In the published version of this Decision, some information has been omitted, pursuant to articles 30 and 31 of Council Regulation (EU) 2015/1589 of 13 July 2015 laying down detailed rules for the application of Article 108 of the Treaty on the Functioning of the European Union, concerning non-disclosure of information covered by professional secrecy. The omissions are shown thus […] PUBLIC VERSION This document is made available for information purposes only.

COMMISSION DECISION (EU) 2021/69

of 24 February 2020

on State aid SA.43549 (2017/C) (ex 2017/FC) (ex 2016/NN) (ex 2015/EO) implemented by Romania for CFR Marfă

(notified under document C(2020) 1115)

(Only the Romanian text is authentic)

(Text with EEA relevance)

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union, and in particular the first subparagraph of Article 108(2) thereof,

Having regard to the Agreement on the European Economic Area, and in particular Article 62(1)(a),

Having called on interested parties to submit their comments pursuant to the provision(s) cited above (1) and having regard to their comments,

Whereas:

1. PROCEDURE

(1) By letter dated 24 September 2015, Romania informed the Commission that in June 2013 it converted into equity a public debt of RON 1 669 million (ca. EUR 363 million (2)) owed by Societatea Națională de Transport Feroviar de Marfa CFR S.A. (hereinafter ‘CFR Marfă’), a State-owned rail freight company, to CFR Infrastructură, a State-owned rail infrastructure manager, various social security bodies and tax bodies (3). On the basis of the information provided by Romania, the Commission decided to open an ex officio case into the measures in favour of CFR Marfă, registered under the State aid case number SA.43549 (2015/CP).

(2) By letters dated 17 November 2015, 6 July 2016, and 6 April 2017, the Commission requested information on the measures in favour of CFR Marfă. Romania responded by letters dated 24 December 2015, 10 and 11 August 2016 and 12 May 2017. Romania also pre-notified the debt-to-equity swap on 5 October 2016 and Romania’s pre-notification was merged with the above mentioned ex officio State aid case.

(3) On 6 March 2017, the Commission received a formal complaint (‘the Complaint’) from the Association of Private Rail Freight Operators in Romania (‘the complainant’ or ‘OPSFPR’, which stands for Organizația Patronală a Societăților Feroviare Private din Romania) (4), representing the interests of private companies operating in the field of rail freight transport in Romania. The complaint together with a request for further technical information was sent to Romania on 6 April 2017. Romania commented on the complaint on 12 May 2017.

(4) On 19 September, an Addendum to the Complaint was submitted to the Commission by the complainant. The non-confidential version of the Addendum was forwarded to Romania for comments. Romania replied on 6 October 2017.

(5) By letter dated 18 December 2017, the Commission informed Romania that it had decided to initiate the formal investigation procedure laid down in Article 108(2) of the Treaty on the Functioning of the European Union (‘TFEU’) in respect of the aid.

(6) The Commission decision to initiate the procedure (hereinafter ‘the Opening Decision’ was published in the Official Journal of the European Union (5). The Commission invited interested parties to submit their comments on the aid/measure.

(7) The Commission received the initial observations from Romania on the Opening Decision on 20 February 2018.

(8) The Commission also received comments from interested parties on 6 July 2018. On 16 July 2018, the Commission forwarded them to Romania with the opportunity to react. Romania submitted its observations on third party comments by letter dated 14 August 2018.

(9) The Commission sent subsequent requests for information to Romania, notably on 14 November 2018 and on 15 March 2019, to which the Romanian authorities replied on 19 December 2018, and on 27 June, 9 July, 13 September and 6 November 2019, respectively.

(10) The Commission held various meetings with the Romanian authorities, the most recent being on 24 July 2019, after which Romania submitted additional information on 13 September 2019.

2. DETAILED DESCRIPTION OF THE AID

2.1. Beneficiary

(11) CFR Marfă is a 100 % State-owned limited liability company (‘State-owned enterprise’ or ‘SoE’) providing rail freight services and operating multimodal terminals. Romania, as a sole shareholder, currently manages and supervises the company (e.g. regarding its annual budget) via the Ministry of Transport.

(12) CFR Marfă was incorporated as a joint stock company on 1 October 1998, following the reorganisation of the Romanian Railways incumbent, Societatea Națională Căile Ferate Române (‘SNCFR’) (6), a vertically integrated railway company, which was then split into five independent companies: CFR Infrastructură (or CFR SA, the infrastructure manager, 100 % owned by the State, hereinafter ‘CFR Infrastructură’), CFR Marfă, CFR Călători (the rail passenger operator, 100 % owned by the State), CFR Gevaro (providing services linked with restaurant cars and sleeping wagons) and Societatea de Administrare Active Feroviare – SAAF (company managing excess rolling stock, which is to be sold, leased or scrapped).

(13) CFR Marfă provides rail freight transport services of, inter alia, domestic coal, cement, chemical products, grain and oil, wood, salt and metals, operates multimodal terminals and provides ancillary services, such as depot services, fuel services, and logistics. Among CFR Marfă’s main clients are other SoEs, such as CE Hunedoara, the former chemicals producers Oltchim, Salrom, and district heating companies.

(14) In 2017, rail freight accounted for 30,2 % of the freight transport market in Romania, compared to 30,7 % in 2013 and to only 24,9 % in 2007 (7). The share of road transport was relatively higher, ranging from 53,5 % in 2007 to 40,3 % in 2013 and 42,4 % in 2017, whereas the share of inland waterways transport varied from 25,2 % in 2007 to 29 % in 2013 and to 27,4 % in 2017 (8).

(15) Romania granted access to its rail network to foreign rail freight operators in 1998 (9). Since Romania’s accession to the EU in 2007, CFR Marfă’s market share in the rail freight sector measured by volume (thousand tonnes of goods carried) decreased steadily from [70-80] % in 2007 to [50-60] % in 2014 and to [40-50] % in 2018. CFR Marfă’s market share measured by distance carried (tonnes-km) also decreased from [60-70] % in 2007 to [40-50] % in 2014 and to [30-40] % in 2018 (10). This represents CFR Marfă’s share of [5-10] % of the total freight market in Romania, comparing to the private rail freight operators combined market share of [10-20] % (11). Table 1 Market share (rail freight) development CFR Marfă 2007-2018 Market share (%) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 (*1) by volume of goods carried CFR Marfă [70-80] [60-70] [50-60] [50-60] [60-70] [50-60] [50-60] [50-60] [50-60] [40-50] [40-50] [40-50] Other rail freight operators [20-30] [30-40] [40-50] [40-50] [30-40] [40-50] [40-50] [40-50] [50-60] [50-60] [50-60] [50-60] by distance carried (tkm) CFR Marfă [60-70] [50-60] [40-50] [40-50] [40-50] [40-50] [40-50] [40-50] [40-50] [30-40] [30-40] [30-40] Other rail freight operators [30-40] [40-50] [50-60] [50-60] [50-60] [50-60] [50-60] [50-60] [60-70] [60-70] [60-70] [60-70] Source: Submission by Romania of 24 December 2015; Romania’s Reply of 12 May 2017, Annex 2; Romania’s Reply of 27 June 2019, point 29.1.

(16) At the time of the Opening Decision, around 20 rail freight operators were active on the Romanian market. CFR Marfă’s main competitors are all private operators with the following market shares (in terms of tonnes-km): SC Group Feroviar Roman SA (12). (‘GFR’; [20-30] % in 2012 and [20-30] % in 2016), SC Unifertrans SA ([5-10] % in 2012 and [5-10] % in 2016), SC Cargo Trans Vagon SA ([5-10] % in 2012 and [0-5] % in 2016), SC DB Schenker Rail Romania ([5-10] % in 2012 and [10-20] % in 2016), SC Transferoviar Grup SA ([0-5] % in 2012 and [0-5] % in 2016), and Rail Cargo Carrier Romania ([0-5] % in 2016) (13). At present, the number of active carriers in the Romanian rail freight market has now increased to 28 (14).

2.2. The financial difficulties of CFR Marfă before the failed privatisation in 2013

(17) Over the past decade, CFR Marfă’s business activity was progressively reduced. The cargo volume carried by CFR Marfă decreased steadily from […] thousand tonnes in 2007 to […] thousand tonnes in 2016 (see Table 2 below). Table 2 CFR Marfă’s cargo volume in thousand tonnes in 2007-2017 per category In thousand tonnes 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Cargo volume transported […] […] […] […] […] […] […] […] […] […] […] Source: Submission by Romania of 24 December 2015; Romania’s Reply of 12 May 2017, annex 1; Romania’s Reply of 19 December 2018, subsection E point 13.

(18) With the downsizing of CFR Marfă’s business activity also the number of employees was progressively reduced from 15 992 employees in full time equivalent (‘FTE’) in 2009 to 6 508 in 2014, to 6 155 in 2016 and to 5 717 in 2018 (see Table 3 below). Table 3 CFR Marfă’s employees in FTE in 2009-2018 In FTE 1999 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Number of Employees 29 289 15 992 10 813 8 257 9 053 8 767 6 508 6 454 6 155 5 995 5 717 Source: Submission by Romania of 24 December 2015, Romania’s Reply of 12 May 2017, annex 1, yearly balance sheets of the company (), Romania’ Reply of 27 June 2019, point 49.

(19) The factors described in recitals 15 and 16 above adversely affected the financial situation of CFR Marfă. As presented in Table 4 below, CFR Marfă has been facing financial difficulties for several years. Table 4 Key financial indicators of CFR Marfă in 2009-2016 In RON million 2009 2010 2011 2012 2013 2014 2015 2016 Total turnover 1 097,30 1 056,10 1 150,00 1 020,60 961,50 954,90 775,94 673,61 EBITDA – 186,60 –97,10 25,10 –41,50 –89,70 17,70 27,56 –43,69 Interest expenses 31,40 29,40 27,00 23,10 16,00 12,90 8,98 5,62 Total debt 1 261,60 1 673,40 1 891,20 2 186,60 666,30 720,20 788,25 868,13 Shareholders’ equity 93,60 – 343,50 – 471,90 – 904,60 566,20 540,50 405,21 302,00 Subscribed share capital 247,33 248,15 251,60 263,96 1 987,54 1 988,35 2 012,12 2 012,12 Other equity – 153,69 – 591,62 – 723,50 –1 168,58 –1 420,20 –1 447,69 –1 606,91 –1 710,13 — Re-evaluation reserves 93,91 120,62 107,98 106,46 114,90 101,99 88,08 88,08 — Reserves 236,22 253,62 266,15 279,17 293,50 306,36 201,05 201,05 — Accumulated profit/loss – 141,84 – 430,59 –1 004,18 –1 149,12 –1 565,68 –1 828,88 –1 736,85 –1 844,48 — Annual profit/loss – 341,98 – 535,27 –93,45 – 405,09 – 262,92 –27,16 – 159,19 – 154,78 % of the share capital lost – 62 – 238 – 288 – 443 – 71 – 73 – 20 – 15 Debt/Equity ratio 13,48 –4,87 –4,01 –2,42 1,18 1,33 1,94 2,87 EBITDA/Interest coverage ratio –5,94 –3,30 0,93 –1,80 –5,61 1,37 3,07 –7,77 Source: Submission by Romania of 24 December 2015; Romania’s Reply of 12 May 2017, annex 1.

(20) CFR Marfă has been loss making since 2008 (16). The accumulated annual losses in the financial years 2009 to 2012 amounted to RON 1 149,12 million (ca. EUR 250 million), which was the main factor for the decrease in shareholders’ equity from a positive value of RON 93,6 million (ca. EUR 20 million) in 2009 to a negative value of RON 904,60 million (ca. EUR 197 million) in 2012. The shareholders’ equity turned positive in 2013, at RON 566,20 million (ca. EUR 123 million), mainly due to a debt-to-equity swap agreed by the State (17) of RON 1 669 million (ca. EUR 363 million). The steady deterioration of the shareholders’ equity resumed in 2013 (immediately after the 2013 debt-to-equity swap) and continued in 2015 and 2016.

(21) As summarised in Table 5 below, CFR Marfă had already a significant level of debt in 2010, amounting to 126 % of total assets. Against the background of the deteriorating financial situation of the company, from 2010 to 2012 CFR Marfă’s debts increased by around 31 %, to reach RON 2 186,56 million (ca. EUR 475 million), i.e. 171 % of total assets.

(22) In 2012 the current liabilities (with due date of less than one year) represented 87 % of CFR Marfă’s total liabilities and consisted of trade payables, tax payables and other liabilities (see Table 5 below). Table 5 Overview of CFR Marfă’s debts 2010-2016 In RON million 2010 2011 2012 2013 2014 2015 2016 Provisions 215,72 96,92 61,1 31,69 1,97 2,68 1,55 Long-term borrowings 324,74 272,82 223,77 169,95 113,23 57,15 — Deferred revenue 2,24 2,49 2,23 2,49 1,61 1,73 1,4 Non-current liabilities 542,7 372,23 287,1 204,13 116,81 61,56 2,95 Trade payables* 556,36 709,55 841,85 301,12 448,10 604,60 731,54 Short-term borrowings 97,38 89,06 83,02 67,23 77,55 83,50 81,46 Taxes 310,86 487,48 631,57 52,15 69,00 14,07 30,79 Other liabilities 166,13 232,86 343,02 36,30 8,25 24,52 21,39 Current liabilities 1 130,73 1 518,95 1 899,46 456,80 602,90 726,69 865,18 Total debts 1 673,43 1 891,18 2 186,56 660,93 719,71 788,25 868,13 Total assets (= equity + debts) 1 329,96 1 419,28 1 281,94 1 227,16 1 260,21 1 193,47 1 170,12 Source: Submission by Romania of 24 December 2015; Private Investor Test application (* for trade payables), Deloitte, 29 March 2013; Romania’s Reply of 12 May 2017, annex 1, financial reports published on CFR Marfă website: http://www.cfrmarfa.cfr.ro/images/stories/financiar/sit%20fin%20extinse/Situatii%20financiare%20extinse%20la%2031.12.2014.pdf

(23) From 2010 to 2012 CFR Marfă’s trade payables increased by 53 %, from RON 562,61 million (ca. EUR 122 million) to RON 862,43 million (ca. EUR 187 million). The majority of the outstanding trade payables ([90-100] % out of total trade payables in 2012) can be attributed to SoEs, namely CFR Infrastructură, Informatica Feroviară (18), CFR Călatori and others (see Table 6 below). Table 6 Overview of CFR Marfă’s trade payables in 2010-2016 In RON million 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total trade payables 562,61 726,74 862,43 318,72 465,70 607,68 724,17 934,66 991,88 — out of which SoEs […] […] […] […] […] […] […] […] […] — out of which CFR Infrastructură 412,68 582,77 716,30 213,47 348,65 505,26 623,54 826,09 860,93 % CFR Infrastructură out of total trade payables 73,35 80,19 83,06 66,98 74,86 83,15 86,10 88,38 86,80 Source: Submission by Romania of 27 June 2019, point 39 and Commission’s own calculations ().

(24) According to the information provided by Romania, for the overdue debts towards CFR Infrastructură, CFR Marfă was charged interest and penalties (see Table 7 below). Table 7 Overview of overdue liabilities (including interest rate and penalties) owed by CFR Marfă to CFR Infrastructură Million RON 2010 2011 2012 2013 2014 2015 2016 2017 2018 Amount overdue, out of which 347 515,66 663,96 182,6 314,28 460,57 557,57 777,33 950,08 Interest rate and penalties (daily) for late payment % 0,05 0,05 0,05 0,05 0,06 0,05 0,05 0,03 0,03 Interest and penalties invoiced within the year […] […] […] […] […] […] […] […] […] % of total debt represented by CFR Infrastructură 30,57 28,08 34,44 34,15 27,65 62,24 61,78 76,57 73,23 Source: Romania’s Reply of 27 June 2019, points 36 and 39.

(25) CFR Marfă’s debts towards the State budget consisting of outstanding tax payables and outstanding social contributions payments (social security, contribution to the health insurance, contribution to the unemployment fund and to the special fund) more than doubled, from RON 376,21 million (ca. EUR 82 million) in 2010 to RON 838,47 million (ca. EUR 183 million) in 2012 (see Table 8 below).

(26) At the same time, CFR Marfă’s outstanding private bank loans decreased from RON […] million (ca. EUR […] million) in 2010 to RON […] million (ca. EUR […] million) in 2012 (see also recital 191 below explaining that CFR Marfă prioritised the repayment of private bank loans, salaries and non-public suppliers while postponing payments towards the State budget).

(27) According to the Romanian authorities, since the second part of 2013 onwards, CFR Marfă had no more overdue debts towards the State budget (see Table 8 below). Table 8 Overview of CFR Marfă’s overdue debts (including interest and penalties) towards the State budget since 2008 (including ANAF, CNPP, ANOFM and CNAS (social contribution)) In RON million 2008 2009 2010 2011 2012 (*2) June 2013 (*3) After June 2013 2014 2015 2016 (*4) 2017 (*5) 2018 Principal amount […] […] […] […] […] […] […] […] […] […] […] […] Interest for late payment […] […] […] […] […] […] […] […] […] […] […] […] Penalties for late payment […] […] […] […] […] […] […] […] […] […] […] TOTAL overdue debts towards the State budget 130,2 309,41 376,21 627,4 838,47 1 001,2 0 0 0 0 0 19,9 Source: Romania’s Reply of 27 June 2019, point 18, 19 and 21; Also Annex 4 to Romania’s comments on the Opening Decision submitted on 20 February 2018 (‘Romania’s Comments on the Opening Decision’).

2.3. History of CFR Marfă’s failed privatisation attempts and the 2013 debt-to-equity swap

(28) CFR Marfă is on the list of SoEs monitored by the International Monetary Fund (‘IMF’) and the World Bank (20) and was also covered by the EU in the second and third Balance of Payments financial assistance programmes (21). The international creditors recommended Romania in 2010 to privatise its majority stakes in several SoEs, including CFR Marfă, in order to reduce the outstanding payments and arrears negatively affecting Romania’s State budget.

(29) According to publicly available information, Romania intended to privatise CFR Marfă at least since 2007 (22). In a Letter of Intent dated 16 June 2010, Romania stated that it remained committed to privatising CFR Marfă in 2011 (23).

(30) In view of the commitments made by Romania through the Letter of Intent and Technical Memorandum of Understanding signed with the IMF and at the same time with the EU (24), Romania approved the privatisation strategy for a majority stake (51 %) in CFR Marfă through Government Decision No 46 of 13 February 2013.

(31) According to publicly available information, on 5 April 2013, the Romanian Ministry of Transport published a notice on the sale of the 51 % stake in CFR Marfă with a starting price of RON 797 million (ca. EUR 173 million) (25). By 8 May 2013, Romania received three bids for CFR Marfă’s shares from the US based OmniTRAX Inc., GFR, and a consortium of Transferoviar Grup and Donau-Finanz (26). On 15 May 2013, Romania announced that all three applications were rejected and that it would restart the privatisation process (27).

(32) On 17 May 2013, Romania published a notice on the sale of CFR Marfă’s shares in international, national and local media and on the websites of the Ministry of Transport and CFR Marfă. The potential investors were invited to express their interest in the acquisition of the majority stake (51 %) in CFR Marfă by 23 May 2013.

(33) On 23 May 2013, the submitted expressions of interest containing prequalification documents had been assessed and a shortlist of prequalified bidders was established. The shortlisted bidders, the Transferoviar Grup and Donau-Finanz consortium, GFR and OmniTRAX Inc., were notified by letter dated 23 May 2013.

(34) Between 24 May 2013 and 20 June 2013, the prequalified bidders received access to the data room allowing them to carry out due diligence. The prequalified bidders were also invited to submit non-binding preliminary offers by 5 June 2013 and binding bids by 20 June 2013. According to publicly available information, after prequalified bidders withdrew from the transaction, GFR remained the sole bidder by the deadline of 20 June 2013, offering ca. EUR 202 million for the 51 % stake and promising further investments amounting to ca. EUR 201,4 million (28).

(35) In the meantime, on 12 June 2013 Romania converted into equity RON 1 669 million (ca. EUR 363 million) of debts of CFR Marfă towards CFR Infrastructură and the State budget (in the form of the social security and tax payables) (29).

(36) Romania foresaw approving the main terms and conditions of the agreement on purchase and sale of shares between 25 June 2013 and 1 August 2013, thus aiming for completion of the transaction in October 2013. GFR however did not pay the purchase price by the deadline established, and the privatisation failed.

(37) Two other bidders – OmniTRAX and the consortium of Transferoviar Group and Donau-Finanz –, which had expressed their interest in buying CFR Marfă in 2013 besides GFR, withdrew from the bid. Subsequently, as reflected in various press declarations of the Government, other privatisation plans were envisaged but none of them were finally implemented (for instance, in 2015 a privatisation via IPO was announced but the project was abandoned) (30).

2.4. CFR Marfă’s financial situation after the failed privatisation

(38) In 2013, CFR Marfă’s total debt dropped significantly thanks to the debt-to-equity swap but then increased again immediately afterwards. After CFR Marfă’s privatisation failed, the total debt kept on steadily increasing: by 9 % in 2014 and 2015, when it reached RON 788,25 million (ca. EUR 171 million), and by 10 % in 2016, when it reached RON 868,13 million (ca. EUR 189 million, see Table 4 above). The overall debt continued to increase steadily in the subsequent years, reaching RON 1 214,66 million (ca. EUR 264 million) in 2018, which corresponds to a 20 % increase compared to RON 1 013,13 million (ca. EUR 220 million) debt in 2017 (31).

(39) Furthermore, following the failed privatisation, CFR Marfă’s current liabilities continued to increase by 32 %, 21 % and 19 % in 2014, 2015 and 2016 respectively, constituting most of the debts (92 % in 2015 and 99,7 % in 2016, see Table 5 above), whereas CFR Marfă’s trade payables steadily rose from RON 251,34 million (ca. EUR 55 million) in 2013 to RON 731,54 million (ca. EUR 159 million) in 2016, again with the majority (90 % in 2016) of these trade payables attributable to the SOEs. In particular, CFR Marfă’s trade payables towards CFR Infrastructură almost tripled from RON 213,47 million (ca. EUR 46 million) in 2013 to RON 623,5 million (ca. EUR 135,5 million) in 2016 (see Tables 5 and 6 above).

(40) After a slight improvement in 2014 (an operating loss of RON 27,16 million (ca. EUR 6) million in 2014 compared to a loss of RON 262,92 million (ca. EUR 57 million) in 2013, CFR Marfă’s financial situation deteriorated further. A loss of RON 159,19 million (ca. EUR 35 million) and RON 154,78 million (ca. EUR 34 million) was recorded in 2015 and 2016 respectively. CFR Marfă’s shareholders’ equity decreased again by 47 %, that is from RON 566,2 million (ca. EUR 123 million) in 2013 to RON 302 million (ca. EUR 66 million) in 2016 (see Table 4 above).

(41) The financial difficulties of CFR Marfă need to be seen in a wider context of influencing factors, besides increased competition from (national and foreign) private rail freight carriers and from other modes of transport. According to the publicly available reports, these additional factors include in particular mismanagement, lack of transparency and accountability, huge costs, significant backlogs from contracts with other SoEs (some of which are in difficulty themselves), outdated rolling stock, managers leaving the company and joining direct competitors, as well as corruption allegedly depleting the company of significant amounts of financial resources (millions of euros) or important customers contracts, as reported by the press (32) (33) and in various official communication for the relevant State agencies (34).

2.5. Scope of the formal investigation procedure

(42) On 18 December 2018, the Commission initiated formal proceedings on five support measures: Measure 1 : Non-enforcement of steadily increasing debts towards the State (social security debts and outstanding taxes) since at least 2010 until the 2013 debt-to-equity swap (Measure 3 below), which converted all of CFR Marfă’s overdue debts towards the State into equity of CFR Marfă; Measure 2 : Non-enforcement of steadily increasing CFR Marfă’s debts towards CFR Infrastructură since at least 2010 until the 2013 debt-to-equity swap (Measure 3 below), which converted 85 % of CFR Marfă’s overdue debts towards CFR Infrastructură into equity of CFR Marfă; Measure 3 : A debt-to-equity swap amounting to RON 1 669 million (ca. EUR 363 million) in 2013; Measure 4 : The continued non-enforcement of debts towards the State (social security debts and outstanding taxes) after the 2013 debt-to-equity swap; Measure 5 : The continued non-enforcement of steadily increasing CFR Marfă’s debts towards CFR Infrastructură after the 2013 debt-to-equity swap.

(43) In the Opening Decision, the preliminary conclusion of the Commission was that the above-described measures entailed State resources and were imputable to the State. Additionally, given the unlikelihood that any rational private operator would have provided CFR Marfă with such measures, the Commission took the preliminary view that the measures provided CFR Marfă with an undue advantage; such advantage would be selective, given that CFR Marfă was its sole beneficiary.

(44) The Commission also noted that the measures were likely to affect trade between Member States as CFR Marfă was in competition with other rail freight carriers from other Member States. The measures enabled CFR Marfă to continue operating so that it did not have to face, as other competitors, the consequences that would normally follow from its poor financial results.

(45) On the basis of the above, the Commission’s preliminary view was that the measures seemed to constitute State aid within the meaning of Article 107(1) TFEU.

(46) The Commission also expressed doubts on the compatibility of the measures, in particular since the Romanian authorities did not provide any possible compatibility grounds. The Commission’s preliminary view was that CFR Marfă could have been considered a firm in difficulty in the sense of the 2004 and of the 2014 Guidelines on State Aid for rescuing and restructuring non-financial enterprises in difficulty (‘the R&R Guidelines’) (35), amongst others in view of the fact that the company was fulfilling the conditions for being put under insolvency since at least 2010.

(47) However, the criteria for compatible rescue and restructuring aid laid down in the R&R Guidelines were not complied with by any of the measures. In particular, in the absence of a notified restructuring plan (the Romanian authorities did not claim the eligibility of the measures as restructuring aid), the Commission could neither assess the necessary components of restructuring, including investment and modernisation measures, nor evaluate whether such measures would be able to restore the long term viability of the company, and would be kept to a minimum, so that undue distortions of competition would be avoided. Lastly, there were no meaningful compensatory measures proposed by the Romanian authorities.

(48) Also, since the measures were granted in breach of the notification and standstill obligations laid down in Article 108(3) TFEU, the Commission noted that they appeared to constitute unlawful State aid. In the absence of notification of the restructuring plan, and on the grounds that behaviour of public creditors was not conform to the market economy operator (‘MEO’) principle, while the requirements of the applicable 2004 and 2014 Rescue and Restructuring Aid Guidelines were not met, these five measures could not be declared compatible with the internal market.

3. COMMENTS ON THE OPENING DECISION

3.1. Observations from interested parties

(49) The complainant submitted its observations on the Opening Decision within the legal deadline, and agreed to the findings of the Commission in the Opening Decision. In particular, the complainant provided further comments on two aspects raised in the Opening Decision, namely on Romania’s argument that CFR Marfă is a company of ‘strategic importance’, and on Romania’s claims that CFR Infrastructură did not relieve CFR Marfă of its debt and that it actually took firm steps towards enforcing its claims upon CFR Marfă between 2013 and 2017.

(50) First, the complainant submits that, contrary to the Romania’s assertion, CFR Marfă is not ‘of strategic importance’ for the rail freight transport sector in Romania.

(51) The complainant, representing an association of rail freight operators, considers it incorrect to state that CFR Marfă is the only operator having the required resources and organisational capacity for acting in case of crises and gives the example of at least 10 carriers that carry a large range of freight (36), and are thus comparable to CFR Marfă in terms of resources.

(52) As regards the transport of military goods, the complainant submits that any private operator could apply for the issuance of a special authorisation such as the one held by CFR Marfă. The lack of interest for applying for such an authorisation is, in the view of the complainant, due to the limited demand for such transport services.

(53) Second, the complainant considers that none of the claims presented by Romania according to which the debts of CFR Marfă were enforced by the State is true.

(54) On the one hand, while the complainant acknowledges that CFR Infrastructură has initiated certain procedures to recover a portion of CFR Marfă’s infrastructure utilisation tax (‘IUT’) debt, it notes that only a part of the total amount of debt has been enforced. Specifically, while CFR Infrastructură held enforceable titles (garnishment orders, i.e. orders requiring third parties who owe money to CFR Marfă to transfer their debt payments to CFR Infrastructură) in an amount of RON […] (ca. EUR […] million), only RON […] (ca. EUR […] million) have been enforced (37) (out of the total overdue debt amounting to no less than RON […] (ca. EUR […] million)).

(55) The complainant further submits that since the submission of the Complaint to the Commission in March 2017, the amount of the debt from infrastructure utilisation taxes owed by CFR Marfă to CFR Infrastructură has steadily increased, yet CFR Marfă has continued to use CFR Infrastructură’s rail freight network.

(56) The complainant cites two documents supporting this view: (a) CFR Marfă’s Board of Directors Note issued on 23 March 2018, stating that the IUT debt of CFR Marfă to CFR Infrastructură was RON […] (ca. EUR […] million), consisting of RON […] (ca. EUR […] million) as a main debt and RON […] (ca. EUR […] million) in the form of penalties (38). (b) A letter addressed to CFR Marfă by the Legal Division of CFR Infrastructură on 26 March 2018, in which CFR Infrastructură estimated that the debt of CFR Marfă to CFR Infrastructură was RON […] (ca. EUR […] million), out of which an amount of RON […] (ca. EUR […] million) was overdue (39).

(57) Therefore, the complainant considers that despite the on-going non-payment and accumulation of the IUT debt, CFR Marfă has continued to use the rail freight track infrastructure managed by CFR Infrastructură without impediment and hence, benefitted from further State aid. Moreover, the complainant explains that CFR Infrastructură has expressly confirmed that CFR Marfă should be able to pursue its commercial activities and that it would not take any measure that would lead to the blocking of CFR Marfă’s activities (40). Specifically, in a letter to CFR Marfă, CFR Infrastructură explains that ‘[In view of the above, we show that] during the course of these procedures CNCF ‘CFR’ SA considered the situation of the debtor and proceeded to recover outstanding debts in a legal framework, without blocking the commercial activity of SNTFM ‘CFR Marfă’ SA.’

(58) On the other hand, the complainant also contends that Romania’s statement quoted in the Opening Decision that, as of 2017, CFR Marfă had ‘no more debts towards the State budget’ is both misleading and incorrect. The complainant notes that CFR Marfă continues to operate on the market and, therefore, is constantly accumulating debts towards the State budget.

(59) The complainant also mentions a note from CFR Marfă where the company acknowledges ‘[b]eing unable to pay the current debts to employees, State Budget and suppliers and especially will not be able to participate on March 29, 2018 in two main transport tenders to accomplish the income required for the company’s activity. The two tenders are [Oltenia Power Complex] and the [SALROM Salt National Company].’ (41)

(60) Finally, the complainant reiterates its views already presented in the Addendum to the Complaint dated 12 September 2017 on the negative effects of the aid, namely that (i) the aid has had serious distortive effects on competition in the liberalised Romanian rail freight market by favouring CFR Marfă over its competitors; (ii) the aid has led to a grave deterioration of the estate of rail infrastructure in Romania, and that (iii) such distortions are aggravated by the Romanian State’s breaches of public procurement law in relation to the discriminatory award of public sector rail freight contracts to CFR Marfă. With regard to the latter points, the complainant acknowledges these issues do not fall under the remit of a State aid assessment by the Commission.

(61) Lastly, in its observations on the Opening Decision, the complainant underlines that the duration of the various aid measures was considerably long and that the aid has a particularly distortive effect on private rail freight operators in Romania. Therefore, it requests the Commission to order a suspension injunction to stop granting State aid to CFR Marfă in form of the non-repayment of infrastructure utilisation tax and of accumulated debts towards the State budget (i.e. Measures 4 and 5).

3.2. Comments from Romania

(62) Romania considers that none of the measures defined in the Commission’s decision to initiate the formal investigation procedure represent incompatible State aid and puts forward a number of reasons. First, as a general comment Romania provides arguments that activities performed by CFR Marfă are of a strategic interest to the State. Secondly, Romania comments on each of the measures subject to the Opening Decision as summarised below in subsections 3.2.3 to 3.2.5.

3.2.1. Romania’s comments concerning the strategic importance of CFR Marfă and the applicability of Article 107(1) TFEU

(63) Romania submits that CFR Marfă is a commercial company of strategic interest to the State, which, apart from competing on a rail freight market with private rail freight operators, also carries out activities related to country’s defence needs and NATO membership, as well as engages in transportation of strategic materials in sectors of major importance to the country’s economy, the energy sector and social sectors.

(64) Romania argues that CFR Marfă has the following obligations related to the country’s defence needs (42): (i) To participate, together with other responsible stakeholders, in the drafting and implementation of the mobilisation plan; (ii) To ensure the necessary reserves and capacities (rolling stock, ferries, personnel, etc.) for the performance of the mobilisation tasks. Although these reserves may be used in the commercial rail freight activity of CFR Marfă, CFR Marfă is obliged to establish these reserves at various points on the national rail network, for which the authorities do not offer compensation. In addition, where such reserves are no longer necessary for commercial purposes because a transport demand does not exist anymore, such resources may not be disposed of and must be kept and maintained operational at the expense of CFR Marfă, which covers the related costs from the revenues obtained from other supplies of services. The estimation of costs related to establishing and maintaining these reserves operational was provided by Romania only very late during the proceedings (43) due to the fact that ‘public authorities did not prepare any calculation methodologies in this respect’ and because such information would be classified as state secret (44). Based on the information provided by Romania, the total estimated costs with the maintenance of reserves for defence purposes would amount to RON […] million (EUR […] million) for the period between 2008 and 2018, and to RON […] million (EUR […] million) for the period between 2010 and 2018. (iii) To draw up the documents related to the supplementation of the necessary workforce; (iv) To ensure the civil protection of its own staff, of passengers and of the goods entrusted for transport purposes in the event of special circumstances, including calamities; (v) to carry out military shipments (both at NATO and at national level), to ensure the continuity of the transportation of military troops and materials in peacetime and in the event of a crisis, calamities and war or other special circumstances, as well to supply wagons, personnel and other resources under request of Ministry of National Defence. These obligations are performed by CFR Marfă on the basis of the provisions of protocols, joint orders and agreements (45) concluded between the Ministry of National Defence and the Ministry of Transport, Construction and Tourism, as well as under respective agreements between Romania and NATO. Romania estimated the proportion of military shipments at […] % of the yearly turnover of CFR Marfă (46), but did not provide a detailed, justified calculation of it, claiming State secrecy; (vi) To maintain and develop a ferry line designed to be an extension of PAN-European Corridor IV, as a means of connection between Europe and Asia. Romania submits that since the ferry lines, which connect Europe and Asia through the Constanta harbour are not profitable and cause losses (47), the ferryboats owned by CFR Marfă were stationed in the seaport of Constanta and did not provide any commercial activity in the period of 2008-2018. Romania explains that the costs for the maintenance of the ferryboats (which are included in the numbers provided in point (ii) of the recital 64 above) would amount to RON […] million (EUR […] million) for the period 2008-2018, and to RON […] million (EUR […] million) for the period of 2010-2018 (48).

(65) Furthermore, Romania argues that, apart from the country’s defence needs, CFR Marfă also has a strategic importance in that it supplies transportation services of coal and other strategic products to the biggest industrial customers (mainly SOEs such as Complexul Energetic Oltenia, Complexul Energetic Hunedoara, CET Govora and other coal-fired plants), which produce such basic utilities as electricity, heat and hot water. According to Romania, these shipments are usually performed on the basis of contracts concluded following tenders, in which other private operators participate and compete with CFR Marfă, but in times of crisis (e.g. severe weather conditions such as snowfalls, blizzards, droughts) such shipments can be demanded by public authorities to be carried out also outside the existing contracts. Romania submits that hydropower plants and wind systems do not have the capacity required to cover the electricity deficit caused by a decrease in the production of thermal power plants, which are the main sources of electricity (Complexul Energetic Oltenia alone accounting for 20-30 % of the electricity production in Romania). Thus, according to Romania, ensuring the continuity of supply of such strategic materials to these industrial customers is necessary to maintain the living standards of the population and to avoid a negative impact on the activities of economic operators, which makes such shipments a matter of national security, as corroborated by findings of the Constitutional Court of Romania in the Judgment No 91 of 28 February 2018 (49).

(66) Furthermore, Romania claims that the accumulation of debts for the services of strategic shipments rendered by CFR Marfă to its industrial customers (mainly SOEs, recital 65) was the underlying cause of CFR Marfă accumulating overdue debt towards ANAF. Romania estimates the amounts of the corresponding penalties and interest generated by the non-payment of CFR Marfă’s debt to ANAF to correspond to the amount of debt accumulated by these SOEs for the services of strategic shipments of CFR Marfă (50).

(67) Romania also notes that CFR Marfă and other public entities have an obligation to participate (free of charge) in various exercises (e.g. simulations of railway accidents) organized by public authorities (such as the General Emergency Inspectorate) and that CFR Marfă provided freight transport resources without any monetary compensation in the interest of/for certain public authorities or public institutions (in the form of custody and stocking of items amongst others for the National Reserve Agency, leasing of special equipment for specific interventions for the Winter Central Commandment) (51). Romania has not provided any quantification of the costs incurred for the activities above.

(68) Romania submits that CFR Marfă is the only operator who possesses the capacities necessary to ensure a proper and timely performance of the above-mentioned obligations in the area of defence and national security. Consequently, Romania argues that the recovery of CFR Marfă’s debts by enforcement proceedings, immediate liquidation or opening of the insolvency proceedings is not an acceptable solution as it could result in significant periods of time when the resources required for the country’s national security and defence could not be used (52).

(69) Therefore, having regard to the provisions of Article 107(1) TFEU, Article 4 TEU and point 17 of the Commission Notice No 2016/C 262/01 on the notion of State aid as referred to in Article 107(1) of the Treaty on the Functioning of the European Union (‘NoA’) (53), Romania argues that: (a) all of the circumstances above allow Romanian authorities to take any measure meant to ensure the territorial integrity, to maintain public order and to safeguard national security, even if that measure affected competition in a certain field; (b) any measure taken in the interest of and meant to ensure national security, territorial integrity and public order, irrespective of whether it is considered State aid or not, is compatible with Community rules (54).

(70) In other words, Romania considers that when adopting measures 1-3 and 5 with regard to CFR Marfă with a purpose to ensure the continuity of military shipments and shipments of strategic materials, as well as to perform other obligations related to national security and defence purposes, Romania exercised its public powers, which is why Article 107(1) TFEU would not be applicable by virtue of the provisions of Article 4 TEU and point 17 of the NoA.

3.2.2. Romania’s comments on the observations submitted by the complainant on the strategic importance of CFR Marfă

(71) Romania submits that the information provided by the complainant does not prove that private operators have the capacity to replace CFR Marfă in the markets of strategic and military shipments for the following reasons.

(72) First, Romania considers that the fact that private operators are not in a position to replace the activities of CFR Marfă is supported by the reality on the market. To this end, Romania gives the example of a tender organised in 2014 by Complexul Energetic Oltenia where a bid by the consortium of three private operators (GFR, Unicom Transit and Servtrans Invest) was rejected because its’ members did not have the technical and operational capacities required in the specifications of the tender procedure, despite the consortium’s more advantageous financial offer. The national court dismissed the consortium’s appeal, confirming the correctness of findings about the lack of technical and operational capacities of the consortium members as required by the tender documents.

(73) Romania further submits that the lack of interest by private operators to engage into military shipment services relates not only to a very low demand for this type of transport services, but also to the fact that military shipments and a respective requirement to respond rapidly to orders for such shipments (having a priority over any private shipment) entail having reserves from various resources (e.g. rolling stock, ferries, etc.) scattered over various points of the national rail network. According to Romania, that reduces the efficiency of use of such resources and this reduction of efficiency is not remunerated by the authorities, which is not attractive for private operators. Moreover, Romania states that CFR Marfă owns ca. 93 % of the national wagon fleet and is the only operator, which may fulfil the obligation of keeping the mobilisation reserves, whereas private operators use mostly wagons rented from foreign companies, which cannot constitute mobilisation reserves.

(74) Therefore, Romania considers that private operators may not replace CFR Marfă in the market of military shipments, as further corroborated by the provisions of the 2013 Decision by the Supreme Council of National Defence, which requires to include clauses into the privatisation contract of CFR Marfă, that would oblige the acquirer to ensure the fulfilment of all strategic obligations currently laid upon CFR Marfă in the area of national security and defence (55).

(75) Second, Romania also claims that the supply of transport services in the interest of national defence implies, in many cases, the disclosure of secret information with various levels of secrecy, which means that private operators interested in supplying such transport services have to hold certain industrial security certificates. However, private rail operators with the highest market shares in Romania (members of OPSFPR) would most likely be denied such industrial security certificate for the provision of strategic and defence shipments, because they would fail to meet the stringent requirements for obtaining such certificates. Romania mentions several possible grounds for refusing the certificates to members of OPSFPR: (a) shareholders or other person with decision-making powers in the company: (1) have been convicted for corruption by way of a final judgement (56); (2) have been indicted on charges of corruption (57); (3) were indicted on charges of establishing a criminal group, tax evasion and money laundering (58); (4) are foreign citizens or undertakings; (b) the operators in question have debts or have recorded significant losses; (c) the operators conduct business with entities in states that Romania’s national defence strategies approved by means of government decisions describe as posing security risks for Romania (namely, countries in the former Soviet Union).

(76) Therefore, Romania claims that CFR Marfă is de facto the only operator on the market, which has a necessary capacity to carry out shipments of strategic and military materials, as well as to perform other obligations related to national security and defence purposes. Consequently, Romania considers that in the light of the above-mentioned circumstances, and given the reality of recent conflict in proximity to Romanian borders (in Ukraine), due to which the amount of military shipments carried out by CFR Marfă increased more than 5 times as compared to 2013, Romania is entitled to invoke the provisions of Article 4 TEU and point 17 of the NoA to claim that Article 107(1) TFEU is not applicable to CFR Marfă’s entire activity.

3.2.3. Romania’s comments on Measures 1 and 4

(77) With regard to Measure 1, Romania submits that, in order to guarantee the outstanding fiscal debts, ANAF commenced enforcement proceedings. Pursuant to the laws in force since 2004, CNPP (the National public Pension Office), ANOFM (the National Employment Agency) and CNAS (the national Health Insurance Office) do not directly collect the contributions owed by the Romanian economic operators and other persons; the only agency responsible for this task is ANAF, which later distributes to the various authorities the amounts collected in their name (59).

(78) As regards CFR Marfă’s above-described debt to the State budget under Measure 1 (see Table 8), Romania submits that ANAF acted as a private market economy operator because it was calculating interest and penalties for CFR Marfă’s overdue debts to the State budget. In particular, Romania submits that the following interest rates were calculated with regard to CFR Marfă’s overdue debts towards the State budget: (i) daily interest rate of 0,1 % during the period of 1.1.2006-30.6.2010; (ii) daily interest rate of 0,05 % during the period of 1.7.2010-30.9.2010; (iii) daily interest rate of 0,04 % during the period of 1.10.2010-28.2.2014 (60). Romania also explains that the late payment of fiscal liabilities is additionally sanctioned with a late payment penalty, as follows: (i) if the payment of overdue tax liabilities is made later than 30 days from the due date, but before 90 days after the due date, a late payment penalty of 5 % of the principal amount due is added; (ii) after the expiry of 90 days from the due date, a late payment penalty of 15 % of the principal amount is added. The payment of a late payment penalty does not remove the obligation of paying interest (61).

(79) Furthermore, Romania submits that ANAF was actively pursuing the enforcement of CFR Marfă’s debts towards the State budget and undertook a number of enforcement measures in the form of injunctions and seizures of bank accounts, movable and immovable property of CFR Marfă.

(80) In particular, Romania submits that in 2009 ANAF issued 12 injunctions to enforce the outstanding debts of CFR Marfă in the total amount of RON […] million (ca. EUR […] million). Romania explains that an injunction is a directly enforceable tax receivable document, meaning that ANAF may continue enforcement proceedings without the involvement of the courts in case the debtor does not pay the outstanding amounts within the period specified in the injunction. In particular, ANAF may then force the execution of outstanding debts by seizing assets and property of the debtor and initiating the sale of such assets and property (62).

(81) These injunctions were followed by one seizure of CFR Marfă’s bank accounts in amount of RON […] million (ca. EUR […] million), which was enforced and yielded the recovery of RON […] million (ca. EUR […] million) (63), and 22 seizures imposed on immovable assets of CFR Marfă with total book value of RON […] million (ca. EUR […] million) (64). Romania explains that the seizure applied on movable or immovable assets constitutes legal mortgage of such assets, which gives a preferential claim to the proceeds of sale of the seized assets with additional consequences that the debtor may not sell the seized assets and can use the seized assets only with the approval of the competent body (in this case – ANAF) (65).

(82) Romania further submits that in 2010 and 2011 ANAF issued 24 injunctions to CFR Marfă and explains that seizures and garnishments on the debtors of CFR Marfă (mainly SOEs) were not imposed in 2010 and 2011 to avoid significant social impact (66). Romania also submits that by June 2013 ANAF imposed 200 seizures on movable and immovable assets of CFR Marfă with a total book value of RON […] (ca. EUR […] million). Romania then elaborates that out of these 200 seizures, 25 seizures were imposed on the movable and immovable assets of SC de Transport Maritim și de Coastă CFR Ferryboat SA (‘CFR Ferryboat’) with a book value of RON […] million (ca. EUR […] million), whereas 84 seizures were imposed on the movable and immovable assets of SC Intreținere și Reparații Vagoane SA (‘Wagon Repair and Maintenance SA’) with a book value of RON […] million (ca. EUR […] million), both of which were the companies merged into CFR Marfă in June 2012 (see recital 27) (67).

(83) Out of the remaining 91 seizures, 10 were imposed on the immovable assets of CFR Infrastructură with a book value of RON […] million (ca. EUR […] million), and the remaining 81 seizures were imposed (in November and December 2012) on the movable and immovable assets of CFR Marfă with a book value of RON […] million (ca. EUR […] million) (68).

(84) In addition to that, Romania submits that the total of 1 440 notices of garnishment over the funds available in the bank accounts of CFR Ferryboat SA, Wagon Repair and Maintenance SA and CFR Infrastructură, as well as 612 third-party bank account garnishments (for the total amount of RON […] million, ca. EUR […] million) were issued by ANAF (69).

(85) Romania also explains that the seizure of movable assets (mainly wagons and locomotives) of CFR Marfă with a book value of RON […] (ca. EUR […] million, 95 % of the overall value of 81 seizures) was imposed only on 28 November 2012 and not earlier because ‘these movable goods’‘represented rolling stock and locomotives, movable goods used for CFR Marfă’s main revenue making activities’, and because CFR Marfă ‘provides activities of national public interest, in order to supply rail freight public transport and to provide national defence required services’ (70).

(86) Romania submits that after the seizures have been imposed on the assets of CFR Marfă, ANAF requested their valuation and the commencement of the procedure for the realisation of assets. However, the realisation of assets never commenced, as the writs of execution on CFR Marfă’s debts were settled by the implementation of the 2013 debt-to-equity swap (71). Romania also explains that the recovery of CFR Marfă’s debts to ANAF by enforcement proceedings, immediate liquidation or opening of the insolvency proceedings was not an acceptable solution because that could have resulted in significant periods of time when the resources required for the country’s national security and defence could not be used, which in the light of recent conflicts in the region could potentially threaten the State as such (‘[the] Romanian State cannot do without an important instrument and resources, which it was under a legal obligation to supply in order to exercise its role and functions to ensure its territorial integrity, to maintain public order and defend national security and which cannot be replaced under the current circumstances’) (72).

(87) With regard to Measure 4, Romania submits that CFR Marfă fully paid its contributions to the State budget between 2013 and 2017 and that fiscal certificates issued by ANAF at various times in this period serve as proof that CFR Marfă did not accumulate any further debt to the State budget in this period (73).

(88) Specifically, Romania explains that Table 7 of the Opening Decision lists, for the period 2013-2016, the fiscal obligations accrued just before the closure of the financial year, for which the due date was in the following year. Romania submits that for all years since June 2013, the respective amounts due by CFR Marfă were paid at the beginning of the following year, meaning by the due date. Romania submits that the respective amounts are listed in the annual balance sheets in accordance with the rules for their preparation, taking into account the starting and payment dates for those fiscal obligations. Romania considers that an assessment of the statement of payment by CFR Marfă of its fiscal obligations based on the balance sheet data is not accurate, and that the documents that should be considered are the tax certificates released regularly by ANAF (74). Accordingly, Romania presented the data corresponding to the fiscal obligations and other debts to the State budget as follows: Table 9 CFR Marfă’ fiscal obligations and other debt to the State budget after the 2013 debt-to-equity swap (million RON) In RON million 2013 2014 2015 2016 2017 Fiscal obligations and other debt to the State budget […] […] […] […] […] Sums to be refunded/returned by ANAF to CFR Marfă […] […] […] […] […] Tax certificate no/date 1042215/ 18.12.2013 1356231/ 5.12.2014 107680/ 16.12.2015 90817/ 12.1.2016 78183/ 14.12.2017 Source: Romania’s Reply of 19 December 2018, Section E. point 21.

(89) Romania explains that fiscal obligations of CFR Marfă for the year 2016 and 2017 have been the subject of legal action by CFR Marfă before the Court of Appeal in Bucharest. By this action CFR Marfă requested the Court of Appeal to annul ANAF’s decision by which ANAF refused CFR Marfă’s request to set-off the outstanding fiscal debts of CFR Marfă for the years 2016 and 2017 by the amounts (RON […] million, ca. EUR […] million), which ANAF was ordered to pay to CFR Marfă by the Civil Judgment No 1011/2015 of the Court of Appeal as upheld by decision No 998/30.3.2016 by the High Court of Cassation and Justice (75).

(90) Based on the above, Romania considers that between 2013 and 2017 CFR Marfă did not register any debt to the State budget given that ANAF must offset/refund the amounts of RON […] million and RON […] million, which would be lower than ANAF’s respective debt to CFR Marfă.

(91) Finally, Romania provided information that CFR Marfă’s overdue debt (together with interest and penalties) towards the State budget reached RON […] million (ca. EUR […] million) in 2018, and more than tripled to RON […] million (ca. EUR […] million) on 28 March 2019 (76). Romania emphasised that with regard to this debt ANAF has imposed 16 seizures on CFR Marfă’s unencumbered movable assets with a book value of RON […] million (ca. EUR […] million) and 66 seizures on CFR Marfă’s unencumbered immovable assets with a book value of RON […] million (ca. EUR […] million) (77).

3.2.4. Romania’s comments on Measures 2 and 5

(92) With regard to Measures 2 and 5, Romania maintains its view that CFR Infrastructură did not exempt CFR Marfă from the payment of debts corresponding to the infrastructure utilisation tax.

(93) Romania explains that the Romanian law does not allow any rail operator to be exempted from the payment of the IUT and that CFR Infrastructură makes no exception for CFR Marfă either.

(94) Romania explains that there are three forms of penalty for the non-payment of IUT by the carriers as follows: (1) For each service, CFR Infrastructură issues monthly invoices and, when such financial obligations are not met with the terms undertaken in the Railway Infrastructure Access Contract (which is concluded annually), it calculates and invoices on a permanent basis, for each day of delay, interests and penalties for the non-payment of the IUT (the first form of penalty for the non-payment of IUT). The rate of interest and penalties is specified in Table 7 (recital 24). The same penalty applies to all rail freight (and passenger) transport operators, irrespective of their ownership. (2) In addition, due to the delays in the payment of IUT, CFR Infrastructură does not grant the discount of 33 % of IUT for trains circulating within the CFR network, operated by CFR Marfă, as it does for private operators (the second form of penalty). (3) Furthermore, CFR Infrastructură does not accept and does not create additional routes for trains subject to the interests of CFR Marfă and its customers, as it does for private operators (third form of penalty).

(95) In this context, Romania claims that CFR Infrastructură has also filed legal actions against CFR Marfă with a purpose of enforcing CFR Marfă’s debts as of 2015. In particular, Romania submits that CFR Infrastructură initiated arbitration and litigation proceedings regarding the enforcement of CFR Marfă’s debts as follows: 2015 arbitration proceedings in amount of RON […] million (ca. EUR […] million); 2016 arbitration and litigation proceedings in amount of RON […] million (ca. EUR […] million); 2017 arbitration and litigation proceedings in amount of RON […] million (ca. EUR […] million); 2018 arbitration and litigation proceedings in amount of RON […] million (ca. EUR […] million) (78). According to Romania, 100 % of these amounts were adjudged in favour of CFR Infrastructură by the respective and final court and arbitration decisions (79).

(96) According to Romania, after these decisions had been issued in its favour, CFR Infrastructură has used the services of bailiffs for the recovery of adjudged debts, including via freezing of funds in bank accounts and garnishments in respect of amounts due to CFR Marfă by its’ customers, as well as by seizures of movable and immovable property of CFR Marfă (80).

(97) Romania also explains that, in 2016, CFR Infrastructură concluded a payment rescheduling agreement with CFR Marfă (‘the 2016 Payment Rescheduling Agreement’) regarding the payment of the amount of RON […] million (ca. EUR […] million), representing principal and interest CFR Infrastructură was awarded in the arbitration proceedings in 2015 and 2016. Romania explains that the amount of RON […] million was fully recovered via forced execution of the debt after CFR Marfă did not comply with the provisions of the 2016 Payment Rescheduling Agreement (81).

(98) According to Romania, until August 2018 CFR Infrastructură has managed to recover from CFR Marfă – through judicial and extrajudicial measures – over RON […] million (ca. EUR […] million) of which RON […] million (ca. EUR […] million) in the period March – July 2018. Furthermore, on 6 December 2018 CFR Infrastructură concluded an agreement for the rescheduling of payment of interest and penalties due by CFR Marfă in the amount of RON […] million (ca. EUR […] million, ‘the 2018 Payment Rescheduling Agreement’). This agreement, inter alia, specifies that on the date of 4 December 2018 a total amount of RON […] million (ca. EUR […] million) was overdue by CFR Marfă to CFR Infrastructură, out of which RON […] million (ca. EUR […] million) is the amount awarded to CFR Infrastructură by seven civil court judgments in 2017, which are being executed. Out of this amount of RON […] million (ca. EUR […] million), RON […] million (ca. EUR […] million) represents interest and penalties. The provisions of the 2018 Payment Rescheduling Agreement also specify that the principal amount of RON […] million (ca. EUR […] million) shall continue being recovered through realization of seizures imposed on movable and immovable property of CFR Marfă.

(99) Romania explains that the enforcement through attachments of assets was applied only as long as CFR Marfă complied with the obligations assumed by rescheduling agreements, and submits that the 2018 Payment Rescheduling Agreement is being complied with by CFR Marfă (82).

(100) In Romania’s view, all of the above confirms the fact that CFR Infrastructură applies debt recovery measures and that CFR Marfă has not been exempted from their payment (83).

(101) Romania considers that ‘CFR Marfă does not receive preferential treatment from CFR Infrastructură and is not, and has not been, exempted from any legal obligation’ (84). Romania submits that ‘[f]or the non-payment of the infrastructure utilisation taxes by any of the rail operators, CFR SA [CFR Infrastructură] has applied and is applying the same financial penalties’, and recalls that ‘[f]inancial penalties are penalties for late payments calculated and applied for the non-payment of the charges owed at the due date according to the same percentage and without discrimination’ (85). Romania furthermore submits that ‘[CFR Infrastructură] applies the same judicial and extrajudicial measures to recover the amounts owed by any of the rail operators’ (86).

(102) Romania also adds that the non-collection of IUT by CFR Infrastructură from CFR Marfă is an objective circumstance and a consequence of the fact that other SOEs or undertakings in which the State is a shareholders (many of these active in the energy sector) have not, in turn, paid their debts towards CFR Marfă. Romania explains that these debts towards CFR Marfă are in the same order of size of the amounts owed by CFR Marfă to CFR Infrastructură, and any interruption of CFR Marfă’s transport services would disturb the activities carried-out by these particular undertakings, to the detriment of people’s living standards and of economic activities in various areas. Romania submits that CFR Marfă has taken steps to recover such debts in line with the legal provisions in the field (87).

(103) Furthermore, Romania adds that it is not possible to impose stronger measures on CFR Marfă (such as an application for insolvency), as CFR Infrastructură and the Romanian authorities must take account of the importance of CFR Marfă and of its resources for the national system of defence, national security, public safety and order, for the transport of strategic materials, for the national economy, and for the population (88) (see also subsection 3.2.1. and 3.2.2. above).

(104) To that end, Romania recalls that the Romanian authorities and CFR Infrastructură must act pursuant to the legal framework applicable to defence (89) and ‘take measures which do not pose the risk of the disposal of certain resources belonging to CFR Marfă (adverse impact on resources considered to be ‘State resources’) and do not affect the military shipments and the transport of strategic materials by this strategic company or CFR Marfă’s response in crisis situations (such as the winter of 2016/2017).’ (90)

(105) Also, in its comments of 14 August 2018 in reply to third party observations, Romania further argues that CFR Infrastructură is obliged to refrain from taking enforcement measures which could block military shipments and reduce the country’s defence capabilities by virtue of Article 34 of the Law on National Defence (91) Romania cites its Transport Minister who says that ‘we should not kill the hen laying eggs’ when referring to why the State should not enforce all the debts owed by Marfa to CFR Infrastructură.

3.2.5. Romania’s comments on Measure 3

(106) First, Romania contests that the Measure 3 stems from State resources. Specifically, Romania submits that ‘the three cumulative conditions [of Article 107(1) TFEU] have not been met so that the debt-to-equity swap in respect of CFR Marfă could be considered State aid, given that the condition under subparagraph (a) has not been fulfilled since no State resources have been spent and no resources have been allotted from the State budget (which would mean that the State has incurred direct budget expenditure). In fact, these amounts no longer represented revenues to the budget, which is beyond the wording of the TFEU text.’ Romania claims that it acted as a simple shareholder would act and aimed at consolidating its own interests and not at providing a certain economic operator with an economic advantage (92).

(107) Second, Romania claims that the debt-to-equity swap was approved by the Council of the European Union in its Council Decision of 22 October 2013 providing precautionary EU medium-term financial assistance to Romania (93) (‘the Council Decision of 22 October 2013’), corroborated with the provisions of the precautionary Stand-by Arrangement between Romania and the International Monetary Fund (‘IMF’) in the amount of SDR 1 751,34 million, as agreed upon by the Letter of Intent signed by the Romanian authorities in Bucharest on 12 September 2013, as approved by the Decision of 27 September 2013 of the Executive Board of the IMF (94). Romania takes this view on the basis of Annex I of the Stand-By Arrangement (95) stipulating the following: ‘Last year we made some important reforms related to SoEs and the energy and transportation sectors. For example, […], through voluntary making a few companies insolvent or liquidating them, debt swaps , and restructuring measures’. (emphasis added) […] Key reforms in the energy and transportation sectors include: […] ‘ Transportation sector: we initiated a sale-purchase agreement for the sale of a 51 % stake in the [S]tate-owned freight company [CFR Marfă] for RON 905 million and took a government decision approving the sale-purchase agreement. We also approved an arrears clearance scheme in June whereby CFR Marfă’s arrears would be reduced by over 90 % upon conclusion of the sale […].’ (96) ‘We also plan to facilitate improved payment of infrastructure access and electricity charges from the [S]tate-owned passenger rail company and CFR Marfă through reforms of those enterprises and to settle off outstanding debts among the three main railway companies. Measures to improve the operating and financial performance of these companies could include: […] –CFR Marfă: We will fulfil our obligations under the sale purchase agreement for the majority sale of CFR Marfă and close the transaction (exchange of payment for shares) by mid-October 2013. In this context, merger control approval will be sought from the relevant regulatory authority. If the privatisation process encounters insurmountable obstacles, we will reopen the tender for the majority privatisation of Marfa in compliance with a process that follows the best international practices’.

(108) Romania explains that the above-mentioned Stand-by Arrangement including the Annex quoted in recital 107 above was approved by the Council of the EU under Article 1(1) of its Decision of 22 October 2013, which amongst others mentions specific economy policy conditions laid down in the Memorandum of Understanding which include, inter alia ‘the restructuring of [S]tate-owned enterprises (SOEs), including sales of stakes in their capital, and strengthening the corporate governance of SOEs’.

(109) Romania submits that not only were the CFR Marfă privatisation and the debt-to-equity swap measure in its favour approved by the Council of the EU, but also the privatisation process of CFR Marfă was permanently monitored by the European Commission.

(110) In particular, in connection with the Commission’s monitoring, Romania mentions the Commission’s report ‘The Balance of Payments Programme. Romania, 2013-2015’ which, amongst others presents that status of CFR Marfă’s privatisation process, including also the debt-to-equity-swap. In particular, according to the quoted report, ‘The privatisation would, inter alia, alleviate concerns with a debt-equity swap performed in June 2013, ahead of the failed privatisation attempt of October 2013.’ (97)

(111) Third, Romania submits that the debt-to-equity swap meets the standard test of the market economy operator and reiterates the findings of the Deloitte study which it produced and submitted to the Commission.

(112) Romania reiterates that it commissioned the audit and consulting firm Deloitte to carry out a study to perform the market economy operator test. The study was performed by applying a renowned method, more specifically the calculation of the market value of the 51 % stake at 31 December 2012 by using the discounted cash flow method (‘the DCF method’) and, separately, a calculation of the market value of the residual equity stake (49 %) under the assumption that such equity stake would be sold in the period 2015-2018, applying the CBIT and EBITDA multiples valuation method.

(113) Romania underlines the findings of the Deloitte report of 29 March 2019, according to which the debt-to-equity swap followed by the privatisation of CFR Marfă would have allowed the State as a shareholder and creditor to recover a larger amount (on average RON 1 079,9 million or approximately EUR 235 million) than an immediate liquidation of the company (on average RON 916,97 million or approximately EUR 199 million).

(114) Romania points out that the debt-to-equity swap was achieved only after the adoption of a decision in compliance of the recommendations of the Deloitte study, by issuing the Emergency Ordinance 61/2013 of 12 June 2013, that is after the market economy operator test was undertaken.

(115) Romania also underlines that the aforementioned Emergency Ordinance 61/2013 was issued ‘with due regard to the opinions and recommendations of the IMF and the EU’ (see also recitals 107 et subseq. above), because ‘all the memorandums of understanding concluded with these international organisations after 2011 provide for structural reforms (including privatisations) intended for a large number of [S]tate-owned undertakings in various fields’, including ‘transport (CFR Infrastructură, CFR Marfă, Tarom)’ (98). In particular, Romania highlights the description of one of the reforms contained in one such memorandum endorsed by the Council’s decision according to which Romania ‘also approved an arrears clearance scheme in June whereby CFR Marfă’s arrears would be reduced by over 90 percent upon conclusion of the sale.[…]’ (99).

(116) Fourth, Romania submits that the 2013 debt-to-equity swap in favour of CFR Marfă is very similar to other measures concerning rail freight incumbents in other Member States in which the Commission’s found that no State aid was involved or where aid was declared compatible with the internal market. Romania gives the examples of the following Commission precedents: decision of 16.6.2017 on the State aid SA.32544 (2011/C) implemented by Greece in favour of the Greek Railway Group TRAINOSE (100), S.A. decision of 20.7.2018 on the public loan SA.29198 – (2010/C) (ex 2009/NN) granted by Slovakia for Železničná Spoločnosť Cargo Slovakia, a.s. (ZSSK Cargo) (101), and decision of 19.6.2017 on State Aid SA.39877 (2017/NN) – Croatia – Aid to HŽ Cargo d. o. o. – Debt cancellation (102).

(117) Romania submits that ‘the common point is that the rail operators in those states and CFR Marfă encountered financial difficulties and incurred significant losses and the public authorities decided to intervene, considering their importance for the national economies.’ Therefore, it considers that ‘Romania, Croatia, Greece and Slovakia acted in the same spirit with regard to the national rail operators, which were all faced with financial difficulties.’ In Romania’s view, the result of the assessment of this particular debt-to-equity swap (as well as for the other measures) should not be different for CFR Marfă.

(118) In particular, Romania recalls the Commission decision in Case SA.32544 implemented by Greece in favour of the Greek Railway Group Trainose S.A. and in particular, the equity increase of EUR 60 million, which was carried out in 2009 with funds from the State budget.

(119) Romania notes that although the Greek authorities had considered that the respective measure was not State aid, the measure was nevertheless found to constitute aid and declared compatible with the internal market by the Commission because (103): (a) the measure was aimed at remedying serious disturbances in the economy of Greece. In this respect, Romania recalls that ‘the Commission retained and accepted the arguments regarding the economic situation of Greece (economic crisis) and the fact that Trainose has a vital role in the economy of this country. Its liquidation would have engendered difficulties for the rail infrastructure manager, for some of its subsidiaries, for important undertakings in Greece and to the overseas trade performed by the country. Moreover, it would have contributed either directly or indirectly to the increase of unemployment in a country affected by crisis;’ (b) the measure was adequate/appropriate, necessary and proportional. In this respect, Romania recalls that ‘the Commission upheld that, beyond the situation and benefits of Trainose: the measure was consistent with the purpose of avoiding risks for the Greek railway system and of preventing discontinuation of the supply of rail transport services from the economy and population; […] was limited in time; […] was necessary for the privatisation of Trainose, […] ensured temporary survival until the actual privatisation of the company; […] was not aimed at increasing the capacity of the company and, for this reason, it did not affect competition and trade among the EU Member States.’

(120) Romania also submits that ‘the cancellation of the debt-to-equity swap after the failed privatisation of 2013 and ordering CFR Marfă to reimburse the swap-related amount would have resulted in major operating difficulties for CFR Marfă, which would have led to the unacceptable risk that the company could not meet its obligations under the law, agreements and conventions in the field of national defence or arising from Romania’s NATO membership, given the conflict in Ukraine, which erupted in 2014, the major response to this political and military context and the increase in the demand for military shipments by 562,89 %. The exception raised under Article 107(1) of TFEU and Article 4 of TEU is justified against this background.’ (104)

(121) In particular, Romania underlines that ‘the sale of assets as part of a potential company liquidation in line with the laws in force could be rather lengthy, which would result in significant periods of time when the resources required for the country’s defence system and strategic shipments could not be used and would deteriorate as a result of garaging. During these periods when CFR Marfă could not supply transport services and those resources would not yet become the property of another rail operator, as experienced in 2008 and 2014, conflicts may erupt or reignite, as indicated in the National Defence Strategy (105) […]’. Under these circumstances, Romania fears that ‘it would no longer have transport capacity and could no longer properly respond to possible challenges, which is unacceptable.’

4. ASSESSMENT OF THE AID

(122) The Commission first examines whether Measures 1 to 5 in favour of CFR Marfă involve State aid within the meaning of Article 107(1) TFEU (see subsection 4.1 below), whether CFR Marfă was an undertaking in difficulty, (see subsection 4.2 below), and whether the aid was already implemented (see subsection 4.3 below). Finally, the Commission assesses whether such aid could be compatible with the internal market (see subsection 4.4 below).

4.1. Existence of Aid within the meaning of Article 107(1) of the Treaty

(123) According to Article 107(1) TFEU, ‘any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the provision of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market’.

(124) The criteria laid down in Article 107(1) TFEU are cumulative. The qualification of a measure as aid within the meaning of this provision therefore requires the following cumulative conditions to be met: (a) the measure must be imputable to the State and financed through State resources; (b) the measure must confer an advantage on its recipient; (c) that advantage must be selective; and (d) the measure must distort or threaten to distort competition and affect trade between Member States.

4.1.1. Undertaking

(125) According to settled case law, the Commission must first establish the beneficiary of the measures under assessment. Article 107(1) of the Treaty refers to the concept of undertaking in defining the beneficiary of the aid. The EU Courts define the notion of undertaking as entities engaged in an economic activity regardless of their legal status and the way they are financed (106). The only relevant criterion is whether it carries out an economic activity, thus, whether it offers goods and/or services in the market.

(126) CFR Marfă is a 100 % State-owned limited liability company. It was incorporated as a joint stock company on 1 October 1998, following the reorganisation of the Romanian Railways incumbent and provides rail freight transport and other related services in the market.

(127) Therefore, CFR Marfă is an entity for the purpose of Article 107(1) TFEU. The Commission will next assess whether the activity of providing rail freight transport and other related services on the market by CFR Marfă is an economic activity.

4.1.2. Economic activity

(128) At the outset the Commission assessed the applicability of the Article 107(1) TFEU in the light of the Romanian’s arguments that CFR Marfă exercises public power.

(129) Romania argues (see recitals 63 to 76 above) that Article 107(1) TFEU is not applicable to CFR Marfă by virtue of the provisions of Article 4(2) TEU (107) and of point 17 of the NoA, which provides, inter alia, that Article 107(1) TFEU does not apply where the State acts ‘by exercising public power’ or where public entities act ‘in their capacity as public authorities’. Romania claims that it exercised its public powers when adopting measures 1-3 and 5, which were aimed at ensuring the continuity of performance of CFR Marfă’s obligations in the areas of national security and defence.

(130) The Commission observes that this argument is flawed for the following reasons.

(131) First, this argument misconstrues the way the provisions of point 17 of the NoA are meant to operate. These provisions are part of section 2 of the NoA, which contains rules related to the notion of undertaking and of economic activity. Article 107(1) TFEU is applicable in relation to entities which qualify as undertakings engaged in an economic activity under rules set out in section 2 of the NoA. Therefore, the test for the applicability of Article 107(1) TFEU entails the assessment of whether CFR Marfă is an undertaking engaged in an economic activity.

(132) On the contrary, Romania suggests that Article 107(1) TFEU is not applicable to CFR Marfă because Romania exercised its public powers when adopting measures 1-3 and 5 in favour of CFR Marfă in order to ensure the continuity of shipments of strategic and military materials, as well as the performance of other obligations related to national security and defence purposes. In other words, Romania suggests that Article 107(1) TFEU is not applicable to CFR Marfă merely because of the capacity in which Romanian State adopted measures 1-3 and 5 in favour of CFR Marfă.

(133) The Commission notes that this argument relates to the question of whether the market economy operator test is applicable to Romania’s actions adopting measures 1-5, and, if applicable, the application of that test (points 76-77 of the NoA) as addressed in recitals 179 to 181 below. The applicability and the application of the market economy operator test, however, does not in any way involve the assessment of whether CFR Marfă is an undertaking engaged in an economic activity for the purpose of applicability of Article 107(1) TFEU. Therefore, the argument by Romania misconstrues the aim of section 2 of the NoA.

(134) Second, Romania has not provided any evidence that the activity of CFR Marfă is not an economic one. In particular, Romania failed to provide any evidence that Romania has taken the activities of military shipments and shipments of strategic products out of the economic domain for the exercise of its public powers, which could have shown that these activities are indeed non-economic ones (108).

(135) Quite to the opposite, it is clear from the Romanian submissions that military shipments are services rendered by CFR Marfă on the basis of annual contracts and are remunerated (109). Romania also admits that the markets for military shipments and related activities are open to all private rail operators with a valid licence, albeit subject to obtaining certain security clearances (see recital 75 above). That is further confirmed by the provisions of protocols, joint orders and agreements (110) concluded between the Ministry of National Defence and the Ministry of Transport, Construction and Tourism, stating that obligations to ensure the continuity of military shipments in times of peace, war, natural calamities, crisis situations or other extraordinary circumstances rest not only on CFR Marfă but also on other licensed rail transport operators, which are to be remunerated on the contractual basis.

(136) The above clearly shows that these services of military shipments were not taken out of the economic domain by the State and are rendered by CFR Marfă based on market mechanisms, which is why they qualify as economic activities (111).

(137) The fact that private rail freight operators do not wish to engage in military shipments either because of the limited demand or due to the lack of capacity does not have a bearing on this conclusion – what matters is the sole possibility for these operators to compete for these contracts with CFR Marfă, which is also guaranteed by the spirit and the wording of Directive 2009/81/EC of the European Parliament and of the Council (112), transposed into Romanian law by Emergency Governmental Ordinance 114/2011 of 21 December 2011 (113).

(138) Furthermore, the obligation to establish, maintain and preserve the reserves along various points of the railway network is a prerequisite for CFR Marfă to be able to provide remunerated military shipments on a contractual basis (114), which is why the Commission considers it part of the economic activity of military shipments. The fact that CFR Marfă may use the resources marked as mobilisation reserves for its usual commercial rail freight activities (including military shipments) serves as an additional confirmation of this conclusion. The fact that CFR Marfă may not be receiving adequate remuneration for the costs incurred by establishing, maintaining and preservation of these reserves does not change that conclusion either, as it is settled case-law that any activity consisting in offering goods and/or services on a given market is an economic activity, irrespective of whether it is done without a profit motive or for due compensation (115). Therefore, the fact that CFR Marfă may not be duly compensated for the provision of certain services should not have a bearing on the qualification of services as economic activity.

(139) The Commission does not accept Romania’s argument that only CFR Marfă, owning ca. 93 % of the national wagon fleet, is de facto the only operator capable of fulfilling the obligation to keep the mobilisation reserves. Even if this argument would be capable of making a difference to Commission’s conclusion in recital 136 (quod non, as in principle the domain of military shipments was not taken out of the economic domain by the Romanian State), Romania has not adduced any evidence on why other private operators would not be able to compete for military shipments or fulfil the mobilization requirements with the other 7 % of the wagons or with the wagons additionally purchased from the market for that purpose (inter alia from CFR Marfă, either on a normal commercial basis or during CFR Marfă’s liquidation). The Commission notes that, although Romania claims that the reserves included in the mobilisation plans may not be disposed of and must be kept operational at the expense of CFR Marfă (recital 64(ii)), Romania could not provide the Commission with the express provision in the laws confirming that (116).

(140) The Commission equally does not accept Romania’s argument that none of the other rail freight operators in Romania can qualify to obtain the necessary industrial security certificates. Even if this argument would be capable of making a difference to Commission’s conclusion in recital 136 (quod non, as in principle the domain of military shipments was not taken out of the economic domain by the Romanian State), the Commission notes that it is up to the respective private rail operators to make the necessary changes to obtain the respective certificates. The Commission also notes the fact that even a former Minister of Transport (117) and a former CEO of CFR Marfă have been convicted by Romanian national courts on criminal activities tantamount to corruption (see recital 41 above), which would equally disqualify CFR Marfă from being a provider of military shipment services.

(141) With regard to Romania’s argument that CFR Marfă’s ferryboat activity is not of economic nature, the Commission takes note of Romania’s argument that these ferryboats were not used for commercial purposes because other ferry lines operating through Constanta harbour were not economically viable (recital 64(vi)). The Commission considers that as a clear indication that CFR Marfă’s ferryboat activity falls within the economic remit, as it is settled case-law that any activity consisting in offering goods and/or services on a given market is an economic activity, irrespective of whether it is done without a profit motive or for due compensation (118).

(142) As concerns the shipments of strategic goods, the Commission notes that these shipments are carried out by CFR Marfă on the basis of the contracts usually concluded following tenders, in which other private operators participate and compete with CFR Marfă (see recital 65 above). Services rendered under these contracts are remunerated under the conditions of the respective contract (recital 66). Therefore, the contracts for the shipments of strategic goods are awarded and respective services under those contracts are clearly rendered on market terms, and, thus are economic in nature.

(143) Although Romania claims that in certain crisis conditions these services may be required by public authorities outside the existing contracts, Romania admits that such shipments were remunerated at prices stipulated in the contracts awarded through procurement procedures prior to the occurrence of the respective difficult weather conditions (119).

(144) With regard to CFR Marfă’s unremunerated participation in various public exercises and provision of freight transport resources without any monetary compensation in the interest of/for certain public authorities or public institutions (as mentioned in recital 67), the Commission fails to see how that may have a bearing on defining CFR Marfă’s activities in carrying out strategic shipments on the basis of contracts awarded on market terms as clearly economic. Furthermore, the Commission observes that Romania has not provided any evidence on whether the provision of CFR Marfă’s resources without any monetary compensation in the interest of certain public authorities or public institutions was mandated by the applicable laws and in any case has not provided any quantification of the costs incurred for such activities.

(145) Therefore, CFR Marfă is undoubtedly an undertaking carrying out economic activity with regard to all of its freight activities, to which Article 107(1) TFEU is applicable.

(146) Third, and in the alternative, the Commission recalls that the fact that an entity exercises, for the purposes of part of its activities, prerogatives of public authority does not, on its own, prevent it from being classified as an undertaking within the meaning of the provisions of Article 107(1) TFEU relating to the competition rules for the rest of its economic activities (120). According to case law, if the economic activity of the entity concerned is separable from the exercise of its prerogatives of public authority, that entity must be qualified as an enterprise for that part of its activities (121).

(147) The Commission considers that, even if CFR Marfă’s activity of military shipment services and maintenance of mobilisation reserves were to be considered as non-economic activities, Romania has adduced no evidence to show that the economic activities of commercial rail freight carried out by CFR Marfă could not be separated from the prerogatives of public authorities in the military area. The mere fact that there can be an economic link between those activities, in that the economic activities of CFR Marfă make it possible to finance, in whole or in part, CFR Marfă’s non-economic activities, is not sufficient to demonstrate the inseparability of these activities, within the meaning of the case-law (122).

(148) Furthermore, the Commission considers that, although Article 346(2) TFEU, which is applicable to the production of or trade in arms, munitions and war material, does not apply in relation to transportation services (and Romania does not invoke it), certain principles derived in the jurisprudence from the application of Article 346(2) TFEU are applicable by analogy to the issue of separation of economic and non-economic activities for the purpose of application of Article 107(1) TFEU. In particular, the Commission considers that undertakings which engage in both non-economic and economic activities cannot invoke the provisions of point 18 of the NoA by arguing that economic activities are necessary for the viability of the military/defence activity to claim that they are inseparably linked (123).

(149) What is more, CFR Marfă’s commercial activity in the rail freight sector is clearly separable from the exercise of such non-economic activities, first and foremost due to the fact that, as admitted by Romania (see recital 64 above), military shipments are governed by separate rules and are carried out under separate contracts concluded between the Ministry of Defence and CFR Marfă, among others.

(150) Furthermore, while initially Romania refused to provide figures on the percentage of resources reserved for national defence purposes (because of State secrecy) and claimed that it was impossible to reflect the costs incurred by CFR Marfă due to such reservation of resources because public authorities did not prepare any methodologies in that regard (see recital 64 above), Romania has nevertheless pointed out that military shipments are ordered in a discontinuous manner and account for a ‘much smaller share than other transport operations’ and indicated that they range around 2 % of CFR Marfă’s total turnover (124). Moreover, Romania has also provided an estimation of the costs incurred by CFR Marfă due to establishing and maintaining the mobilisation reserves (see recital 64 above).

(151) The Commission considers that to be an additional indication that CFR Marfă’s activity of military shipments and the adjacent obligation of establishing and maintaining the mobilisation reserves, even if qualified as non-economic (quod non, see recital 145), would indeed be separable from the economic activities of CFR Marfă.

(152) However, and without prejudice to the conclusion in recital 151, the Commission considers that the estimation of the costs incurred by CFR Marfă due to establishing and maintaining the mobilisation reserves as provided by Romania is not substantiated, for the following reasons.

(153) First, the Commission considers that the estimation of costs incurred by CFR Marfă due to establishing and maintaining the mobilisation reserves, provided by Romania, is clearly exaggerated. Romania indicates as costs all annual expenditure for the amortisation of all idle locomotives and wagons of CFR Marfă, as well as annual expenditure for the maintenance and repair of such wagons. The Commission considers that the need for the mobilization reserves is not (and should not be) determined by the amount and the variations in the rolling stock owned by a railway transport company (variations which depend on a multitude of factors such as the history and commercial decisions of the railway incumbent itself), but by the actual need for such reserves, which should be determined by the Ministry of Defence. However, Romania did not provide any evidence to sustain that all the idle rolling stock of CFR Marfă serves as mobilization reserves.

(154) The same is also true in relation to the costs of maintenance of ferryboats owned by CFR Marfă. Romania simply presents all the costs of maintenance and other expenditures related to these ferryboats as costs incurred by CFR Marfă due to its obligation to keep the mobilization reserves. However, Romania fails to substantiate that these ferryboats are indeed marked as mobilisation reserves, as well as fails to elaborate on whether these costs have been paid by the Ministry of Defence, notably for certain military shipment services provided by CFR Marfă for defence purposes in the framework of the contract with the Ministry of Defence which involved ferry transportation and for which invoices were issued by CFR Marfă according to its tariff policy.

(155) Second, Romania did not provide the Commission with the documents allowing the Commission to check the accuracy of the expenditures for the amortisation, maintenance and repair of such idle rolling stock submitted by Romania, as well as other expenditures (for staff, fuel, ferryboats, non–IUT fees etc.).

(156) Third, Romania took as a proportion for the allocation of other costs (including for instance expenditures on personnel, as well as on diesel for special movement of the rolling stock corresponding to the mobilisation reserves, and non-IUT fees for such movements) a factor equal to 2 %, but did not explain on what basis this particular allocation factor was chosen. This percentage seems to correspond to the proportion of military shipments in the total turnover of CFR Marfă (see point (v) of recital 64). However, Romania did not explain whether this is truly the reason why it chose 2 % for the allocation of costs. In any case, it is highly unlikely that an activity of 2 % turnover of CFR Marfă would require the exact % of assets or personnel for the maintenance of mobilisation reserves.

(157) Therefore, the Commission considers that Romania did not substantiate to the requisite standard the estimations of the costs incurred by CFR Marfă due to its obligation to keep and maintain the necessary reserves and capacities for the performance of the mobilisation tasks.

(158) On the basis of the foregoing the Commission concludes that CFR Marfă is an undertaking carrying out an economic activity with regard to all its’ rail freight activities, which is why Article 107(1) TFEU is applicable to CFR Marfă’s entire activity. Even if the activity of military shipments and maintaining the mobilization reserves were to be recognized as a non-economic activity, it is clearly separable from the main economic activity of CFR Marfă, namely commercial rail freight, in which case Article 107(1) TFEU is applicable to the economic activity of CFR Marfă.

4.1.3. State origin (resources and imputability to the State)

(159) As has been stated by the EU Courts (‘the Court’) (125), for the measures to be qualified as State aid within the meaning of Article 107(1) of the Treaty, (a) they have to derive from the State’s resources, either indirectly or directly by any intermediary body acting by virtue of powers conferred on it and (b) they have to be imputable to the State. The notion of Member State includes all levels of public authorities, regardless of whether it is a national, regional or local authority (126).

4.1.3.1. Measures 1 and 4 – Non-enforcement of social security debts and outstanding taxes (i) since at least 2010 until the 2013 debt-to-equity swap and (ii) after the debt-to-equity swap

(160) As noted in recital 77, ANAF, CNPP, ANOFM and CNAS are part of the public administration subordinated to the Romanian Government. Therefore, the non-enforcement of the overdue debt (i.e. tax payables and social contribution payments, plus interest and penalties) by those bodies and the further accumulation of debts that should have been normally paid to them burdens the State budget and involves State resources. Romania did not contest imputability in the case of the aforementioned public creditors.

(161) In the light of the considerations in recital 160 above, the Commission concludes that Measures 1 and 4 are imputable to the State and involve a transfer of State re