Short Reads

Reducing contractually agreed compensation payments because of economic crisis is not State aid

Reducing contractually agreed compensation payments because of econom

Reducing contractually agreed compensation payments because of economic crisis is not State aid

06.12.2018 NL law

On 23 November 2018, the European Commission confirmed that the Antwerp Port Authority's retroactive reduction of contractual minimum tonnage requirements for two port concessionaires did not qualify as State aid.

Even if the Port Authority's decision was partly guided by mobility and employment considerations, its main reasons for the reduction were economically motivated. The Commission's findings confirm that States and state authorities may take considerations such as maintaining business relations and potential litigation risks into account without necessarily violating State aid rules.

In March 2013, following the economic crisis in maritime trade from 2009 onwards, the Antwerp Port Authority (APA) decided to substantially reduce the contractually agreed compensation payments due by two port concessionaires (PSA and Antwerp Gateway (AG)) that had failed to achieve their respective contractual minimum tonnage requirements (MTRs), i.e. tonnages they had to tranship. A third concessionaire (Katoen Natie) submitted a State aid complaint but in its recent decision, the Commission concluded that no State aid was involved.

Despite initial doubts expressed in its decision to open the formal procedure, the Commission validated the APA’s decision to reduce the concessionaires’ increasing MTRs. According to the Commission, applying this new MTR methodology for the crisis years fulfilled the ‘Market Economy Operator’ (MEO) test, having regard to, for example:

  • APA’s interest in maintaining long-term cooperation with two key customers.
  • the underlying goal of the MTRs (namely to serve as an incentive to increase volumes, rather than as a source of revenue).
  • if the initial MTRs had been upheld, the risk of PSA and AG initiating litigation to challenge the legality of the compensation payments, and that the APA might well have (partially) lost.

The decision confirms that States and or state authorities - like any market economy operator - can enter into settlement agreements with private undertakings to, for example, avoid (uncertain) legal proceedings, without necessarily violating the State aid rules.

The Commission pointed out that all concessionaires in the port, including the complainant, could benefit from the APA’s measure. At the same time, it recognised that while the MTRs of other concessionaires were stable, the MTRs of PSA and AG were still increasing because they were still in the start-up phase of their concession. As a result, the latter were hit harder by the crisis in terms of compensation payments to be made which meant their situation was not comparable and could justify more substantial reductions.

The length of time between the start of the crisis (in 2009) and the actual decision (2013) to readjust the MTRs is not itself contrary to the MEO test. Nor is the fact that the APA may have been partly guided by considerations of, for example, mobility or employment. In the end, the Commission agreed that the APA’s decision was primarily led by economic considerations and did not involve State aid.

 

This article was published in the Competition Law Newsletter of December 2018. Other articles in this newsletter:

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