# EUR-Lex - 52014DC0232 - EN

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# 52014DC0232

**COMMUNICATION FROM THE COMMISSION on the interpretation of Council Regulation (EEC) No 3577/92 applying the principle of freedom to provide services to maritime transport within Member States (maritime cabotage) /* COM/2014/0232 final */**

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COMMUNICATION FROM THE COMMISSION

on
the interpretation of Council Regulation (EEC) No 3577/92 applying the
principle of freedom to provide services to maritime transport within Member
States (maritime cabotage)

Summary

Drawing on the
experience gained during twenty years' practical application of Regulation
(EEC) No 3577/92, the Commission has decided in the interests of transparency
and legal certainty to update and amend its interpretation of the provisions of
the Regulation. This Communication amends and replaces the previous
Commission's interpretative communications of 2003[1]
and 2006[2].

This
Communication is being presented for information purposes only, to help explain
the Regulation. It indicates how the Commission intends to apply the
Regulation. It does not set out either to revise the Regulation or to encroach
on the Court of Justice's jurisdiction in matters of interpretation.

This
Communication starts by specifying the scope of the freedom to provide services
in the maritime cabotage sector. It indicates who enjoys that freedom and
recalls which services the Regulation covers.

It goes on to
specify the extent of the derogations to the freedom to provide services, as
provided for in the Regulation. There are three such derogations. Firstly,
Member States have the power to impose manning rules on board ships smaller
than 650 gt and vessels performing island cabotage services between two ports
on their territory. Secondly, Member States may impose public service
obligations and conclude public service contracts in order to ensure an
adequate scheduled transport service to, from and between islands. Lastly,
Member States may ask the Commission to adopt safeguard measures to remedy a
serious disturbance of the internal market.

The
Communication also provides an overview of transitional measures for the
application of this Regulation in respect to Croatia since its accession to the
 Union.

Finally, the
Communication provides guidance on application of Regulation (EC) No 1370/2007
of the European Parliament and of the Council on public passenger transport
services by rail and by road and repealing Council Regulations (EEC) Nos
1191/69 and 1107/70[3]
to maritime cabotage services.

1. 
Introduction

Council
Regulation (EEC) No 3577/92 (hereinafter the 'Regulation') applying the
principle of freedom to provide services to maritime transport within Member
States (maritime cabotage)[4],
which was adopted when the internal market was created, is now over twenty
years old. Since its entry into force on 1 January 1993, maritime cabotage
has undergone gradual liberalisation.

Since 1993, the
Commission has reported several times on the economic and legal progress of
this liberalisation[5].
It has also addressed the problems of interpretation raised by the Regulation
in its interpretative communications of 2003 and 2006.

The fifth report
on the implementation of the Regulation[6]
highlights the need to further clarify certain aspects of the Commission's
guidance on the application of this Regulation.

The present
Communication updates and amends the previous guidance in order to bring it in
line with the recent EU law and case-law of the Court of Justice and to better
reflect the changes in the Commission's understanding of certain provisions of
the Regulation. This concerns in particular the Commission's interpretation of
the provisions of the Regulation on manning (point 4 of this Communication) and
the duration of public service contracts (point 5.5.2 and section 5.7 of this
Communication).

This
Communication merely presents the Commission's interpretation of the Regulation
for information purposes. It does not set out to revise the Regulation or to
encroach on the Court of Justice's jurisdiction in matters of interpretation.
It does not prejudge the application of State aid rules.

2. 
The opening of the maritime cabotage market
2.1. 
Freedom to provide maritime cabotage services

Article 1
of Regulation (EEC) No 3577/92 liberalised maritime cabotage in the countries
where that economic sector was reserved for nationals. Freedom to operate between
two ports in the same Member State is ensured to all Union shipowners.[7]

Member States
cannot make this freedom subject to any restrictions, except in duly justified
cases. For this reason, Member States might not introduce any scheme of prior
authorisation unless (1) such scheme is justified by overriding reasons in the
public interest (e.g. ensuring safety of ships and order in port waters), (2)
is necessary and proportionate to the aim pursued and (3) is based on
objective, non-discriminatory criteria which are known in advance to the
shipowners concerned.[8]

Member States
should demonstrate that all the above conditions are met in order to be able to
establish any regimes affecting the exercise of freedom to provide maritime
cabotage services by the beneficiaries of the Regulation.[9]

However, the
Commission considers that in order to monitor the cabotage market, Member
States may ask shipowners to supply advance information on the services they
intend to provide. Such information may help Member States to better assess the
real transport needs.

Finally, the
Commission does not believe Member States can require companies to have a
representative on their territory.

2.2. 
The beneficiaries of the freedom to provide
services

Article 1
of the Regulation stipulates who the beneficiaries are of the freedom to
provide maritime cabotage services. They are 'Community shipowners' (1)
who have their ships registered in a Member State and flying the flag of that Member State (2), provided that they comply with the conditions for carrying out cabotage
in that Member State (3).

The above
conditions imposed by the Regulation merit closer attention. The question also
arises on the opening of the market to vessels which do not comply with the
conditions listed above.

2.2.1. 
The concept of 'Community shipowner'

Article 2(2)
of the Regulation distinguishes three types of 'Community shipowners'.

'(a)     nationals
of a Member State established in a Member State in accordance with the
legislation of that Member State and pursuing shipping activities;

(b)     shipping
companies established in accordance with the legislation of a Member State and
whose principal place of business is situated, and effective control exercised,
in a Member State; or

(c)      nationals
of a Member State established outside the Community or shipping companies
established outside the Community and controlled by nationals of a Member
State, if their ships are registered in and fly the flag of a Member State in
accordance with its legislation.'

The matter which
has raised the most queries is the definition of the concept of 'control' to
which the Regulation refers in two of the three categories of 'Community
shipowner'.

The Regulation
states that 'Community shipowners' include 'shipping companies
established in accordance with the legislation of a Member State and whose
principal place of business is situated, and effective control exercised, in a
Member State' (Article 2(2)(b)). The Commission considers that the
concept of 'effective control in a Member State' means in this context that
the major decisions are taken and the day-to-day management performed from a
place in the Union territory and that management board meetings are held in the
territory of the Union.

Also included
among 'Community shipowners' are 'nationals of a Member State
established outside the Community or shipping companies established outside the
Community and controlled by nationals of a Member State, if their ships are
registered in and fly the flag of a Member State in accordance with its
legislation' (Article 2(2)(c)). The Commission considers that the
concept of 'control by nationals of a Member State' referred to in that
Article means that the Union nationals have the possibility of exercising
decisive influence on the shipping company, for example, if the majority of the
company's capital or the majority of the voting rights is held by Union
nationals, or if the Union nationals can appoint more than half of the members
of that shipping company's administrative, management or supervisory body.[10]

2.2.2. 
The conditions of registration in a Member State and access to
national cabotage

The Regulation
does not list the Member State registers for which the conditions of
registration and of access to national cabotage are met. Such a list would in
any event be liable to change over time.

The condition of
registration in a Member State assumes that the register in question is located
in a territory in which the Treaty and the laws deriving from it apply.
Accordingly, ships entered in the registers of the Dutch Antilles, the Isle of
Man, Bermuda or the Cayman Islands are not among the beneficiaries of the
Regulation.[11]

By contrast,
ships registered in Gibraltar are among the Regulation's beneficiaries as the
Treaty applies to that territory.[12]
Ships registered in Gibraltar are entitled to have access to maritime cabotage
under the same conditions as any ship registered in a Member State.

The Regulation
also provides that for a ship from a Member State to be able to carry out
cabotage in another Member State it must first comply with all the conditions
for carrying out cabotage in the Member State in which it is registered. This
requirement is also applicable to vessels registered in and flying the flag of
a land-locked Member State.

Accordingly,
ships which do not enjoy access to national cabotage are not entitled to access
to the markets of the other Member States either. Similarly, ships which enjoy
conditional access to the national market may have similar conditions placed
upon them if they wish to operate in another Member State. For example, if
registration in the second register X of a Member State is subject to the
condition that the ship operate at least half the year on international routes,
the ship entered in that register X will not be able to demand broader
access to cabotage in the other Member States (it will not be entitled to
provide scheduled services there all year round).

2.3. 
Opening up the market to ships which are not
among the Regulation's beneficiaries

Several Member
States have opened up their markets more fully than the Regulation requires,
whether erga omnes or by means of wavers and individual authorisations.
Certain Member States with so called 'open coast' policies allow that
also vessels registered in and flying the flag of a third country provide
maritime cabotage between the ports located in their territory. In addition,
some Member States foresee individual authorisations to carry out maritime
cabotage for vessels which are not among the beneficiaries of the Regulation or
general waivers from the requirements laid down by the Regulation for vessels
registered in and flying the flag of a third country in case no vessels
registered in a Union Member State are available.[13]
Such practices do not infringe Union law.

3. 
The scope of Regulation (EEC) No 3577/92

Article 2(1)
of Regulation (EEC) No 3577/92 indicates that the Regulation applies to
maritime transport services (the carriage of passengers or goods by sea) within
a Member State. It goes on to provide an indicative list of the types of
cabotage service covered by the Regulation.

According to the
Court, despite the non-exhaustive nature of the list of maritime cabotage
services in Article 2(1) of the Regulation, the services falling within its
scope are, firstly, normally provided for remuneration, and secondly, as the
essential characteristics of the examples in that article illustrate, serve the
purpose of transporting passengers or goods by sea between two places in the
territory of a single Member State.[14]

Since the
Regulation entered into force, four main questions have been raised regarding
Article 2 (1). What does 'carriage by sea' and 'between ports'
mean? Do pleasure craft fall within the scope of the Regulation? Does the
cabotage leg of an international cruise service fall within the scope of the
Regulation? Should feeder services be considered as cabotage or as
international services? These questions are addressed individually below.

3.1. 
Definition of 'carriage by sea between ports'

The Regulation
does not define the term 'carriage by sea'. According to the Court, in
order to interpret this term account must be taken of the objective of that
provision, which is to implement freedom to provide services for maritime
cabotage under the conditions and subject to the exceptions which it lays down.[15]

Accordingly, the
distinction between the 'internal waters' and 'territorial sea'
in terms of international law (United Nations Convention on the Law of the Sea
of 10 December 1982, 'Montego Bay Convention') was considered by the
Court as irrelevant for the purpose of defining 'sea' under the
Regulation.[16] As a
consequence, the term 'carriage by sea' should include also transport
services that operate on the sea waters on the landward side of the baseline of
the territorial sea ('internal waters') that States may draw in accordance
with that Convention.

Therefore, in
line with the opinion of the Advocate General,[17] the
Commission considers that for the purpose of applying the Regulation not only
cabotage transport services carried out through open sea but also those
operated in sea areas such as bays, estuaries[18],
fjords and inlets should be considered as the 'carriage by sea'.

In line with the
Court's case-law the term 'port' encompasses infrastructure, albeit
small-scale, the function of which is to enable goods to be loaded and unloaded
or passengers to be embarked and disembarked for conveyance by sea.[19]
Therefore, any infrastructure, even not permanent, which serves the purposes of
sea transport by allowing goods to be loaded and unloaded or passengers
embarked or disembarked, meets this definition.

The
Commission would point out that the carriage of passengers by boat by sea is
subject to Regulation (EEC) No 3577/92 even when the service takes place within
a single 'port system' as defined by the legislation of the Member State
concerned (e.g. the crossing of an estuary by sea)[20].
Similarly, the remunerated carriage of passengers by boat by sea for touristic
purposes starting and ending in the same port with the same
passengers is
covered by the Regulation, since such service is provided for remuneration and
serves the purpose of transporting passengers by sea in the territory of a
single Member State.

3.2. 
Pleasure craft

Regulation (EEC)
No 3577/92 only covers maritime services 'normally provided for
remuneration'. Accordingly, most pleasure craft activities fall outside its
scope.

3.3. 
Cruise services

Cruise services
do fall within the scope of Regulation (EEC) No 3577/92 when they are provided
within a Member State (see Articles 3(1) and 6(1) of the Regulation)[21]. The
question is whether the cabotage leg of an international cruise service also
falls within the scope of the Regulation.

The Commission
takes the view that the Regulation only applies when passengers are embarked
and disembarked in the Member State where the cabotage leg takes place.

A cruise service
starting in Member State X or a third country and ending in a third country or
Member State X and calling at ports in a Member State Y does not come under
Regulation (EEC) No 3577/92 if no passengers embark and disembark in ports of
Member State Y. In that case, it is Council Regulation (EEC) No 4055/86 of
22 December 1986 applying the principle of freedom to provide services to
maritime transport between Member States and between Member States and third countries which applies[22].

3.4. 
Feeder services

Feeder services
(also known as relay of international cargo) are services by which a carrier
unloads goods from a vessel that has sailed from a point of departure in order
to transfer the same goods on to another vessel which continues the journey to
a port of destination. The service is normally carried out under a through bill
of lading. The question has been raised whether such services should be
considered as international services falling within the scope of Regulation
(EEC) No 4055/86 (which does not impose any flag requirement) or as
cabotage services falling within the scope of Regulation (EEC) No 3577/92
(where there is a flag requirement).

In cases where
the feedering consist in pre- or onward transportation between two ports of the
same Member State X of cargo (a) with destination in a Member State Y or in a
third country, or (b) coming from a Member State Y or a third country, Member
State X could reserve such feeder services for Union-flagged vessels. In fact,
in all the Member States where cabotage services are reserved for Union flagged
vessels in accordance with Regulation (EEC) No 3577/92, feeder services
are considered to be cabotage services (with the exception of France[23] and
Portugal), whereas in the rest of the Member States, feedering is free.

It should be
noted, however, that allowing a company to perform feeder services for the
carriage of international cargo following or preceding an international voyage
may lead to substantial savings in the cost of transport and contribute to a
better efficiency of services offered. For this reason, certain aspects of
feedering are increasingly the subject of negotiations in trade agreement
discussions. The Commission therefore takes the view that this issue requires
further examination in cooperation with Member States.

4. 
Manning rules

Questions of
manning have traditionally been the responsibility of the flag States. The
rules vary greatly from one register to another. For instance, some Member
States impose strict nationality conditions requiring all crew members to be
Union nationals. Others merely reserve the posts of master and chief officer
for Union nationals. These different nationality requirements translate into
major differences in cost from one register to another.

To avoid distortion
of competition on the most sensitive routes, Article 3 of the Regulation
provides that 'host' Member States may impose their own manning rules on
ships carrying out island cabotage. Host Member States may also decide the
manning rules applicable to small ships (ships smaller than 650 gt). In
practice, six Member States have chosen to avail themselves of these provisions
of the Regulation.

However, so as
not to void the principle of freedom to provide services of its content, the
Regulation stipulates that the rules of the flag State will continue to apply
to cargo ships over 650 gt carrying out island cabotage where the voyage
concerned follows or precedes a voyage to or from another State ('consecutive
cabotage').

These provisions
raise two sets of questions regarding the extent of the host State's
competence.

The first
relates to the content of those manning rules for which the host State is
responsible, while the other concerns the boundary between the competence of
the host State and that of the flag State in the case of consecutive cabotage.

The question has
also been raised whether it is the host State's rules or the flag State's rules
which apply to cruise liners carrying out island cabotage. The Court has
confirmed the Commission's interpretation that for cruise liners exceeding 650
gt the manning rules are the responsibility of the flag State, irrespective
whether the cruise liner carries out island or mainland cabotage[24].
The host State is not allowed to apply its own legislation concerning manning
to cruise liners exceeding 650 gt. It may apply it only to the cruise liners
smaller than 650 gt.

4.1. 
The content of the manning rules which may be
imposed by a host State

The Regulation
does not specify which 'matters relating to manning' are the responsibility
of the host State. Some people claim the host State's competence is unlimited
(the Regulation refers to 'all' manning rules). The Commission takes a
more restrictive approach. It believes the host State's competence needs to be
limited in order to safeguard the principle of freedom to provide services, in
respect of which that competence is a derogation.

The Commission
considers that host States are, among others, competent to specify the required
proportion of Union nationals on board ships carrying out island cabotage (and
ships smaller than 650 gt). A Member State may therefore require the crews
of such ships to be composed entirely of Union nationals. Member States may
also require the seafarers on board to have social insurance cover in the European
Union. In terms of working conditions, they may impose the minimum wage rules
in force in the country. As regards the rules on safety and training (including
the languages spoken on board), the Commission considers that Member States may
do no more than require compliance with the Union or international rules in
force (STCW and SOLAS Conventions), without disproportionately restricting the
freedom to provide services.

In line with
Article 9 of the Regulation any Member State wishing to avail itself of the
possibility to apply its own rules to matters relating to manning should
consult the Commission. The scope and content of envisaged measures will be
subject to a case-by-case analysis in the light of the above mentioned
principles of necessity and proportionality.

4.2. 
Consecutive cabotage

Article 3(3)
of the Regulation stipulates that 'from 1 January 1999, for cargo
vessels over 650 gt carrying out island cabotage, when the voyage
concerned follows or precedes a voyage to or from another State, all matters relating
to manning shall be the responsibility of the State in which the vessel is
registered (flag State)'.

The Court ruled
that a voyage which follows or precedes the cabotage voyage means in principle
any voyage to or from another State, whether or not the vessel has cargo on
board[25].

Contrary to what
has been noted by the Commission in its interpretative Communication of 2003,
the Court considered that flag State rules apply not only where goods actually
are carried during the international leg of the voyage which follows or
precedes the cabotage leg of the voyage but also when this voyage is made in
ballast (without cargo on board). As a consequence, the Commission cannot
accept that Member States continue to apply the host State's rules where the international
voyage which follows or precedes the island cabotage is in ballast.

However, this
should not mean that shipowners are allowed to set up a fictious international
voyage without cargo on board in order to avoid the application of Article 3(2)
in favour of Article 3(3), thus circumventing the Regulation[26].

It is for the
national courts to verify in accordance with the rules of evidence of national
law whether such abusive practices have taken place.

The manning
rules applicable where the ship concerned is fulfilling public service
obligations are specified in point 5.3.2.2.

4.3. 
Revision of the manning rules

According to the
Regulation, definitive manning arrangements were to be adopted by the Council
before 1 January 1999 on the basis of a Commission proposal following a
detailed examination of the economic and social consequences of the
liberalisation of island cabotage.

The Commission
presented a report on the matter to the Council on 17 June 1997, and a
proposal for a regulation on 29 April 1998[27].
The proposal was for a generalisation of the flag State's responsibility for
manning issues. The host State would have retained responsibility for ships
smaller than 650 gt and for determining the required proportion of Union
nationals in the crews of ships carrying out scheduled passenger and ferry
services (including mixed services and scheduled cruise services). Seafarers
from third countries on board such ships were to have been subject to the same
working conditions as residents of Member States.

The Commission
proposal failed to win the approval of the Member States. The Commission
therefore proposed that it be withdrawn on 11 December 2001. The
Commission currently has no plans to present a new proposal. Accordingly, the
rules laid down in Article 3 of the Regulation will not be amended in the
short term.

However, on the
occasion of preparation of the fifth report on the implementation of the
Regulation the Commission became aware that the lack of an easy access by the
shipowners to the legislation of the host State on manning requirements often
impedes the further development of island cabotage. In order to remedy this
problem, the Commission encourages Member States which apply Article 3(2) of
the Regulation to appoint a focal point that shipowners can contact in order to
obtain information on the applicable host State rules relating to manning.

5. 
Public service

The
maritime transport of passengers and goods is vital for the inhabitants of Europe's
islands. That is why a special set of rules was drawn up to protect some of
these maritime links not adequately served by the market.

The Regulation
offers Member States a framework to organise in a compatible way market
intervention through restrictions on market access relating to public service
obligations on maritime services. In addition, the provision of public funding
to compensate for the costs of providing public service must comply with the EU
State aid rules. The purpose of this Section is to further clarify, where
necessary, the conditions laid down by the Regulation and the State aid rules
with the objective of rendering public intervention compatible with general
Treaty rules.

5.1. 
Geographical scope of public service links

According to the
wording of Article 4(1) of the Regulation, public service links have to
serve routes to, from or between islands.

The Regulation
does not contain a definition of an 'island'. The Commission considers
that application of Article 4 should be limited to those islands that can be
reached only by sea or air and which have no permanent land links with the
European mainland. Accordingly, a peninsula which remains permanently linked to
the mainland by road or rail (such as Peloponnese) cannot be considered as an 'island'[28].

In line with the
opinion of Advocate General Tizzano, the possibility of applying Article 4(1)
can be extended to services provided between places in an analogous situation
to that of islands (e.g. banks of long fjords or estuaries with which there are
no direct road links) where there is the same need of ensuring the adequacy of
maritime transport services[29].

A study carried
out on behalf of the Commission[30],
shows that long
estuaries or fjords which lead to a detour of about 100 km by road[31] may
be treated as islands for the purposes of this section as they may cause a
similar problem by isolating conurbations from each other.

5.2. 
Island cabotage routes on which public service
obligations may be imposed

It is for the
Member States (including regional and local authorities where appropriate) and
not the shipowners to determine which routes require public service
obligations. In particular, public service obligations may be envisaged for
regular (scheduled) island cabotage services in the event of market failure to
provide adequate services.

According to the
conditions laid down by the Regulation, Member States may impose public service
obligations in order to 'ensure the adequacy' of regular maritime
transport services to a given island (or in relation to an estuary), where
Union shipowners, if they were considering their own commercial interest, would
not provide services of an adequate level or under the same conditions[32].
Trade should otherwise remain free.

When imposing
public service obligations for services described in Article 4(1) of the
Regulation, Member States must limit their intervention to the essential
requirements referred to in Article 4(2) and fulfil the requirement of non‑discrimination
as laid down by Article 4(1) of the Regulation in respect of all Union
shipowners interested in serving the route. This requirement must be strictly
observed when deciding on the content of the obligations to be fulfilled and
during the administrative procedure resulting in the selection of an operator
of a given service or establishing the amount of compensation.

5.3. 
The obligations that may be imposed
5.3.1. 
The distinction between public service
obligations and public service contracts

A distinction is
made in Regulation (EEC) No 3577/92 between 'public service obligations'
(see Article 2(4) and Article 4(2) of the Regulation) and 'public
service contracts' (see Article 2(3)).

Public service
contracts are the instrument normally used to enshrine public service
obligations where a horizontal approach applying to all shipowners intending to
serve a given route may not be sufficient to meet the essential transport
needs, in particular general conditions concerning the quality of a given
service.

Article 4(2)
of the Regulation sets out an exhaustive list of requirements that may be
introduced when public service obligations are imposed. Article 2(3) of
the Regulation provides only an indication of the scope of public service
contracts; Member States may go further. In practice, quality requirements are
often part of public service contracts, but cannot be introduced as part of
public service obligations. With regard to public service obligations, the
requirement relating to the shipowners' 'capacity to provide the service'
may include an obligation related to their solvency as well as the requirement
that they have no outstanding tax and social security debts[33]. The
Commission takes the view that the obligation to use a fast ferry may also fall
within this category.

When public
service obligations are imposed, the requirements relating to the regularity
and frequency of the service may be met collectively – and not individually –
by all the shipowners serving the same route[34].

Member States
can impose public service obligations and conclude public service contracts
only if they have determined, for each route in question, that the regular
transport services would be inadequate (i.e. they would not be provided to the
extent or under the conditions defined by the public authorities as
appropriate) if their provision was left to market forces alone. Moreover, the
public service obligation or contract must be necessary and proportionate to
the aim of ensuring the adequacy of regular transport services to and from the
islands[35]. In
other words, Member States may not subject to public service obligations and
public service contracts services which are already provided satisfactorily and
under conditions, such as price, continuity and access to the service,
consistent with the public interest, as defined by the State, by the
undertakings operating under normal market conditions[36].

The Commission
recalls that although Member States have a wide margin of discretion in
defining the need of public service and the extent of such service, the
decision of Member States in this respect is subject to the Commission's
control of manifest error of assessment[37].

5.3.2. 
The principle of non-discrimination.

Pursuant to the
principle of non-discrimination laid down by the Regulation, Member States must
not set obligations that are tailor-made for a given shipping company and that
would prevent other Union shipowners from entering the market or apply
obligations with that effect.

In particular,
the Commission would draw the attention of Member States to the problems raised
by the following two types of provisions.

5.3.2.1. The taking-over of vessels

Firstly, the
question has been raised whether a Member State, when putting a public service
contract out to tender, could require the successful bidder to take over
vessels and crews from the previous operator. The Commission takes the view
that, in most cases, such an obligation would infringe Regulation (EEC) No
3577/92 as it would be discriminatory. It would prevent Union shipowners from
bidding with their own vessels and would give an advantage to the incumbent
operator should the latter be a candidate for its own succession.

However, the
Commission can agree that where serving an island requires the use of a vessel
with a design so special that it cannot be easily found or sold on the market
or used for another purpose, it will be less restrictive of the freedom to
provide services for there to be a requirement that that vessel be taken over
than for the service to be awarded to a single shipowner with a contract that
would be long enough to allow the full amortisation of a purpose-built vessel.
In such cases, the vessel could be leased – under very clear conditions set out
in detail in the tender documents – by successive operators from a
vessel-owning company set up for that purpose. An obligation for the new
service provider to take the ship over directly from its predecessor would also
be conceivable.

Where Member
States' authorities themselves own vessels or have them otherwise at their
disposal, these may be placed at the disposal of all potential service
operators under the same non-discriminatory terms.

5.3.2.2. Manning conditions

Secondly, questions
have also been raised in relation to the manning conditions that may be imposed
under public service obligations and contracts.

The Commission
takes the view that rules that may be imposed under public service obligations
and contracts (Article 4 of the Regulation) should be limited to the
requirements that are essential for the public service needs and do not go
beyond what is necessary to achieve it. This will need to be examined on a
case-by-case basis.

The Commission
notes that Member States may decide to impose under public service obligations
and contracts the same rules as those imposed by host Member States on any
vessel participating in an island cabotage service (Article 3(2) of the
Regulation). These rules are specified in Section 4 of this Communication.

5.4. 
The procedure for imposing public service
obligations and concluding public service contracts

Member States
have several administrative means at their disposal for imposing 'public
service obligations', applied to all operators of a given route, such
as a declaration regime, a licensing system or an authorisation system.
Member States may also impose public service obligations by concluding public
service contracts with one or a limited number of operators.

The Court of
Justice in Case C-205/99 stated that a procedure as restrictive as an
authorisation procedure is acceptable provided that it is necessary (where 'a
real public service need arising from the inadequacy of the regular transport
services under conditions of free competition can be demonstrated'),
proportionate to the aim pursued and based on objective, non-discriminatory
criteria which are known in advance to the undertakings concerned. Companies
should also be given the right to appeal against any decision taken against
them[38].

5.4.1. 
Applicable public procurement rules

When the
competent authority of a Member State concludes a public service contract, it
has to respect the applicable procurement rules. On 26 February 2014 the
Council and the European Parliament adopted a new Directive on the award of
service concession contracts (hereunder Concessions Directive)[39]. On
the same date, the Council and the European Parliament also adopted Directive
2014/24/EU and Directive 2014/25/EU (hereunder Public Procurement Directives)[40].

According to the
Commission's experience, most of public service contracts awarded in
application of Article 4 of the Regulation constitute 'service concessions'
in the meaning of the public procurement legislation. In particular, by means
of such contract the competent authority entrusts the provision of the maritime
cabotage service to a shipowner for a certain period of time. The shipowner is
obliged to provide the transport service stipulated in the contract, usually
against a financial compensation from the authority[41]. The
shipowner in principle bears the operating risk (if this is not the case, such
a contract qualifies as a public contract in the meaning of Public Procurement
Directives), encompassing the risk related to the demand for his transport
services, since the competent authorities usually do not guarantee in the
public service contract that the shipowner would recoup all the investments
made or the costs incurred in performing his contractual obligations.

For
the award of public service contracts falling within the scope of Concessions
Directive the competent authority must treat all shipowners equally and without
discrimination and is required to act in a transparent and proportionate manner
in order to ensure genuine competition[42].
Moreover, the Directive lays down, among others, an obligation to publish the
concession notice and the relevant contract award notice in the Official
Journal of the European Union[43]. It
also establishes a number of obligations with respect to the selection and
award criteria and sets out procedural guarantees aimed at ensuring
transparency and equal treatment, notably during negotiations between the
competent authority and tenderers.

Regarding the
award of public service contracts that fall within the scope of Public
Procurement Directives, it should be stressed that the new Directives abolish
the distinction between prioritary and non-prioritary services. Waterborne
transport services were defined in public procurement Directives 2004/17/EC and
2004/18/EC as non-prioritary and were subject only to a limited number of
requirements (on technical specifications and award notice). Under the new
Public Procurement Directives the award of public service contracts falling
within the scope of these Directives is in principle subject to all requirements
established therein.

In cases of
contracts below the thresholds for application of Concessions Directive or
Public Procurement Directives a selection and award procedure is nonetheless
required to meet the Treaty requirements of non-discrimination and equal
treatment that imply an obligation of transparency. According to the Court of
Justice, the latter consists in ensuring, for the benefit of any potential
tenderer a degree of advertising sufficient to enable the services market to be
opened up to competition and the impartiality of the procedures to be reviewed[44].

5.4.2. 
Choice of the award procedure

Article 4 of
Regulation 3577/92 requires that in awarding public service contracts Member
States should not discriminate between shipowners.

The Commission
takes the view that, in general, the awarding of public service contracts risks
to discriminate between operators, as normally only one operator on a given
route is granted the contract. It therefore considers that launching an open
tender procedure is in principle the easiest way to ensure non‑discrimination.
An award procedure involving negotiation with the potential bidders may
comply with the principle of non-discrimination provided that the negotiations
between the adjudicating authority and companies having submitted bids in the
tender are impartial, fair and transparent[45]. The
Commission believes that a direct award fails to respect the principle of
non-discrimination and transparency enshrined in Article 4 of the Regulation.
Likewise, any tender procedure which is designed in such a way as to unduly
restrict the number of potential bidders does not comply with the principles of
non-discrimination and transparency.

Moreover, in order
to ensure the compliance with these principles, the period between the
launching of the tender procedure and the date from which the operation of the
transport services has to start, should be of appropriate and reasonable
length. The Commission considers that too short periods that do not
sufficiently reflect the needs of cabotage service to be awarded (e.g.
regarding the size of the market, requirements of quality or frequency) might
favour the incumbent shipowner in breach of the principle of equal treatment.

The Commission
would also point out that the choice of the award procedure has implications
for the assessment in the light of State aid rules of any financial
compensation granted for discharging the public service contract. In
particular, in order not to constitute State aid such compensation has to
respect the four conditions laid down by the Court in the Altmark
judgment[46]. In
accordance with the fourth Altmark criterion, the compensation offered
must either be the result of a public procurement procedure which allows for
selection of the tenderer capable of providing those services at the least cost
to the community, or the result of a benchmarking exercise with a typical
undertaking, well run and adequately provided with the necessary means. The
Commission considers that the simplest way for public authorities to meet the
fourth Altmark criterion is to conduct an open, transparent and
non-discriminatory public procurement procedure[47]. As
a consequence, provided that remaining conditions laid down in the Altmark
judgement are met, such procedure will also generally exclude the existence of
State aid[48].

The Regulation
does not require the Member States to notify every public service contract they
conclude. Where the contract involves compensation for the costs of providing a
public service, it may need to be notified to the Commission in advance in
accordance with the State aid rules (point 5.6 of this Communication gives more
details in this respect). The notification obligation laid down by
Article 9 of the Regulation only refers to acts with a broader scope such
as a general legal framework for cabotage services.

5.5. 
Market access and competition on public service
routes

By imposing
public service obligations, Member States intervene in the conditions of market
access on certain routes, which may distort competition if not done in a non‑discriminatory
way. Such interventions may be considered both legitimate and lawful in view of
the aim pursued (to ensure the adequacy of regular-scheduled- transport
services to, from and between islands). Any intervention in relation to a public
service obligation should remain proportionate to the aim pursued. Should it go
beyond what is strictly needed, it would unnecessarily restrict a freedom which
is essential for the proper functioning of the internal market. The Commission
wishes to address three topics related to this issue.

5.5.1. 
Exclusivity

Granting
exclusivity to a shipowner on a public service route normally allows Member
States to achieve the least financial burden to the community but it restricts
the traditional freedom of trade in the maritime transport sector.

A fair balance
should be established between the two principles.

In duly
justified cases exclusivity may be considered the only adequate instrument to
meet the essential transport needs, when granted for a limited period of time
and on the basis of an open, fair and non-discriminatory Union-wide award
procedure.

The Commission
stresses, however, that in many cases, less restrictive measures than
exclusivity may be taken in order to avoid 'market skimming' and to
diminish the amount of financial compensation needed. An operator contractually
bound to fulfil public service obligations all year round, without an exclusive
right, might suffer from the behaviour of another operator who, in the absence
of any public service obligations could enter the market only for the more
profitable months of the year and seriously reduce the first operator's
earnings.

The Commission
considers that light public service obligations may be imposed on all operators
of the same route in parallel to a public service contract concluded with one
operator[49]. For
example, a condition could be set according to which any shipowner entering a
route where a public service contract is in force which imposes all year round
services will have to operate all year round as well.

5.5.2. 
Duration of public service contracts

The Regulation
does not set any maximum duration for public service contracts. However, it
follows from Article 1 and Article 4 of the Regulation that public
service contracts should have a limited duration in order to allow regular and
open prospecting of the market.

If a public
service contract is a concession, according to Article 18 of Directive
2014/23/EU on the award of concession contracts in case of contracts with a
duration greater than five years, the maximum duration of the concession must
'not exceed the time that a concessionaire could reasonably be expected to take
to recoup the investments made in operating the works or services together with
a return on invested capital taking into account the investments required to
achieve the specific contractual objectives'.

With a view to
complying with the principle of proportionality in any market intervention,
Member States should choose the least distortional means, also in terms of
duration, to meet the essential maritime transport needs. All Union shipowners
should be regularly given the opportunity to apply for the operation of a given
service (on this matter, see also point 5.6 below).

In its
interpretative Communication of 2003 the Commission indicated that a public
service contract of a period of more than six years does not normally meet the
proportionality requirement.

However, the
Commission's experience since 2003 has shown that in some cases the six years
limit puts shipowners off bidding as they consider this duration to be too
short to recoup the investments in the operation of the service. Likewise,
public authorities also claim that contracts of short duration might discourage
shipowners from making more substantial investments, thus hampering innovation
and possible improvements in the quality of the service. It should also be
underlined that the preparation of selection procedure for awarding maritime
cabotage public service contracts might take a certain time.

For this reason
the Commission believes that public service contracts lasting more than five
(in case the contract is a concession in the meaning of Concessions Directive)
or six years can meet the proportionality requirement provided that (1) they
are justified by objective criteria, such as the need to recoup the investments
made in operating the maritime cabotage service under normal operating
conditions (e.g. investments in vessels or infrastructure) (2) and they do not
lead to the market foreclosure.

Without
prejudice to a case-by-case analysis, according to the Commission's experience
and the information provided by the public authorities, contracts of a maximum
duration of 12 years could be justified in order to enable the depreciation of
a significant part of costs of an average new ferry, while allowing the proper
functioning of the market. In the Commission's opinion contracts of a
significantly longer duration (e.g. that would allow the full amortisation of a
new vessel with a return on the invested capital) could hamper the benefits of
competitive pressure on the cabotage market [50](see
also section 8 below).

5.5.3. 
Bundled routes

Member States
often wish to group public service routes to and from different islands into a
single bundle in order to generate economies of scale and attract operators.
Bundles as such are not contrary to Union law provided that bundling does not
lead to discrimination and does not lead to undue market distortions.

The most
appropriate size of bundles should be decided by taking account of the best
synergy to be made in meeting essential transport needs.

5.6. 
Public subsidies granted to compensate for
public service obligations

The Regulation
applies in the same way whether subsidies are granted or not. However, when
compensation for public service obligations and contracts is granted, this must
be done in compliance with the Treaty State aid rules as interpreted by the
Court of Justice and with the rules contained in the Commission's package of
instruments governing State aid for the provision of Services of General
Economic Interest (SGEI).

That package
consists of the following instruments:

(a) 
a
Communication[51] that
clarifies the key concepts underlying the application of the State aid rules to
public service compensation, as well as the conditions (so called Altmark[52]
criteria) under which public service compensation does not constitute State
aid;

(b) 
a Commission Regulation on de minimis aid for
the provision of SGEI[53], providing that public service compensation in an amount not
exceeding EUR 500 000 over any period of three fiscal years is deemed not to
constitute aid, provided that the conditions set out in that regulation are
fulfilled.

(c) 
a Decision [54] that sets out the conditions under which State aid in the form of
public service compensation is compatible with the internal market and exempt
from the requirement of notification.

(d) 
a Framework for State aid in the form of public
service compensation[55] that sets out the conditions under which compensation subject to
the notification requirement[56] may be declared compatible with Article 106(2) TFEU.

(e) 
The Commission has also published a Guide on the
application of the EU rules on State aid, public procurement and the internal
market to services of general economic interest, and in particular to social
services of general interest[57], to provide further guidance on the application of the SGEI rules.

5.7. 
The case of 'small islands'

Procedures for
concluding public service contracts in the maritime sector may be
over-complicated when it comes to organising services for small islands, which
normally only attract local operators.

In order to
reconcile this specificity with the need to comply with the principles of
transparency and non-discrimination, which it considers can be achieved only
through open, fair and non-discriminatory award procedures, the Commission
takes the view that, without prejudice to Union procurement and State aid rules
where applicable, the selection of a suitable operator entrusted to serve a
small island could be carried out following a simple call for expressions of interest
without launching a formal tender, provided that a Union- wide announcement of
the service – which is very easily organised – is maintained. The Commission
takes the view that a longer duration of contracts, of 12 years, might be
acceptable.

Regulation (EEC)
no 3577/92 does not provide for a definition of small islands. For the purpose
of this Communication, experience, and particularly a study carried out on
behalf of the Commission[58],
shows that 'small islands' could be understood to mean islands where
the total annual number of passengers carried by sea to and from the island is
around 300 000 or fewer. The threshold of 300 000 passengers refers
to a one-way count, i.e. a passenger travelling to the island and back counts
twice. As far as outermost regions are concerned, this threshold only applies
to trade within the region (and not trade between an outermost island and the
mainland).

The simplified
rules may in principle apply to the carriage under public service contracts of
both passengers and goods to and from a 'small island'. However, goods
trade, which can normally be organised under competitive conditions, should be
excluded wherever there is a risk of unjustifiable market distortion.

Where the same
operator serves several small islands, the total number of passengers carried
by that operator in the context of the public service should be taken into
account when determining whether the threshold is reached.

6. 
Safeguard measures

Article 5
of the Regulation stipulates that Member States may request the Commission to
adopt safeguard measures 'in the event of a serious disturbance of the
internal transport market due to cabotage liberalisation'. Article 2(5)
provides that such measures may be applied for a maximum of one year where
problems appear on the market which 'are likely to lead to a serious and
potentially lasting excess of supply over demand, are due to, or aggravated by,
maritime cabotage operations, and pose a serious threat to the financial
stability and survival of a significant number of Community shipowners,
provided that the short-term and medium-term forecasts for the market in
question do not indicate any substantial and lasting improvements'.

This provision
has been applied only once, in Spain, when the Regulation first entered into
force[59].

It should be
stressed that individual instances of shipowners on a given route going
bankrupt are not sufficient to warrant the application of this clause.

The cabotage
reports published since the Regulation entered into force show that liberalisation
of cabotage has not caused any other serious disturbance of the internal
transport market. It is unlikely that it would cause such a disturbance now,
given that most services have been liberalised.

7. 
Transitional measures

Article 6 of the
Regulation lays down a number of temporary derogations from the implementation
of this Regulation. The derogations set out by this Article expired in 2004.
Upon the accession of Croatia, which became an EU Member State on 1 July 2013,
Article 6 of the Regulation was amended in order to ensure some temporary
derogations for Croatia[60].

In line with the
new Article 6(4) public service contracts to and between Croatian islands
concluded before the date of Croatia's accession may continue to apply until 31
December 2016.

According to
Article 6(5) cruise services carried out between Croatian ports by ships
smaller than 650 gt have been reserved until 31 December 2014 to ships
registered in, and flying the flag of, Croatia, which are operated by shipping
companies established in accordance with Croatian law, and whose principal
place of business is situated, and effective control exercised, in Croatia.

Finally, Article
6(6) lays down additional safeguard measures until 31 December 2014 regarding
cruise services between ports of a Member State other than Croatia carried by
the Croatian vessels smaller than 650 gt. The Commission may, upon a request by
a Member State, decide within 30 days that such Croatian vessels shall not
carry out cruise services between ports of certain areas of a Member State
other than Croatia where it is demonstrated that the operation of these
services seriously disturbs or threatens to seriously disturb the internal
transport market in the areas concerned.

If after the
period of 30 working days from the request the Commission has taken no
decision, the Member State concerned can apply safeguard measures until the
Commission has taken its decision. In the event of an emergency, the Member State may unilaterally adopt provisional measures for no more than three months and
inform the Commission thereof. The Commission may abrogate the measures or
confirm them until it takes its final decision.

8. 
Application of Regulation (EC) No 1370/2007 to
maritime cabotage

Regulation (EC)
No 1370/2007 of the European Parliament and of the Council on public passenger
transport services by rail and by road and repealing Council Regulations (EEC)
Nos 1191/69 and 1107/70[61]
was adopted on 23 October 2007. According to Article 1(2) this Regulation shall
apply to the national and international operation of public passenger transport
services by rail and other track-based modes and by road. The same Article
provides that 'Member States may apply this Regulation to public passenger
transport by inland waterways and, without prejudice to Council Regulation
(EEC) No 3577/92, national sea waters'.

As Regulation
(EC) No 1370/2007 does not provide for a definition of 'national sea waters'
nor is this term defined in any Union or international acts, the Commission has
been faced with questions of application of this Regulation to maritime
cabotage services.

First of all,
the Commission would point out that Regulation (EC) No 1370/2007 is not
automatically applicable to public passenger transport by national sea waters,
but applies only in those cases where a Member State makes it expressly
applicable.

Secondly, the
majority of public service contracts and obligations in maritime cabotage cover
transport of both passengers and freight carried out by means of mixed
passenger/cargo ferries, while Regulation (EC) No 1370/2007 may be applied only
to public transport of passengers and not freight. Thus, Member States may not
apply Regulation (EC) No 1370/2007 to such mixed public service contracts
involving transport of freight.

Finally, Member
States may apply Regulation (EC) No 1370/2007 to public transport of passengers
by national sea waters to the extent that it does not prejudice the application
of Regulation (EEC) No 3577/92. Therefore, in case a conflict of provisions of
these two regulations exists, Regulation (EEC) No 3577/92 should supersede the
conflicting provision of Regulation (EC) No 1370/2007. The latter might
complete Regulation (EEC) No 3577/92 when there is no contradiction between
them.

Certain
provisions of Regulation (EC) No 1370/2007 that appear to affect the
application of Regulation (EEC) No 3577/92, in particular the provisions on
direct award of contracts, exclusivity or contract duration, are briefly
discussed below[62]. This
assessment of simultaneous application of the two regulations addresses only
the most recurrent questions which the Commission received since the entry into
force of Regulation (EC) No 1370/2007 and does not cover all its provisions in
an exhaustive manner.

Regulation (EC)
No 1370/2007 requires that public service contracts should be awarded through a
fair, open, transparent and non-discriminatory competitive tendering procedure[63].
However, Regulation (EC) No 1370/2007 provides for some exceptions to this
general principle such as for instance in Article 5(4) which states that the
competent authorities may award a public service contract of small value or to
a small or medium-sized operator directly without a competitive tendering
procedure. The Commission considers that such direct award is in principle contrary
to the principle of non-discrimination between shipowners laid down in Article
4(1) second sentence of Regulation (EEC) No 3577/92. Therefore, the
Commission believes that in applying Regulation (EC) No 1370/2007 Member States
may not award public service contracts regarding the passenger transport by
national sea waters directly, without following a procedure which ensures the
compliance with the principles of non-discrimination, transparency and
impartiality (see section 5.4 and 5.7 for simplified rules in case of 'small
islands').

Pursuant to
Article 3(1) and 2(f) of Regulation (EC) No 1370/2007 Member States may grant
an operator an exclusive right in return for the discharge of public service
obligations. Recital 8 of this Regulation recalls that passenger
transport markets which are deregulated and in which there are no exclusive
rights should be allowed to maintain their characteristics and way of
functioning insofar as these are compatible with Treaty requirements. The
exclusivity is exceptional in maritime cabotage as in principle less
restrictive measures might be taken by Member States to meet the public
transport needs (see paragraph 5.5.1 of this Communication). Therefore, the
Commission considers that Member States may not introduce exclusivity on the
basis of Article 3(1) of Regulation (EC) No 1370/2007 to public
transport of passengers by national seawaters routes which
have not been subject to exclusive rights pursuant to Regulation (EEC) No
3577/92.

Article 4(3)
first sentence of Regulation (EC) No 1370/2007 states that the maximum
duration of a public service contract shall be ‘10 years for coach and bus
services and 15 years for passenger transport services by rail or other
track-based modes.’ The Regulation does not provide for any modalities of
application of this Article to contracts of public transport of passengers by
national seawaters. Instead, it states in the second sentence of the same
Article that the
duration of public service contracts relating to several modes of transport
shall be limited to 15 years if transport by rail or other track-based modes
represents more than 50% of the value of the services in question. The
Commission considers
that in
case a Member State decides to apply Regulation (EC) No 1370/2007 to public
transport of passengers by national seawaters it should limit
the duration of public service contracts relating to several modes of
transport- including by national sea waters- to 15 years maximum provided that
the conditions established in Article 4(3) second sentence are met.

It seems that
applying Regulation (EC) No 1370/2007 to passenger transport services by
national seawaters might in some cases be useful where those services are
integrated into a wider urban, suburban or regional public passenger transport
network
(e.g. in the context of integrated local transport services involving estuaries
or within a lagoon).

Each time a Member States decides to
apply this Regulation to public passenger transport by national sea waters it
should analyse whether any provisions of its respective national legislation do
not prejudice application of Regulation (EEC) No 3577/92. The Commission would
also point out that in line with the obligation stemming from Article 9 of
Regulation (EEC) No 3577/92 Member States should consult the Commission before
adopting any measures applying Regulation (EC) No 1370/2007 to public passenger
transport by national sea waters[64].

[1]               Communication from the Commission to the European
Parliament, the Council, the European Economic and Social Committee and the
Committee of the Regions on the interpretation of Council
Regulation No 3577/92 applying the principle of freedom to provide services to
maritime transport within Member States (maritime cabotage) of 22.12.2003,
COM(2003)595.

[2]               Communication from the Commission to the European
Parliament, the Council, the European Economic and Social Committee and the
Committee of the Regions updating and rectifying the Communication on the
interpretation of Council Regulation No 3577/92 applying the principle of
freedom to provide services to maritime transport within Member States
(maritime cabotage) of 11.5.2006, COM(2006)196.

[3]               OJ L 315, 3.12.2007, p. 1.

[4]               OJ L 364, 12.12.1992, p. 7.

[5]               COM(95)383, COM(97)296, COM(2000)99, COM(2002)203.

[6]               COM (2014)231.

[7]               For the beneficiaries of the freedom to provide
services, see point 2.2.

[8]               Joined Cases C-128/10 and C-129/10 Naftiliaki
Etaireia Thasou [2011] ECR I-1887, paragraphs 43 et seq.

[9]               See also sections 4-6 of this Communication.

[10]             For more guidance see also the Commission Consolidated
Jurisdictional Notice under Council Regulation (EC) No 139/2004 on the control
of concentrations between undertakings (2008/C 95/01), OJ C 95, 16.4.2008, p.1.

[11]             By and large, these territories form part of the
overseas countries and territories subject, by virtue of Article 355 of
the Treaty, to special arrangements for association with the Member States.

[12]             Article 355(3) of the Treaty stipulates that 'the
provisions of this Treaty shall apply to the European territories for whose
external relations a Member State is responsible'.

[13]             For an overview of national regimes on maritime
cabotage see Table 3 of the Commission staff working document accompanying the
fifth report on the implementation of the Regulation referred to in footnote 6.

[14]             Case C-251/04 Commission of the European Communities
v Hellenic Republic [2007] ECR I-67, paragraphs 28-29.

[15]             Case C-323/03 Commission of the European Communities
v Kingdom of Spain [2006] ECR I-2161, paragraph 24.

[16]             Ibidem, paragraph 25.

[17]             Opinion of Advocate General Tizzano delivered on 10
November 2005 in Case C-323/03 referred above.

[18]             River valley inundated by the sea.

[19]             Case C-323/03 Commission of the European Communities
v Kingdom of Spain [2006] ECR I-2161, paragraph 33.

[20]             Ibidem, paragraph 34.

[21]             Case C‑17/13 Alpina River
Cruises, not published yet.

[22]             OJ L 378, 31.12.1986, p. 1.

[23]             Administrative note of 9 February 2007 on the
interpretation of Article 257 of the French Customs Code.

[24]             Case C-288/02 Commission of the European Communities
v Hellenic Republic [2004] ECR I-10071.

[25]             Case C-456/04 Agip Petroli SpA v Capitaneria di porto
di Siracusa and Others [2006] ECR I-3395, paragraphs 15-25.

[26]             Ibidem, paragraph 23.

[27]             COM (1998)251 final.

[28]             Case C-288/02 Commission of the European Communities
v Hellenic Republic [2004] ECR I-10071, paragraph 42.

[29]             Opinion of Advocate General Tizzano delivered on 10
November 2005 in Case C-323/03 referred above, points 39-45.

[30]             Study on Small Islands and Estuaries (2002), ICF
Consulting.

[31]             The ratio between the distance around the estuary and
the distance across should be around 10 or greater.

[32]             See Recital 9 and Article 2(4) of the
Regulation. See also the judgement in Case C-205/99 Analir v Administración
General del Estado [2001] ECR I-1271, paragraphs 31 et seq.

[33]             Case C-205/99, cited above, paragraphs 45 to 51.

[34]             If an island needs to be served 4 times a week and two
shipowners are willing to participate in the trade, each of them should only
commit himself to operating twice a week or, respectively, once and three times
a week.

[35]             Joined Cases C-128/10 and C-129/10 Naftiliaki
Etaireia Thasou [2011] ECR I-1887, paragraph 54.

[36]             Communication from the Commission on the application of
the European Union State aid rules to compensation granted for the provision of
services of general economic interest (OJ C 8, 11.1.2012, p. 4), point 48.

[37]             Case T-17/02 Fred Olsen [2005] ECR II-2031,
paragraph 216 and Commission Decision 2013/435/EU of 2 May 2013 on State aid
SA.22843 (2012/C) (ex 2012/NN) implemented by France in favour of Société
Nationale Maritime Corse-Méditerranée, OJ L 220,
17.8.2013, p. 20–45.

[38]             Case C-205/99, cited above. See also Joined Cases C-128/10
and C-129/10 Naftiliaki Etaireia Thasou [2011] ECR I-1887, paragraphs 52
et seq.

[39]             Directive 2014/23/EU of the European Parliament and of
the Council of 26 February 2014 on the award of concession contracts, OJ L 94,
28.3.2014, p.1

[40]             Directive 2014/24/EU of the European Parliament and of
the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC,
OJ L 94, 28.3.2014, p.65; Directive 2014/25/EU of the European Parliament and
of the Council of 26 February 2014 on procurement by entities operating in the
water, energy, transport and postal services sectors and repealing Directive
2004/17/EC OJ L, 28.3.2014, p.243.

[41]             See also Case C-205/99, cited above, paragraphs 63 and
65.

[42]             Articles 3 and 30.

[43]             Articles 31-33.

[44]             See the Commission interpretative communication on
concessions under Community law (OJ C 121, 29.4.2000, p. 2), Commission interpretative
communication on the Community law applicable to contract awards not or not
fully subject to the provisions of the Public Procurement Directives (OJ C 179,
1.8.2006, p. 2), Case C-324/98 Teleaustria and Telefonadress v
Telekom Austria [2000] ECR I – 10745, paragraph 60.

[45]             See also point 66 of the Communication from the
Commission on the application of the European Union State aid rules to
compensation granted for the provision of services of general economic interest
(OJ C 8, 11.1.2012, p. 4).

[46]             Case C-280/00 Altmark Trans
GmbH and Regierungspräsidium Magdeburg v Nahverkehrsgesellschaft Altmark
GmbH (‘Altmark’) [2003] ECR I-7747.

[47]             Points 63-64 of the Communication from the Commission
on the application of the European Union State aid rules to compensation
granted for the provision of services of general economic interest (OJ C 8,
11.1.2012, p. 4)

[48]             Ibidem, points 65-68.

[49]             On the possibility for a Member State to impose public
service obligations in parallel to a public service contract, see also Case
C-205/99, paragraphs 60 to 71.

[50]             In Case C-323/03 Commission of the European
Communities v Kingdom of Spain [2006] ECR I-2161 the Court ruled that a
national measure which reserves maritime transport services to a single
undertaking by a means of an administrative concession for duration of 20
years, renewable for the period of 10 years constitutes a restriction on
freedom to provide services (paragraph 44).

[51]             Communication from the Commission on the application of
the European Union State aid rules to compensation granted for the provision of
services of general economic interest - OJ C 8, 11.1.2012, p. 4.

[52]             Case C-280/00 Altmark Trans GmbH and Regierungspräsidium
Magdeburg v Nahverkehrsgesellschaft Altmark GmbH.

[53]             Commission Regulation (EU) No 360/2012 of 25 April
2012 on the application of Articles 107 and 108 of the Treaty on the
Functioning of the European Union to de minimis aid granted to undertakings
providing services of general economic interest (OL L 114, 26.4.2012, p.8).

[54]             Decision on the application of Article 106(2) of the
Treaty on the Functioning of the European Union to State aid in the form of
public service compensation granted to certain undertakings entrusted with the
operation of services of general economic interest (OJ L 7, 11.1.2012, p. 3).

[55]             Communication from the Commission on European Union
framework for State aid in the form of public service compensation, OJ C 8,
11.1.2012, p. 15.

[56]             That is when the public service compensation does not
meet the Altmark criteria, is not covered by the SGEI de minimis regulation and
is not block exempted under the Decision

[57]             SWD(2013) 53 final/2, available at http://ec.europa.eu/competition/state_aid/overview/new_guide_eu_rules_procurement_en.pdf

[58]             Study on Small Islands and Estuaries (2002), ICF
Consulting.

[59]             Commission Decision 93/396/EEC of 13 July 1993 on
Spain's request for adoption by the Commission of a prolongation of safeguard
measures pursuant to Article 5 of Regulation (EEC) No 3577/92
applying the principle of freedom to provide services to maritime transport
within Member States (maritime cabotage) , OJ L 173, 16.7.1993, p. 33.

[60]             Act concerning the conditions of accession of the Republic
of Croatia and the adjustments to the Treaty on European Union, the Treaty on
the Functioning of the European Union and the Treaty establishing the European
Atomic Energy Community, Article 18 and Annex V, point 7 (1), OJ L 112,
24.4.2012, p. 21.

[61]             OJ L 315, 3.12.2007, p. 1.

[62]             See also the Communication from the Commission on
interpretative guidelines concerning Regulation (EC) No 1370/2007 on public
passenger transport services by rail and by road, OJ C 92, 29.3.2014, p. 1.

[63]             Article 5(3) of Regulation (EC) No 1370/2007.

[64]             On the obligation of consultation see Case C-323/03 Commission
v Kingdom of Spain [2006] ECR I-2161, paragraphs 69-70.