU, as they must all apply for a public measure to constitute State aid.
Since 2014, the permits have been granted for free to individuals for their own use. The eligible individuals must be registered on a waiting list and they have not right to transfer the permit to third persons. However, before 2014, the permits were also granted to taxi companies for free. Those pre-2014 permits could be transferred to other users. In addition, after 2014, the permits that were issued before 2014 could also be bought. In 2023, the Paris authorities decided to issue, on an exceptional and temporary basis, new permits to undertakings already holding permits for the exclusive purpose of transporting wheelchair users, especially during the 2024 Olympics. The issuing of the new permits was subject to a number of conditions concerning the technical features of vehicles, the prices that could be charged, etc.
Commission assessment
First, the Commission explained that a measure is financed by state resources when the resources are provided by a public authority and the measure is imputed to a decision of the state. An undertaking receives state resources not only when the state grants a subsidy but also when the state forgoes revenue that it is owed with the result that the undertaking concerned is relieved from costs that it should normally bear. It consequently obtains an advantage. Moreover, the revenue that is forgone must be directly linked to the advantage enjoyed by the undertaking. [paragraphs 86-88 & 90 of the decision]
The Commission also explained that a regulatory measure that results in “loss” of potential revenue does not constitute State aid when the “loss” is an inherent feature of the measure. [para 89]
Then the Commission applied the above principles to the case at hand. It began its assessment by observing that the permits were granted to all beneficiaries [undertakings and individuals] for free. However, the number of permits was limited. [paras 92-93]
Next, the Commission noted that the French authorities did not act as manager of a public asset but as regulator. The system of parking permits was not exploited commercially. [para 97] Since, there was no market price, paragraph 53 of the NoA was not applicable. Therefore, the Commission held that it was not necessary to determine, as required by paragraph 54 of NoA, whether “all the operators concerned are treated in line with the principle of non-discrimination” and whether there was “an inherent link between achieving the regulatory purpose and the foregoing of revenue”. [para 98]
According to the Commission, its approach was in line with the ruling of the Court of Justice in case C-518/13, Eventech, whereby bus lanes in London were constructed by public authorities but were not exploited commercially by them. So their free use by bus companies and black taxi companies did not result in loss of revenue for the state. Similarly, permits in Paris have been issued for free without being commercially exploited by the relevant authorities. The same conclusion applied to the new permits for the carrying of handicapped persons. [paras 99-101]
Furthermore, the Commission made a distinction between the new Paris permits and the Eventech case, on the one hand, and case C-279/08, Commission v Netherlands, on the other. In the latter case, certain companies in the Netherlands were required to hold emission permits. They received some permits for free but they could also acquire additional permits according to their needs by buying them on the secondary market. The Netherlands forfeited revenue by issuing permits for free. [paras 105-106]
The Commission also made a distinction between the new Paris permits and case C-50/21, Prestige and Limousine, concerning limitation of the number of taxi licences in Barcelona. In that case, the Court of Justice found that the measure did not entail any use of state resources and therefore the refusal of the Barcelona authorities to grant operating licences to taxis from outside Barcelona did not result in a loss of potential revenue. [However, that measure infringed the right of free establishment and free provision of services.] By analogy, the increase of parking permits in Paris did not result in a loss of state resources either. [paras 107-109]
Lastly, the Commission considered whether the fact that the pre-2014 permits could be transferred for a fee meant that the state forfeited potential revenue. Indeed, the permits had value because they enabled taxi companies to earn income by offering transport services or by transferring the permits to third persons.
Nonetheless, the Commission held that the state did not exercise any control over the transfer of pre-2014 permits or the fee that was charged for them in the secondary market. By contract, there was no secondary market for the new permits, as they were non-transferrable. [paras 110-111]
Given that the decision concerned the new permits, the Commission was correct to conclude that the state forfeited no revenue. However, the comments concerning the absence of state control over the pre-2014 permits is puzzling. The case law does not require state control over the secondary market for permits in order to find that the state forgoes potential revenue.
[1] The full text of the Commission decision, in French, can be accessed at:
https://ec.europa.eu/competition/state_aid/cases1/202512/SA_109742_56.pdf
