EN Official Journal of the European Union L 351/68

COMMISSION DECISION (EU) 2016/2327

of 5 July 2016

on State aid SA.19864 — 2014/C (ex 2009/NN54) implemented by Belgium — Public financing of Brussels public IRIS hospitals

(notified under document C(2016) 4051)

(Only the French and Dutch texts are 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 (1),

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

Having called on interested parties to submit their comments pursuant to the provision(s) cited above (2) and having regard to their comments,

Whereas:

1. PROCEDURE

(1) By letters of 7 September 2005 and 17 October 2005, registered on 12 September 2005 and 19 October 2005, the Commission received a complaint against the Belgian State as regards the alleged granting since 1995 of unlawful and incompatible aid to the five public general hospitals (3) (hereinafter ‘IRIS-H’) (4) belonging to the IRIS (5) network of the Brussels Capital Region (hereinafter ‘IRIS’). The complaint was lodged by two associations (i.e. the Coordination bruxelloise d'institutions sociales et de santé (CBI) and the Association bruxelloise des institutions de soins privées (ABISP)) representing hospitals managed by legal persons governed under private law (hereinafter ‘private hospitals’) and also individually by several hospitals that are members of these associations (6).

(2) The complaint focused on the following groups of arguments: (i) the absence or insufficiently clear definition and entrustment of the specific public service missions that are only conferred to the IRIS-H, but not to the Brussels private hospitals (ii) the compensation of losses of the IRIS-H by public authorities, (iii) the overcompensation of the costs linked to the public service missions of the IRIS-H through the Fonds Régional Bruxellois de Refinancement des Trésoreries Communales, (iv) the lack of transparency in the method of public financing of the IRIS-H, and finally (v) the presence of cross-subsidisation of the non-hospital activities of the IRIS-H through the State compensation received for the provision of their hospital missions (7).

(3) Following the submission of additional information by the Belgian authorities, the Commission services informed the complainants by letter of 10 January 2008 of their preliminary views on the complaint (8) and asked the complainants to submit new information allowing them to reconsider the preliminary assessment of the complaint, failing which the complaint would be considered withdrawn. Following the reply from the complainant, the Commission services confirmed their preliminary assessment in their letter of 10 April 2008.

(4) Subsequently, the complainants informed the Commission of the fact that they had introduced an application for annulment before the Court of First Instance of the European Communities (as from 1 December 2009 the General Court of the European Union, hereinafter the ‘GC’) against the letter of 10 January 2008, which they saw as a Commission decision (9). Furthermore, on 20 June 2008 the complainants lodged an application for annulment of the letter of the Commission services of 10 April 2008 (10). Both Court procedures were suspended by the GC until 31 October 2009, based on the information submitted by the Commission that it intended to adopt a decision pursuant to the Council Regulation (EC) No 659/1999 (11). With a view of adopting such a decision, the Commission services requested additional information from the Belgian authorities as well as from the complainant.

(5) In its decision of 28 October 2009 (12) (hereinafter ‘the Commission's 2009 decision’, see also Section 4.1), the Commission decided not to raise objections to the aid for financing of the public hospitals of the IRIS network in the Brussels Capital Region as the financing at hand was deemed compatible with the common market under the conditions set out in Commission Decision 2005/842/EC (13) (hereinafter ‘2005 SGEI Decision’) and directly with Article 86(2) EC Treaty (now Article 106(2) TFEU) with respect to entrustments pre-dating the entry into force of the 2005 SGEI Decision on 19 December 2005.

(6) Subsequently, the complainants launched an action for annulment of this Commission decision at the General Court. The GC annulled the Commission decision by its judgment of 7 November 2012 in case T-137/10 (14) (see also Section 4.2), concluding that this decision had been adopted in violation of the procedural rights of the complainants. In particular, the GC concluded that the Commission should have had doubts concerning the compatibility of the measures at hand with the internal market considering the arguments of the complainants with respect to the compatibility. The GC therefore concluded that the Commission was required to initiate the formal investigation procedure, in order to gather any relevant information for verifying the compatibility of all the aid measures at issue with the internal market, and to allow the complainants and other interested parties to present their observations in connection with that procedure (15).

(7) By letter dated 1 October 2014, the Commission informed Belgium that it had decided to initiate the procedure laid down in Article 108(2) of the TFEU in respect of the public financing measures in favour of the Brussels public IRIS hospitals.

(8) The Commission's decision to initiate the procedure (hereinafter ‘the opening decision’) was published in the Official Journal of the European Union (16). The Commission invited interested parties to submit their comments on the measures.

(9) By letter of 22 October 2014, the Belgian authorities requested an extension of the deadline to submit their comments on the opening decision, which was accepted by the Commission by letter of 23 October 2014. A further extension of the deadline was requested by email of 1 December 2014, which was accepted by the Commission by letter of 2 December 2014. By letter of 16 December 2014, the Kingdom of Belgium submitted its observations on the opening decision.

(10) The Commission received comments from interested parties (see Section 5) on 15 December 2014, 5 January 2015 and 9 January 2015. By letters of 13 and 20 February 2015, the Commission forwarded these comments to Belgium, which was given the opportunity to react. Belgium's comments were received by letter dated 13 March 2015, registered on 17 March 2015.

(11) On this basis the Commission has reassessed the case and interpreted certain elements differently in comparison to the assessment in the annulled Commission's 2009 decision.

2. BACKGROUND

(12) The IRIS-H operate in a complex legislative and regulatory environment which is shaped by various public authorities. A comprehensive assessment of the compliance with State aid rules of the public financing from which they benefit requires at the outset a brief description of the legislative and regulatory framework as it applies to the IRIS-H. This description encompasses an introduction to the Loi CPAS (on the basis of which the IRIS-H were created), a brief account of the creation of the IRIS-H, a survey of the legislative and other documents regulating the operations of the IRIS-H, a short overview of the main activities of the IRIS-H, as well as an enumeration of the various applicable financing mechanisms.

2.1. The right to social aid and the Loi CPAS

(13) The right to social aid is a constitutional right in Belgium. In particular, Article 23 of the Belgian Constitution provides: ‘Everyone has the right to lead a life in keeping with human dignity. To that end, the laws, the decree or rule referred to in Article 134 guarantee economic, social and cultural rights, taking account of the relevant obligations, and determine the conditions for their exercise. Those rights include, inter alia: […] 2o the right to social security, healthcare and social, medical and legal aid.’

(14) Actual access to social aid by citizens is governed primarily by the Organic Law of 8 July 1976 (17) (hereinafter ‘Loi CPAS’) which created the Centres Publics d'Action Sociale (hereinafter ‘CPAS’). The CPAS are public bodies, with legal personality, and are present in each Belgian municipality. The CPAS are governed by a board the members of which are elected by the municipal council of the respective municipality. According to Article 1 of the Loi CPAS: ‘Everyone has the right to social aid. The purpose of such aid is to enable everyone to lead a life in keeping with human dignity. CPAS shall be set up to provide such aid in accordance with the conditions laid down in this Law.’

(15) In practice, the CPAS provide social aid to persons who do not have the resources to be able to live in dignity and who are ineligible for other forms of social security (e.g. unemployment benefits). In this context, Article 57(1) of the Loi CPAS specifies that the CPAS have the mission to provide individuals and families with the aid that the community is due to provide and describes this aid as follows: ‘It shall provide not only palliative and curative assistance but also preventive assistance. It shall encourage social participation by users. The assistance may be material, social, medical, medico-social or psychological.’

(16) Although each CPAS has the obligation to provide social aid to individuals and families, it does have a certain discretion as to how this aid is provided. More specifically, a CPAS may provide such aid: — either itself, directly, or — ‘where necessary and if appropriate under an existing scheme’ (see also recital 19), through institutions or services which it creates (on the basis of Articles 60(6), 79, 118 Loi CPAS), in which case the CPAS setting up such an institution or service also necessarily determines its purpose; any of its social obligations, which the CPAS delegates to the institution or service, is then exercised in accordance with that purpose, or — through institutions or services with which it collaborates (Article 61 Loi CPAS), in which case the respective institutions or services will have been created: — either by the CPAS itself (see previous indent), or — by a third party which will also have decided the purpose of its institution.

(17) In the latter two cases, the CPAS will delegate (part of) its social aid obligation solely in so far as this is consistent with the purpose of the collaborating institution. On the one hand, if the institution is set up by the CPAS, it will control this purpose. In the case of an entirely third-party institution, on the other hand, the collaboration will be limited by the purpose of this institution.

(18) The legal obligation on the CPAS to provide social aid, whether material, social, medical, medico-social or psychological, is the same no matter whether it provides the aid directly or through institutions that it creates or with which it collaborates. Article 57 of the Loi CPAS imposes the obligation to provide such aid on the CPAS (alone) in all cases. Any forms of delegation are arrangements for the exercise of this obligation and do not exempt the CPAS from its responsibility to ensure that its obligation is — and continues to be — fulfilled.

(19) The requirements that apply when a CPAS wants to create an institution or service (such as a hospital) for the performance of (part of) the CPAS mission to provide social aid are set out in Article 60(6) of the Loi CPAS: ‘Where necessary and if appropriate under an existing scheme, the CPAS shall set up, develop and manage social, curative and preventive establishments and services. The need to create or develop an establishment or service must be based on documentation including an evaluation of the needs of the municipality and/or region and of similar establishments or services already in existence, a description of their operation, an accurate assessment of the cost price and expenditure involved and, if possible, information allowing a comparison with similar establishments or services. The creation or development of establishments or services that will potentially receive either investment or operating subsidies can only be decided on the basis of documentation showing that the conditions laid down in the organic law or regulations on the granting of such subsidies will be satisfied. Notwithstanding the authorisation to be obtained from other public authorities, as soon as the decision to create or develop an establishment or service might entail a contribution from or addition to the municipal budget, it shall require the approval of the municipal council.’

(20) The obligation in Article 57 of the Loi CPAS to provide individuals and families with aid (of social, medical, medico-social or psychological nature) is: — General: aid is to be provided irrespective of the ideological, philosophical or religious beliefs of the beneficiary (Article 59 of the Loi CPAS) and the person's possible lack of means. The CPAS has the specific purpose of providing aid in view of the person's state of poverty. On this basis, each CPAS has the obligation to provide aid to all, and if it sets up an institution or service to fulfil its task the latter will necessarily have the same obligation. — Not subject to time limits: the aid is to be provided for as long as the social need exists. The CPAS is therefore obliged to ensure the continuity of the aid and hence of the institution or service that provides it.

(21) On the basis of the principle of municipal autonomy, each CPAS in its respective municipality takes an autonomous decision, whilst complying with the Loi CPAS, as to the most appropriate means of fulfilling its obligation to provide social aid (including medical aid). The constitutional choice to organise social aid at the municipal level is also driven by the wish and need to establish a social aid policy that is as close as possible to the population. When a CPAS decides to set up a curative healthcare institution in order to cater for the healthcare needs of the local population, the institution thus created is regulated both by the Loi CPAS and the federal regulatory framework for hospitals (see recital 32 for this framework), which applies to all hospitals regardless of their status (public or private) and ensures a common organisational system for the whole country. Unlike private hospitals, the primary purpose of hospitals established by a CPAS, such as the IRIS-H, is however always to contribute to the provision of social aid. The exact nature of the social aid obligations that apply to the IRIS-H (see also Section 7.3.4.1) is specified in the bylaws of the IRIS-H and the IRIS strategic plans in line with the requirements of the Loi CPAS (in particular in its Articles 120 and 135 quinquies).

(22) Finally, on the basis of Article 106 of the Loi CPAS, municipalities are required to cover the deficit of their CPAS when the latter does not have sufficient resources to cover the expenditures connected to the provision of its social aid obligation.

2.2. The creation of the IRIS hospitals

(23) As explained above (see recital 15), the social aid provided by the CPAS includes medical and medico-social assistance, and can be both of preventive and curative nature. Such assistance may be provided either (i) directly by the CPAS, or, (ii) through a third party (such as a private hospital) in accordance with their statutory autonomy, or, (iii) particularly if the CPAS wishes to control the means of achieving those objectives, by creating an institution or service to perform part of its mission (which will then be defined in the bylaws of that institution or service and in the case of the IRIS-H also in the IRIS strategic plans (see recitals 16 and 21). To achieve their mission in the field of medical assistance, the CPAS have set up and continue to (co-)manage hospitals in several Belgian cities and municipalities.

(24) Historically, the CPAS in the six Brussels municipalities concerned (18) have provided social assistance of medical and socio-medical nature themselves via eight public hospitals (19) spread over eight different sites. These hospitals were managed directly by the respective CPAS and did not have legal personality. Hence, it was clear that these hospitals contributed to fulfilling the social aid obligation of the respective CPAS. However, in the first half of the 1990s, the Brussels public authorities found that the structural deficits of these hospitals jeopardised their continuity. To ensure the continuity and viability (referred to as pérennité by the Belgian authorities) of the Brussels public hospitals, these authorities decided to restructure these hospitals.

(25) The first step of the restructuring operation was taken on 19 May 1994 when the Belgian Federal Government, the Brussels Capital Region and the Brussels Commission Communautaire commune signed a cooperation agreement on hospital policy. This agreement provided for the implementation of a restructuring agreement to ensure the continuity of public and local hospital services. As stated in Article 2 of that cooperation agreement: ‘This restructuring agreement must satisfy the following conditions: 1. to provide guarantees of the maintenance of, on the one hand, the specific character of public hospitals, inter alia, by the choice of legal structures and coordination ensuring predominance of the public sector in the management bodies and decision-making procedures, and, on the other hand, a local basis, through greater representation of directly elected members in the composition of the management bodies’ (20).

(26) The preamble to the cooperation agreement states to that effect: ‘Whereas the financial deficit shown by the public hospitals in the territory of the Brussels Capital Region has in fact reached worrying proportions; Despite several restructuring plans, the financial equilibrium of those institutions is extremely precarious and is accordingly burdening the municipal budgets with a structural debt; Whereas it is necessary in those circumstances to encourage the establishment of mechanisms for coordination and cooperation between municipalities and the CPAS and associations set up in accordance with Chapter XII of the [Loi CPAS] with responsibility for public hospitals in the territory of the Brussels Capital Region; Whereas such coordination and cooperation mechanisms can ensure the continuity of public hospitals, by encouraging synergies in equipment and infrastructure and their management and development resources and help to offset the deficit in municipal budgets; Whereas this agreement in no way alters the rules for hospital financing, but is designed solely to offset the structural deficit affecting the CPAS and municipalities’ (21).

(27) It was on that basis that the Brussels Commission Communautaire commune adopted the Ordonnance of 22 December 1995 which inserted a Chapter XII bis in the version of the Loi CPAS that applies in the Brussels Capital Region. The preparatory work for this Ordonnance (22) refers to the cooperation agreement of 19 May 1994 (see recital 25) of which the main objective was to guarantee, through the proposed restructuring, the continuity (pérennité) of the Brussels public hospitals (23).

(28) The restructuring consisted of the following key elements: — The CPAS relinquishing the direct management of their public hospital(s) to newly created legal persons (so-called ‘Chapter XII associations’) which the CPAS established (jointly with the respective municipality or municipalities, the association representing the hospitals' doctors and, where relevant, the universities Université Libre de Bruxelles and/or the Vrije Universiteit Brussel). In doing so, the CPAS departed from their original choice of managing their own hospitals themselves as they did in the past. As allowed by Articles 60(6) and 118 of the Loi CPAS (see recital 19), the CPAS chose to set up an association through which they can provide medical and medico-social assistance to the community. As a result, the existing Brussels public hospitals were liquidated and their activities were transferred to eight local hospital associations established on the basis of Chapter XII of the Loi CPAS. In this way, the IRIS-H obtained legal and financial independence (24) on 1 January 1996. The following eight hospital associations were created: the CHU Brugmann — HUDERF, the CH Brien, the CHU Saint-Pierre (CHU-SP), the CH Etterbeek-Ixelles, the CH Baron Lambert, the CH Bracops, the CH Molière, and the Institut Bordet (IB). These eight hospitals were then further regrouped, while retaining all hospital sites, into the current five IRIS-H as follows. The CHU Brugmann (CHU-B) and Queen Fabiola Children's University Hospital (HUDERF) were split into two separate legal entities on 1 January 1997. On 1 July 1999, the CHU Brugmann and the CH Brien became one entity named CHU Brugmann. On that same date, the CH Etterbeek-Ixelles, the CH Baron Lambert, the CH Bracops, the CH Molière merged into the Iris South Hospitals (ISH). Unless indicated otherwise, where the decision at hand refers to the ‘IRIS-H’ this concerns these current five local public hospital associations (25). — Creating an umbrella structure called IRIS (on the basis of Chapter XII bis of the Loi CPAS) to coordinate and supervise the hospital activities of each of the Chapter XII associations (26). The main objective of the IRIS umbrella is to reach a sustainable financial equilibrium for the hospital activities performed by the IRIS-H. The main tasks of IRIS are to coordinate the activities of the IRIS-H, determining the strategic plan for the IRIS network, improving the quality of the services offered, and monitoring the budget of the network.

(29) In line with Chapter XII of the Loi CPAS, each of the local hospital associations is established on the basis of bylaws which among others determine the purpose, the rights and obligations of the members, and the decision-making bodies of the association (27). On this basis, each association has a General Assembly and Administrative Council in which the parties that established the association (see recital 28) are represented; but the representatives of the government (i.e. the municipality and the CPAS) always occupy a majority of the seats in these decision-making bodies (28). As a result, it is clear that each of the IRIS-H is controlled by the public authorities. Likewise, the municipalities, the CPAS have a large majority in the General Assembly and the Administrative Council of the IRIS umbrella structure.

(30) Chapter XII bis of the Loi CPAS determines, among others, the rules with respect to control and administrative oversight that apply to the local hospital associations. More specifically, the IRIS umbrella organisation is required to draw up a strategic plan which is binding on the local Chapter XII associations. On the basis of this plan, each local hospital association has to draw up management and financial plans and submit these to IRIS for approval (see Article 135 quinquies Loi CPAS). The local hospital associations are also required to ask the permission of IRIS before taking certain major decisions (see Article 135 sexies) and are monitored by IRIS on a quarterly basis (see Article 135 octies). IRIS also appoints a representative in each local hospital association who attends the meetings of the decision-making bodies of these associations and who can veto decisions that are not in line with those of IRIS itself (see Article 135 novies).

(31) Finally, as explained in recitals 31 and 32 of the opening decision, the restructuring of the Brussels public hospitals that were supervised and managed by the CPAS also consisted of a financial part. More specifically, via the Fonds Régional Bruxellois de Refinancement des Trésoreries Communales (hereinafter ‘FRBRTC’) the Brussels Capital Region granted a loan of 4 billion Belgian francs (about 100 million EUR) over a period of 20 years to those municipalities that managed a public hospital (via their respective CPAS) (29). In turn, the municipalities awarded these funds to their public hospitals to cover part of their financial liabilities (30). On 6 June 1996, the Brussels Capital Region decided not to demand repayment of the loan and interests, on the condition that the hospital restructuring agreements were fully implemented and the financial plans respected.

2.3. The regulatory framework applying to the IRIS-H

(32) From the previous section it is clear that the IRIS-H have been established on the basis of the Loi CPAS to enable the CPAS to fulfil their obligation to provide social aid. These hospitals are therefore governed primarily on the basis of the Loi CPAS. However, as hospitals, they are also subject to the Law of 7 August 1987 (Loi coordonnée sur les hôpitaux, hereinafter ‘LCH’) (31) Article 147 (now Article 163 of the LCH in the version of the Law of 10 July 2008) (32) of which specifies: ‘In the case of hospitals managed by a CPAS and the doctors working in those hospitals, the provisions of this Coordinated Law supplement the Loi CPAS.’

(33) The LCH sets out, inter alia, the types of hospitals that can be formally authorised (33), the conditions for the management of a hospital and the structure of the medical activity (34), the hospital programming (35), the conditions for authorisation of hospitals and hospital services (36), the legal relationship between a hospital and the hospital doctors, the financial statute of the hospital doctors including among others the collecting and setting of the fees, what the fees cover, and the allocation of the centrally collected fees (37).

(34) In addition, the IRIS-H are also subject to the rules laid down in the bylaws of the local hospital associations, specifying among others the purpose of the IRIS-H as well as the rights and obligations of members of the association (see also recital 29).

(35) Finally, the local hospital associations operate under the oversight of the IRIS umbrella organisation, restricting their ability to autonomously take certain financial and management decisions (see also recital 30). Significantly, the IRIS umbrella organisation adopts multi-annual strategic plans which are binding for the local hospital associations as determined by Article 135 quinquies Loi CPAS.

(36) In conclusion, the regulatory framework in which the IRIS-H operate is made up of the Loi CPAS, the LCH, the bylaws of the local hospital associations, and the binding strategic plans adopted by the IRIS umbrella organisation.

2.4. Main activities of the IRIS-H

(37) The primary activity of the IRIS-H is the provision of hospital services to patients in the Brussels Capital Region. The IRIS-H together employ nearly 10 000 staff, provide over 1 million consultations per year, and constitute Belgium's largest emergency service. The IRIS-H offer comprehensive medical services across all major medical fields, with two of them specialising in particular disciplines (in particular Queen Fabiola Children's University Hospital specialises in paediatrics, while the Institut Bordet specialises in oncology).

(38) In addition to medical services, the IRIS-H also engage in a series of related social activities. In particular, social workers employed by the IRIS-H assist disadvantaged patients and their families in solving and managing financial, administrative, interpersonal and social difficulties.

(39) The five IRIS-H currently provide their medical and related social services across a network of eleven sites in Brussels. These sites are spread over six municipalities (i.e. Anderlecht, la Ville de Bruxelles, Etterbeek, Forest, Ixelles, and Schaerbeek).

(40) The IRIS-H consider it as their mission to be ‘in the service of one and all, at all moments of their existence, from cradle to grave, and irrespective of their medical problems’ (38). Ten of the eleven IRIS-H sites are located in municipalities where the average income does not exceed the median (39) for the Brussels Capital Region. On the basis of a ranking by the Federal Public Service for Public Health (see recital 185 for the table with this ranking), the three large comprehensive IRIS-H (CHU Saint-Pierre, CHU Brugmann, ISH) are the three hospitals whose patient profile in socioeconomic terms is the weakest in Belgium. This is further illustrated by the fact that in 2012 almost 11 % of the total number of admitted patients in CHU Saint-Pierre and CHU Brugmann were not covered by the mandatory Belgian sickness insurance and could not pay for treatment, while 15 % of these hospitals' patients were (also) dependent on CPAS support.

(41) Finally, the IRIS-H also have a number of ancillary activities (e.g. ambulance transport of patients between hospitals; a nursery for the children of staff members; nursing and elderly homes; nursing schools; research; assisted living; and psychiatric care institutions; a little shop for patients and visitors; renting of TVs to patients, renting of rooms to third parties; a canteen and parking facilities). These ancillary activities represent only a very limited percentage of the IRIS-H's total activities, as reflected by their small share (i.e. on average less than 2 %) of the IRIS-H's total revenues.

(42) The totality of these activities account for the IRIS-H costs and revenues. Their costs are, in addition to the particular activities they carry out, also influenced by their status as public hospitals which entails a number of constraints that do not apply to private hospitals. In particular, the operating costs incurred by the IRIS-H in the provision of their services of general economic interest (hereinafter ‘SGEI’) and ancillary activities are among others increased by factors such as: — the requirement to pay mandatory language bonuses (40) that have to be awarded to bilingual employees with an estimated yearly cost (41) to be borne by the IRIS-H of approx. EUR […] (42) million, — the pension scheme that applies to statutory employees (43) (i.e. civil servants) which is more generous than the one applying to private sector employees and for which the IRIS-H have to contribute an estimated amount of EUR […] million per year, — the costs related to long-term illnesses of statutory employees (44) that have to be borne by the IRIS-H (instead of by the social security system) for an estimated yearly amount of EUR […] million, — pay scale increases imposed on the IRIS-H by the Brussels Capital Region (45) which sets the pay scales for employees of the municipalities, the CPAS and the IRIS-H and which only pays for 60 % of these increases leaving an annual cost of approx. EUR […] million for the IRIS-H, and — the mandatory contributions by the IRIS-H to the cost of the IRIS umbrella organisation (46) for an estimated annual cost of EUR […] million.

(43) These residual costs have to be borne by the IRIS-H and are not covered by other public financing sources (such as for instance the BMF, see recital 46(a)).

2.5. The financing and accounting mechanisms of the IRIS-H

2.5.1. Financing mechanisms

(44) The fundamental principle according to which the IRIS-H are funded is enshrined in Article 46 (47) of the bylaws of each of the five local hospital associations (see recitals 28-29), which stipulate that: ‘Without prejudice to Article 109 [LCH], the result of the financial year shall be allocated between partners holding at least one fifth of the votes in the General Assembly by decision of the General Assembly’ (48). On this basis, the municipalities and the CPAS are required to fully absorb any deficit incurred by the IRIS-H as reported in their financial accounts. In addition, according to Article 106 of the Loi CPAS, the municipalities have to cover any deficit generated by their CPAS (see recital 22). In consequence, the municipalities (directly and via their funding obligation towards their respective CPAS) ultimately ensure the continuity of the IRIS-H by fully covering any deficit these hospitals may generate.

(45) The extent to which the municipalities and the CPAS have to intervene to cover any deficit generated by the IRIS-H on the basis of Article 46 of their respective bylaws naturally depends on the degree to which the IRIS-H can cover their costs from other financing sources.

(46) The LCH describes five financing sources that are available equally for public and private hospitals. The operating costs of Belgian hospitals are mainly covered by the first three financing sources (49) while the fourth and fifth sources are related to hospitals' investments costs. (a) The first financing source is the budget des moyens financiers (hereinafter ‘BMF’) (50), which is established by the Federal Minister responsible for public health, and only takes into account healthcare activities that are covered by the social security. The BMF is determined for each hospital within the boundaries of the global Federal State budget. The available Federal budget is allocated among all hospitals and may not necessarily cover all of their eligible costs. Since 2002, the BMF for each hospital is mainly determined on the basis of the number of days of treatment provided by each hospital during the previous year. This specific amount is then paid out to each of the hospitals in two different ways. In particular, about 85 % (the fixed part) of this amount is being paid to the hospitals on a monthly basis, while the remaining 15 % (the variable part) is paid on the basis of the actual admissions and days of treatment in the hospital during the year. At the end of each year, the BMF is recalculated on the basis of the actual figures for the year and depending on the outcome the hospital either receives or has to repay an amount. The BMF is regulated in more detail by the Royal Decree of 25 April 2002 which defines the conditions and rules for setting the BMF granted to hospitals. In particular, the Royal Decree determines how the BMF is set, which type of costs are accepted for coverage by State funding and what criteria apply in this regard (51). It is important to point out that the BMF is not set up to cover the actual costs incurred by each hospital but is instead mainly arranged as flat rate financing based on their average actual historical costs. As a result, the BMF may be insufficient in case of significant cost increases, or other evolutions in the organisation and cost structure of a hospital. (b) The second source of financing are the social security payments, i.e. made by the Institut National d'Assurance Maladie-Invalidité (hereinafter ‘INAMI’), to the hospitals for the treatments they offered to their patients. This financing is based on the Loi Assurance Maladie-Invalidité (52), respectively its consolidated version laid down in the Law of 14 July 1994 (53), which sets up the Belgian social security system with regard to sickness and invalidity and specifies the medical services and medication that are eligible for compensation by the social security. The hospitals directly charge part of the doctor's fees and the cost of the patients' medication to the INAMI. These payments however do not cover the full costs that the hospitals incur when providing their healthcare activities. As a result, hospitals that have insufficient other sources of revenues risk becoming loss-making. (c) A third source of financing are payments made directly by the patient or by their private health insurers to the hospitals. These payments are necessary because the social security does not cover 100 % of doctors' fees nor of medication and other medical supplies (e.g. implants). In addition, if patients choose to have a single room, then supplements can be charged on top of the normal hospitalisation price and on top of the normal doctor's fee (i.e. more than the standard rates that apply per treatment). Finally, patients may also be charged for the use of additional services (e.g. rent for a TV, use of the hospital parking, etc.). All payments made by patients or third parties to compensate hospital doctors for their treatment of hospitalised patients, have to be collected centrally by the hospital (54). The hospitals and their doctors conclude agreements that determine the percentages of the fees that the hospitals can keep to cover their collection costs and other costs that are not financed by the BMF (55). Similarly as for the normal doctors' fees, part of the abovementioned supplements can also be retained by the hospital to cover part of its costs (again conditional on an agreement between the hospital and its doctors). Part of the doctors' fees are hence not a payment going to the doctors but instead are used to cover the operating costs of the hospitals. (d) The fourth source of financing is specifically meant to cover investment costs incurred by the hospitals. The investments of hospitals are mainly covered by the State (the Federal government and the Regions each pay a part) and the remaining part is paid from the hospitals' own resources combined with bank loans. The State financing is aimed at the costs of building or renovating a hospital or hospital ward and the costs of the first acquisition of equipment and medical devices (56). Investment subsidies are capped (e.g. a fixed amount per square metre or per unit). (e) The fifth general source of public financing is related to investments and concerns damages payments for studies, the development of building projects, but also costs resulting from the closure or non-usage of a hospital or hospital ward (57). In practice, this type of financing is not very commonly awarded.

(47) Article 109 of the LCH (now Article 125 of the LCH in the version of the Law of 10 July 2008 (58)) sets out a sixth financing mechanism of which only public hospitals (such as the IRIS-H) can benefit. According to this provision, public hospitals' deficits arising from their hospital activities have to be covered by the municipalities that control them (i.e. via their CPAS or via a central structure such as IRIS). The principle of this (partial) deficit cover by the municipalities was already included in the Law of 23 December 1963 (59), which preceded the LCH, and was confirmed by Article 34 of the Law of 28 December 1973 (60). The criteria to calculate the deficits that the municipalities are obliged to cover are determined in a Royal Decree (61). On this basis, the Federal Minister responsible for public health each year determines the deficit that must be covered for each public hospital. In practice, the Article 109 LCH deficit that must be covered as determined by the Minister is not exactly equal to the deficit reported in the financial accounts of the hospital, since certain cost elements (e.g., the result of the non-hospital activities which in the case of the IRIS-H are purely ancillary to the hospital activities as will be explained in recital 155) (62) contained in the deficit reported in the financial accounts are excluded from the Article 109 LCH deficit.

(48) In conclusion, the IRIS-H thus enjoy a comprehensive financing mechanism that ensures coverage of any deficit they may generate. The five general financing measures foreseen by the LCH (see recital 46) cover the majority of the hospitals' operating and investment costs. To the extent that these sources are insufficient to cover the costs arising from the hospitals' activities, Article 46 of the bylaws of the IRIS-H obliges the municipalities to fully cover any deficit generated by the IRIS-H (see recitals 44-45). The accounting deficit addressed by Article 46 of the bylaws necessarily includes the ‘Article 109 LCH deficit’ (63) (see recital 47) and by fully covering the accounting deficit, the municipalities also fulfil their obligation under Article 109 LCH. The payment modalities of this deficit compensation mechanism will be described below (see Section 7.3.5).

2.5.2. Accounting requirements

(49) All hospitals (i.e. public and private) are subject to accounting and transparency requirements. In particular, each hospital must keep a set of accounts that allow determining the cost of each service and that respect certain elements of the Law of 17 July 1975 (64) on accounting (65). It is mandatory to record non-hospital activities on separate accounts. Hospitals are also obliged to appoint an auditor who certifies the hospital's accounts and financial statements (66). Finally, hospitals are required to submit certain (financial) information to the Federal Minister responsible for public health (67) and its Federal Public Service also monitors compliance with the LCH (68).

3. DESCRIPTION OF THE MEASURES TARGETED BY THE COMPLAINT

(50) According to the complainants, the Brussels Capital Region has chosen to de facto take up the role of the relevant Brussels municipalities for the compensation of the deficits of the IRIS-H. In particular, the complaint mentions interventions by the Fonds Régional Bruxellois de Refinancement des Trésoreries Communales (or FRBRTC) which was created by the Brussels Capital Region (69). In addition, the complaint adds that since 2003 the Brussels Capital Region itself also allegedly granted special subsidies to the municipalities (70) (i.e. up to EUR 10 million annually), which were allegedly intended to be passed on as aid for the IRIS-H.

(51) While the complainants do not put into doubt the competence of the Brussels Capital Region towards these municipalities they consider that what they qualify as regional financing of the IRIS-H goes beyond what is envisaged by the deficit cover as specified by Article 109 of the LCH (see also recital 47). The complainants argue that the IRIS-H benefited significantly from regional financing awarded to the municipalities in which they are located and that this financing cannot be justified on the basis of the provisions of the LCH. The complainants did not refer to the deficit cover obligation in Article 46 of the bylaws of the IRIS-H.

(52) Finally, the complainants referred to approximately EUR 100 million being awarded via the FRBRTC in the context of the restructuring of the Brussels public hospitals which led to the creation of the IRIS-H (see also Section 2.2). The complainants allege that this operation would have resulted in overcompensation of the IRIS-H.

4. GROUNDS FOR INITIATING THE PROCEDURE

4.1. The Commission's 2009 decision

(53) As recalled above (see recital 5), on 28 October 2009, the Commission adopted a no objections decision (71), concluding that the public financing of the IRIS-H in the Brussels Capital Region constituted State aid compatible with the internal market as compensation for the provision of services of general economic interest. The Commission based this decision on the 2005 SGEI Decision as well as directly on Article 86(2) EC Treaty (now Article 106(2) TFEU).

(54) In its decision, the Commission considered that the IRIS-H were entrusted with three hospital public service missions: first, the general hospital mission of all hospitals (public and private) under the LCH (72); second, the obligation to treat any patient in all circumstances, including post-emergency (73); and third the obligation to provide complete multi-site hospital care (74). In addition, the Commission concluded that the IRIS-H were entrusted with the non-hospital public service mission of providing social assistance together with medical care (75). Finally, reference was also made to a bilingualism obligation (76). These missions were considered to have been entrusted to the IRIS-H via the LCH, the Loi CPAS, the IRIS strategic plans, and finally a convention signed by the IRIS-H and the CPAS. The Commission further considered that the compensation parameters were established ex ante (77) and that sufficient procedures for preventing and correcting overcompensation were in place (78). Finally, the Commission was also satisfied that the IRIS-H kept separate accounts for hospital and non-hospital activities (79), which in turn ensured the absence of cross-subsidisation of commercial non-SGEI activities of the IRIS-H (80).

(55) The Commission also assessed whether the IRIS-H had been overcompensated in the past (i.e. between 1996 and 2007) (81), reaching the conclusion that this had not been the case (82). Apart from assessing the financing measures as a whole, the Commission also examined an alleged mechanism of advances. Since the deficit compensation pursuant to Article 109 LCH was regularly only paid out with a long delay of up to 10 years, the IRIS-H allegedly received an advance on these outstanding payments through the FRBRTC. The Commission concluded that since these alleged advances would in any event have to be repaid once the deficit compensation pursuant to Article 109 LCH was paid, they could not lead to overcompensation of the IRIS-H (83).

4.2. The 2012 annulment judgment of the General Court

(56) In response to the Commission's 2009 decision, the complainants launched an action for annulment of that decision in front of the General Court (84). The complainants argued that the Commission violated the complainant's procedural rights by not opening the formal investigation procedure, as the Commission should have noted serious difficulties in the examination at issue (85).

(57) In its judgment of 7 November 2012 in case T-137/10, the General Court annulled the Commission's 2009 decision, concluding that the Commission was obliged to open the formal investigation procedure (86).

(58) The General Court first considered whether the IRIS-H had been entrusted with clearly-defined public service missions (87). At the outset, the General Court noted that all parties agreed that the LCH entrusted all hospitals, public and private, with a general hospital public service mission (88). It was thus only in doubt whether the Commission had erred in finding, in the preliminary examination, that the IRIS-H were entrusted with additional hospital and non-hospital public service missions (89). The General Court concluded that there were doubts whether the provisions relied on by the Commission in its decision were sufficient to entrust the IRIS-H with the additional missions to treat all patients in all circumstances (90), to provide multi-site hospital care (91), and to provide additional social services (92). In addition, with respect to the alleged mission to provide multi-site hospital care, the General Court pointed out that it was not clear how that mission differed from the general programming and operational requirements applicable to all hospitals subject to the LCH (93).

(59) Secondly, the General Court examined whether the Commission had demonstrated the existence of clear compensation parameters (94). As regards the hospital missions, the General Court addressed the deficit compensation mechanism under Article 109 LCH (95) — while noting that this mechanism was explicitly not challenged by the complainant (96) — and the alleged regional financing mechanism through the FRBRTC established in order to advance temporarily the amounts needed to make up the deficits of the IRIS-H before the deficit cover under Article 109 LCH takes effect (97). With respect to Article 109, the General Court found that the complainants had not put forward any arguments affecting the Commission's positive assessment thereof (98). Regarding the alleged advances paid out via the FRBRTC mechanism, however, the General Court concluded that the Commission had not identified any parameters for the calculation of those advances (99), thus evincing an incomplete examination of these advances (100). The General Court added that the Commission contradicted its decision when it claimed, in the hearings, that the FRBRTC was only a mechanism by which the Brussels Capital Region financed the Brussels communes, but not the IRIS-H (101).

(60) With regards to the public financing in favour of the IRIS-H's alleged additional social mission (102), the General Court observed that this financing apparently again originated from the FRBRTC, which had concluded an agreement with the relevant Brussels communes to grant them a special subsidy with a view to enabling the communes to finance the social missions performed by the IRIS-H (103). The General Court concluded that this agreement did not specify the prior compensation parameters relating to the alleged additional social missions of the IRIS-H (104).

(61) Next, the General Court considered whether the Commission had demonstrated the existence of procedures for avoiding overcompensation and the absence of overcompensation (105). The General Court first found that the LCH provides for sufficient safeguards to ensure that the procedure pursuant to Article 109 LCH does not lead to overcompensation (106). It concluded further that the Commission had not established that with respect to the alleged advance payments by the municipalities that a similar mechanism existed (107), pointing in particular to the apparent lack of a legal obligation of the IRIS-H to repay these advances once the Article 109 LCH deficit-financing was received (108). With respect to the special subsidy referred to by the Commission as financing the additional social mission, the General Court concluded that the assessment made by the Commission of the procedure for avoiding overcompensation in connection with the funding of the social missions was inadequate (109).

(62) With respect to the question of whether the IRIS-H had been overcompensated in practice (110), the General Court merely remarked that the scope of the analysis was very broad, covering all the financial results of the IRIS-H over a period of more than a decade (111). Without concluding specifically on the Commission's finding that there had been no overcompensation, the General Court considered that the breadth and complexity of the assessment made by the Commission constituted, in themselves, support for the complainant's arguments alleging the existence of serious difficulties (112).

(63) Finally, the complainants argued that the Commission should have taken the criterion of economic efficiency of the SGEI provider into account in its assessment (113). The General Court however rejected that argument and concluded that: ‘[T]he criterion linked to the economic efficiency of an undertaking in supplying the SGEI is unconnected with the assessment of the compatibility of State aid in the light of Article 86(2) EC [now: Article 106(2) TFEU], and the choice made by the national authorities relating to the economic efficiency of the public operator cannot therefore be criticised in that regard’ (114).

(64) Summarizing its findings, the General Court stated that: ‘The [complainant] has presented a body of consistent evidence showing the existence of serious doubts as to the compatibility of the measures under examination in the light of the criteria relating to the applicability of Article 86(2) EC [now: Article 106(2) TFEU] concerning, first, the existence of a clearly defined mandate relating to the hospital and social public service missions specific to the IRIS hospitals, second, the existence of previously established compensation parameters and, third, the existence of procedures for avoiding overcompensation in the funding of the public service missions […]’ (115).

4.3. The Commission's opening decision of 1 October 2014 (116)

(65) In the light of the GC's conclusions (117) that the Commission should have had doubts as to the compatibility with the internal market of the disputed public financing granted to the IRIS hospitals on the basis of Article 106(2) TFEU, the Commission was required to initiate the formal investigation procedure and did so by decision of 1 October 2014 In its opening decision, the Commission noted that according to the Belgian authorities the respective Brussels municipalities and CPAS have chosen to entrust the public IRIS-H but not the private hospitals with the following additional obligations (118), justifying the deficit compensation measures put in place in favour of the IRIS-H: (a) Obligation to offer medical assistance to all patients in all circumstances: the IRIS-H cannot refuse to treat patients that are not able to pay and/or are uninsured, even if they do not require urgent medical care. Private hospitals allegedly are only obliged to treat all patients that need urgent medical care, but would not have such an obligation in non-urgent situations. (b) Obligation to offer a full range of hospital services at multiple sites: The municipalities and the CPAS have made the deliberate choice to maintain multiple hospital sites that offer a full range of treatments in order to ensure accessibility for patients. The alternative option of regrouping the beds and accompanying services at fewer locations and hence to save costs was deliberately dismissed. This choice is especially relevant for disadvantaged patients and their families, since the IRIS hospitals are mainly located close to or in neighbourhoods with a large disadvantaged population. (c) Obligation to provide social services to patients and their families: social workers assist the disadvantaged patients and their families in solving and managing financial, administrative, interpersonal and social difficulties. In addition, the social workers draw up prior social reports to facilitate a financial intervention by the CPAS. While all public and private hospitals are required to employ social workers for certain hospital services (such as geriatrics and psychiatry), the Belgian authorities claim that the IRIS hospitals have a specific additional obligation which results in much larger social services and higher costs than are compensated pursuant to the LCH.

(66) On the basis of the doubts expressed by the GC (119), the Commission invited the Belgian authorities, the complainants and any other interested parties to provide all relevant information for verifying the compatibility of the disputed public financing, in particular as regards the following points: — the exact definition of the alleged additional missions of the IRIS-H and on what documents the entrustments of these alleged additional missions are based (see recitals 87-89 of the opening decision), — the legal basis for the compensation of the deficits of the IRIS-H (to which the costs of each of the alleged additional missions contribute) (see recital 91) of the opening decision), — whether there are (sufficient) measures in place to avoid overcompensation of the alleged additional missions, in particular via the deficit compensation mechanism in combination with the repayable advances (if any), and whether the IRIS-H are under a legal obligation to repay any advances they may have received in order to avoid overcompensation (see recital 95 of the opening decision), — in the event that the payments of the special subsidies of up to EUR 10 million annually (see above recital 50) are to be considered as a transaction separate from the compensation of deficits of the IRIS-H, whether there are sufficient measures in place to ensure that the compensation does not exceed what is necessary to cover the costs occasioned by the performance of public service obligations (see recital 96 of the opening decision), — whether no overcompensation was in fact granted to the IRIS-H since they started operating as independent legal structures (see recital 97 of the opening decision), — any further concrete, specific and detailed argumentation and documentation whether, why and to what extent the public financing measures for the IRIS-H fall under the 2012 SGEI Decision or the 2012 SGEI Framework (see recital 98 of the opening decision) respectively the 2005 SGEI Decision (see recital 100 of the opening decision) and whether, why and to what extent all the compatibility criteria laid down therein would be fulfilled.

(67) The Commission also took the opportunity of adopting the opening decision to seek clarification on the following additional factual matters: — whether or not any FRBRTC funds, respectively the special subsidies (see above recital 50), were directly transferred to the IRIS-H or whether the FRBRTC and the special subsidies are merely financing mechanisms between the Brussels Capital Region and the Brussels municipalities (see recital 17 of the opening decision), — the exact nature of the requirement of Article 60(6) of the Loi CPAS (see above recital 19), the possibilities for a public hospital to close down, and the difference with the hospital programming mechanism (see recital 26 of the opening decision), — whether or not the additional social services carried out by the IRIS-H are economic or non-economic in nature (see recital 48 of the opening decision), — whether or not the passing on of the special subsidies (from the Brussels Capital Region to the municipalities) by the municipalities to the IRIS-H can be considered as a transaction separate from the deficit coverage mechanism (see recital 92 of the opening decision) and, if so, what is the applicable legal basis that sets out its precise modalities, — whether or not there is a mechanism of advance payments, on what legal basis and how such payments are made (if any) and whether or not they are considered as an aid measure separate from the deficit coverage mechanism, and to clarify whether such advances (if any) were funded via the FRBRTC (see recital 93 of the opening decision), — further clarification on the concept of pérennité (i.e. the continuity and viability of public hospitals, see also below recital 91), its legal basis (in particular at the level of IRIS and the IRIS-H), its implications and how pérennité justifies the deficit compensation mechanisms that benefit these hospitals (see recitals 102-103 of the opening decision), — whether there are any reasons other than those explicitly mentioned in the opening decision (i.e. the existence of additional SGEI missions and the pérennité of the public hospitals) that may justify the additional financing for the IRIS-H (see recital 103 of the opening decision).

5. COMMENTS FROM INTERESTED PARTIES

(68) The Commission received comments from four interested parties (i.e. CBI, ABISP, Zorgnet Vlaanderen and UNCPSY), as summarised below:

5.1. CBI

(69) In response to the opening decision, CBI, the complainant, notes that in their view that decision does not contain any new element, arguments or explanations to establish the existence of a specific mission entrusted to the IRIS-H or concerning the compensation mechanisms for this claimed mission or the controls which would be put in place in this respect. The complainants therefore mainly refer to the arguments that were developed in their prior submissions.

(70) The CBI confirms its position that: (1) the IRIS-H are not entrusted with specific SGEI in addition to those incumbent upon all Belgian hospitals (public and private); and (2) even if the Commission would conclude that such additional missions exist they are not defined sufficiently clearly to meet the requirements of Union law in this respect. The CBI also points out that in the proposed policy program by the new Brussels government (published in July 2014) mention is made of ‘rewording the Ordonnance of 13 February 2003 to specify the missions of general interest which justify specific subsidies to municipalities’. The complainants consider this to be an indication that no such missions currently exist but would be defined in the future.

(71) With respect to the requirements of Article 60(6) of the Loi CPAS, CBI considers that these add nothing to the LCH in terms of definition of any additional or specific SGEI that would only apply to public hospitals such as the IRIS-H. The complainants also argue that the additional social mission only appears to consist of a higher volume of social services than that provided by other hospitals and which they refer to as a ‘basic social mission (common to public and private hospitals)’. CBI is of the opinion that this is insufficient to consider that the IRIS-H have an additional social mission. Furthermore, with regard to the question whether these services are economic in nature they argue that the fact that these services are provided free of charge does not make them non-economic. Finally, CBI considers that the additional social services are inseparable from a broader healthcare service which is itself indubitably economic in nature as this has never been put into doubt.

(72) According to CBI, the mission of universal care exists both for public hospitals and for private hospitals. In their view, there would be no difference between public hospitals and private hospitals with regard to the treatment of ‘social patients’, whether in an ‘emergency’ or ‘post emergency’ situation. In this context, CBI refers to a judgment of the Brussels Court of First Instance (120) concerning urgent medical aid (121) for foreigners living illegally in Belgium (hereinafter ‘undocumented migrants’) which would demonstrate that in this context such aid can be provided by both public and private hospitals. The CBI adds that according to a February 2004 publication (122) of the Mutualités Chrétiennes (123), the private hospitals treat more than 60 % of ‘social patients’ in the Brussels Capital Region. The complainants also consider that no additional mission is laid down in the Loi CPAS, in the strategic IRIS plans nor in ‘domicile de secours’ conventions (124).

(73) As regards the ‘multi-site mission’, CBI considers that it is still not explained what the obligation to offer complete ‘multi-site’ hospital care activities comprises, nor to what extent this obligation imposes additional burdens on the IRIS-H. As regards the additional social mission, CBI is of the opinion that Article 57 of the Loi CPAS does not create additional obligations with respect to the IRIS-H and, in any case, does not define them in an intelligible manner (no more than the strategic IRIS plans or the ‘domicile de secours’ conventions).

(74) With regard to the question of a clear definition of the compensation parameters CBI points out that, according to the Belgian authorities, the IRIS-H perform a specific mission distinct from that of private hospitals and that specific mission is not defined in the LCH but has another legal basis. According to CBI, it is clearly excluded that the LCH can establish the compensation parameters with respect to one or more public service mission(s) for which the LCH does not provide. In addition, CBI notes that there is no correspondence between the claimed legal bases for the specific missions in question and the compensation mechanisms. The complainants observe that it seems that no distinction is made between deficits resulting on the one hand from the costs of the claimed specific missions and on the other hand those resulting from the costs of the basic mission. Finally, CBI makes reference to a series of opinions by the Belgian Inspectorate of Finance which concluded that it was impossible to monitor the use of the special subsidies awarded on the basis of the Ordonnance of 13 February 2003 because that Ordonnance did not specify the tasks of communal interest for which these subsidies were granted.

(75) CBI also repeats its previous assertions that there are no measures to avoid overcompensation. They add that in the absence of a precise definition of the specific missions performed by the IRIS-H, it is impossible to say what activities should be subject to compensation or not. In CBI's view, it is consequently impossible to verify the existence of a monitoring mechanism to avoid overcompensations.

(76) Finally, CBI points out that while the pérennité of the public hospitals is cited in the cooperation agreement of 19 May 1994, this document does not define such a mission and does not constitute an entrustment. In particular, according to CBI this agreement would in no way indicate that a municipality or a city must have a public hospital on its territory and would also not lay down any rule for hospital service programming in Belgium requiring the operation of a service in a public hospital.

5.2. ABISP

(77) The Association bruxelloise des institutions de soins privées (ABISP), one of the initial complainants (see recital 1), notes in its comments on the opening decision that all Belgian hospitals, regardless of their bylaws (statuts) or owners, are required by law to fulfil a mission of general interest. In this context, ABISP makes reference to Article 2 of the LCH (125). Finally, ABISP recalls that it has withdrawn its complaint.

5.3. Zorgnet Vlaanderen

(78) Zorgnet Vlaanderen represents over 500 Flemish care providers (such as general hospitals, psychiatric care institutions, and nursing homes). In its observations on the opening decision, Zorgnet Vlaanderen emphasises that all Belgian hospitals, whether they are public or private, fulfil the same public service obligations in the framework of the LCH. In addition, Zorgnet Vlaanderen points out that the LCH does not set out any conditions regarding the legal form (i.e. public or private) to be recognised as a hospital. Furthermore, Zorgnet Vlaanderen observes that the definition of the public service obligations of the hospitals does not refer to a regional specificity. Finally, Zorgnet Vlaanderen claims that hospitals in Flanders and in the Brussels Capital Region do not perform a different social task.

5.4. UNCPSY

(79) The Union Nationale des Cliniques Psychiatriques Privées (UNCPSY) is the federation of private psychiatric clinics in France. In its comments on the opening decision, UNCPSY argues that for the check of whether the public funding does not exceed the net costs of the public service, this net cost cannot be without a limit and cannot ignore whether or not the service provider is well managed. In this context, UNCPSY is of the opinion that the Commission should compare public and private hospitals to determine whether or not the aid is proportionate within the meaning of Article 106(2) TFEU.

(80) In this context, the Commission observes that UNCPSY's comments run counter to the GC's conclusion in paragraph 300 of its judgment of 7 November 2012 (T-137/10) that economic efficiency of an undertaking in supplying the SGEI is not a criterion for the assessment under Article 106(2) TFEU of the State aid compatibility of the public funding which this undertaking receives (see in this respect recital 63).

6. COMMENTS FROM THE KINGDOM OF BELGIUM

6.1. Comments from Belgium on the opening decision

(81) In their reply to the Commission's decision of 1 October 2014 and in particular to recital 17 of that decision, the Belgian authorities note that the financial interventions by the Brussels Capital Region (i.e. the special subsidies of up to EUR 10 million per year) and by the FRBRTC were financial transfers granted to the municipalities only and not to the IRIS-H. As a result, the Belgian authorities consider these were financial transfers between public authorities which are not covered by Article 107(1) TFEU. According to the Belgian authorities, neither the Brussels Capital Region nor the FRBRTC has granted aid to the IRIS-H. Instead, they consider that these transfers were made as part of the Region's competence for the general financing of the municipalities, which enables the latter to fulfil their common interest missions, including the missions of the CPAS. In this context, the complainant's reference to the opinions of the Inspectorate of Finance only concerns the Brussels Capital Region and the municipalities but not the IRIS-H. Finally, the Belgian authorities argue that on the basis of the Special Law of 8 August 1980 on institutional reforms and the Opinion of the Belgian Council of State (126), the Brussels Capital Region can only finance the municipalities and not the IRIS-H since financing specific hospital missions does not fall within the Region's competences.

(82) With respect to the doubt expressed in recital 26 of the opening decision, the Belgian authorities clarify the difference between, on the one hand, the requirement of Article 60(6) Loi CPAS and the possibilities for a public hospital to close down with the hospital programming mechanism, on the other hand. According to them, Article 60(6) Loi CPAS (127) lays down the conditions that need to be fulfilled for a CPAS to be able to establish a hospital. In particular, a CPAS must analyse whether there is a genuine need for such a hospital taking into account the needs of the area, including the medico-social needs, and the presence of similar facilities. The Belgian authorities further point out that the hospital programming mechanism consists of determining the maximum number of hospital beds per Region by the Federal Government who bases its decision solely on the hospital needs identified without taking into account the level of social needs in each area (128). They explain that for the Brussels Capital Region, the maximum number of hospital beds is determined for the region as a whole and not for each of the 19 municipalities separately. In contrast, each of the 19 CPAS in the Brussels Capital Region determined autonomously for their municipality whether or not to establish a hospital based on the local needs.

(83) The Belgian authorities also explained that the closure of a public hospital or its transfer to a private sector partner are not dealt with formally or specifically in the LCH or the Loi CPAS (129). However, according to the Belgian authorities the case law of the Belgian Council of State has clarified the arrangements and conditions for the closure and/or the transfer of institutions set up by a CPAS. In its judgment 113.428 of 9 December 2002, the Council of State ruled that the transfer of a convalescent home belonging to a CPAS to a private operator was to be annulled. In particular, the Council of State found that the need to provide medico-social services also had to be assessed before a decision was taken to close or transfer an establishment. That assessment must take due account of the assessment made when the establishment was created and hence of any changes that had occurred since the decision to create the establishment. Furthermore, the Belgian authorities note that this assessment could not be based purely on the financial situation of the establishment or on the costs incurred for its maintenance. On this basis, the Belgian authorities conclude that a CPAS cannot close its hospital unless it has first established that the medical and social needs the hospital was created to meet no longer exist.

(84) According to the Belgian authorities, for a public hospital to be established, both the requirements of Article 60(6) Loi CPAS and of the authorities' hospital programming need to be fulfilled while for private hospitals only the latter applies. Under Article 60(6) Loi CPAS, the opening of a new public hospital has to be justified by the existence of a genuine need. Furthermore, the Belgian authorities explain that if a public hospital is opened with a capacity that equals the number of beds foreseen under the hospital programming, then there is no longer room for another (public or private) hospital in that area under that programme, in which case there is no other way of meeting the needs of the population. The Belgian authorities note that if at some point a CPAS wishes to close its public hospital it must first ensure that it is no longer needed in line with the jurisprudence by the Council of State. On the contrary, if a private operator decides to close its hospital, that operator, unlike the CPAS, is not legally required to ensure that the population continues to be provided with healthcare. According to the Belgian authorities, it is only its own choice that motivates a private hospital to remain open, a choice which can be changed at any time. The Belgian authorities refer to the abrupt closure of the private Hôpital Français of Berchem-Sainte-Agathe (Brussels) in 2008 (130) as an illustration. To conclude, the Belgian authorities explain that the hospital programming mechanism equally restrains the freedom of public and private operators to establish a hospital (as this is only possible if the maximum number of hospital beds in an area has not yet been reached). In their view, the obligations arising from the Loi CPAS however put additional constraints on both the possibility for a CPAS to establish and to close a public hospital while private hospitals can close at any time.

(85) With respect to the obligations that allegedly only apply to the IRIS-H (see recitals 87 to 89 of the opening decision), the Belgian authorities argue that these obligations are the direct consequence of the fact that the IRIS-H have been set up to contribute to the provision of social aid by the CPAS (see also Section 2.2). The Belgian authorities consider that these obligations derive from the Loi CPAS, pursuant to which the IRIS-H were created, and are entrusted by means of the bylaws of the IRIS-H and the IRIS strategic plans. The Belgian authorities also refer to these documents for the exact definition of these obligations. For reasons of brevity and in order to avoid repetition, the Commission will only cite the relevant quotations in its assessment (see Section 7.3.4.1).

(86) In its opening decision (see recital 48), the Commission expressed doubts with respect to the economic or non-economic nature of the additional social services carried out by the IRIS-H. In their reply to the opening decision, the Belgian authorities consider that these social services are non-economic activities. In essence, they argue that the social aid in the form of material, social, medical, medico-social and psychological assistance provided by the Brussels CPAS is not part of a competitive market and that this remains the case even if part of the social aid (i.e. the additional social services) is performed by the IRIS-H on the basis of an entrustment.

(87) With respect to the legal basis for the compensation of the deficits (see recital 91 of the opening decision), the Belgian authorities consider that the obligation for the municipalities to cover the deficit of their public hospitals is laid down in Article 46 of the IRIS-H bylaws and also in Article 109 of the LCH. They explain that Article 109 LCH lays down a general principle that applies to all Belgian public hospitals and that determines the minimum that municipalities have to do (since it only requires them to cover part of the deficit, see also recital 47). The Belgian authorities also note that Article 46 of the IRIS-H bylaws is a specific obligation that applies only to the six municipalities that established the IRIS-H and who chose to go beyond the minimum of Article 109 LCH by covering the entire accounting deficit of the IRIS-H.

(88) In recital 92 of its opening decision, the Commission asked whether or not the passing on of the special subsidies (which the Brussels Capital Region grants to the municipalities) by the municipalities to the IRIS-H can be considered as a separate transaction from the deficit coverage mechanism. In their reply, the Belgian authorities argue that the Brussels municipalities only use the special subsidies to (partially) fulfil their obligation to cover the deficits of the IRIS-H. As will be explained in more detail below (see Section 7.3.5), the deficit compensation is paid out in several steps, among which the transfer of the special subsidies from the municipality to the IRIS-H, but all these payments are made on the same basis, namely the municipal obligation to cover the deficit.

(89) The Commission also asked for clarification regarding an alleged mechanism of advance payments (if any), its legal basis and operation, the difference with the deficit coverage mechanism, and the role of the FRBRTC in its funding (see recital 93 of the opening decision). The Belgian authorities consider that there is no mechanism for advances in place. More specifically, they explain that the obligation to cover the deficit of the IRIS-H comes into effect as soon as the deficit occurs. Indeed, according to the Belgian authorities Article 46 of the IRIS-H bylaws refers to the accounting deficit which is laid down in the hospitals' financial statements no later than six months after the end of the financial year. In contrast, the calculation of the Article 109 LCH deficit by the Federal Public Service for Public Health takes much longer (up to 10 years). However, the Belgian authorities argue that since the Article 109 LCH deficit is merely a part of the accounting deficit which is covered immediately under Article 46 of the IRIS-H bylaws, the IRIS-H are not paid any advances that might be classified as aid distinct from the deficit cover mechanism. Finally, the Belgian authorities repeat that the FRBRTC has provided financing to the municipalities which helped them to fulfil their deficit cover obligation which as explained above does not constitute a mechanism of advance payments.

(90) With regard to the measures to avoid overcompensation and the absence of overcompensation in fact (see recitals 95-97 of the opening decision), the Belgian authorities provide the following arguments. They first explain that the decisions to compensate the deficit are annual and are taken at a time when the estimated deficit for the respective year is known so that there is no risk of overcompensation. They add that the Belgian legal framework (among others the Law of 14 November 1983 and the Loi CPAS) allows the municipalities to ensure that the IRIS-H use the State aid correctly and to recover this aid in the event of non-compliance or overcompensation. In addition, to show the absence of overcompensation the Belgian authorities refer to several tables submitted to the Commission which contain the deficits and municipal interventions for each of the five IRIS-H over the period 1996-2014 (see also Section 7.3.5 for these figures).

(91) As requested, in their reply the Belgian authorities also provide further clarification on the concept of pérennité (see recitals 102-103 of the opening decision). According to them, the obligation to ensure the continuity (or pérennité) of the IRIS-H is based directly on the Loi CPAS. As has been explained above (see Section 2.1), each CPAS can set up establishments to provide social aid, including medical and medico-social assistance, if they can demonstrate that this is necessary to fulfil a genuine need in line with Article 60(6) Loi CPAS. They explain that historically, six of the nineteen CPAS in the Brussels Capital Region established hospitals (without separate legal personality) that they managed themselves until the end of 1995 in order to provide social aid. According to them, the restructuring of these public hospitals which led to the creation of the public IRIS-H that became legally independent of the CPAS on 1 January 1996 (see also Section 2.2) did not alter the obligation on the CPAS to provide social aid whether directly themselves or via the IRIS-H. In this context, the Belgian authorities point out that the primary objective of the restructuring and the creation of the IRIS network and the IRIS-H was to ensure the continuity of public hospital services in the Brussels Capital Region (see also recital 27). Hence, they note that to ensure the continuity of the IRIS-H and hence guarantee that the social needs of the population are fulfilled, the municipalities and the CPAS are required to absorb any hospital deficit on the basis of Article 46 of the IRIS-H bylaws. Furthermore, the Belgian authorities conclude that as long as the genuine need exists, in line with the jurisprudence of the Council of State (see recital 83), the public authorities cannot close the IRIS-H nor transfer them to a private owner.

(92) Finally, in recital 103 of the opening decision, the Commission asked whether there are other reasons that may justify the additional financing for the IRIS-H. In this respect, the Belgian authorities note that the aim of the IRIS-H is not merely to establish ‘viable’ hospital services, missions and programmes, as Belgian private hospitals could do. Instead, according to the Belgian authorities, the IRIS-H have to guarantee the widest possible range of healthcare, specifically in order to ensure access for everyone, including the poorest members of society, to whatever treatment their pathology requires, even if that goes well beyond the norms of hospital planning and approval applicable to all hospitals, by and under the LCH. In this context, the Belgian authorities also make reference to paragraph 162 of the General Court judgment of 7 November 2012 which states: ‘compensation for public hospital deficits may be necessary for health and social reasons in order to ensure the continuity and viability of the hospital system’. The Belgian authorities also point out that the status of a public hospital entails certain costs that are not fully compensated by the federal financing measures. They note that these costs include among others: the payment of language bonuses to bilingual staff, higher pension and sickness expenses for statutory employees (civil servants), and pay scale increases imposed (but only partially paid) by the Brussels Capital Region.

6.2. Comments from Belgium on third party comments

(93) The Belgian authorities start by noting that the observations by CBI, ABISP and Zorgnet Vlaanderen to the Commission's opening decision are founded on the common assertion that in their opinion the IRIS-H are not entrusted with SGEI in addition to those incumbent on any hospital (public or private) in Belgium. In their view, this assertion is based on a single premise, namely the fact that the LCH entrusts private and public hospitals with the same public service obligation regardless of any particular regional aspect. However, according to the Belgian authorities, the intervening parties do not explain how the Loi CPAS would not apply to the IRIS-H while according to Belgium this law is the specific legal cause for the existence of the IRIS-H. The Belgian authorities point out that Article 147 of the LCH explicitly acknowledges that for hospitals managed by a CPAS (such as the IRIS-H (131)), the LCH supplements the Loi CPAS which confirms that the LCH is not the only relevant legal basis when it comes to a hospital managed by a CPAS.

(94) The CBI's assertion that the Brussels government's intention to reword the Ordonnance of 13 February 2003 to specify the missions of general interest which justify specific subsidies to municipalities (see recital 70) is an indication that no specific missions (only applying to the IRIS-H) currently exist, is deemed incorrect by the Belgian authorities. In particular, they point out that the specific subsidies foreseen by this Ordonnance are only awarded to the municipalities and not to the IRIS-H. Belgium furthermore confirms that the interventions by both the FRBRTC and the Brussels Capital Region itself (of up to EUR 10 million per year (132)) in support of the municipalities constitute financial transfers between public authorities outside the scope of Article 107(1) TFEU. The Belgian authorities repeat that none of these amounts have been granted by the Region or the FRBRTC to the IRIS-H. On the contrary, according to Belgium they are simply transfers between the Region and the municipalities within the Region's remit in terms of the overall funding of municipalities. This overall funding is designed to enable the municipalities to fulfil their tasks of communal interest which includes the missions of the CPAS. According to the Belgian authorities, the announced reform of the Ordonnance of 13 February 2003 in any event cannot amount to an admission that the IRIS-H have no additional SGEI. It is the municipalities that specify the SGEI entrusted to the hospitals they establish and the Ordonnance has no relevance in this context as it only concerns intra-State financing.

(95) The Belgian authorities also refute the allegedly inaccurate portrayal of the social missions made by CBI in its observations. In particular, CBI considered that the LCH defines a ‘basic social mission’ common to public and private hospitals, but which only the IRIS-H would perform more intensively. From this perspective, the ‘additional’ social missions of the IRIS-H could not be separated from the hospital services provided and would be an integral part of these. According to the Belgian authorities, this view cannot be followed. The Belgian authorities consider that beyond the fact that CBI expressly recognises here that there is indeed an intrinsic difference between public and private hospitals (i.e. a higher volume of social services being provided by the IRIS-H), CBI does not define what it means exactly by ‘basic social mission’, which it considers to be a hospital SGEI, or determine the legal basis which supports it or the specific mandate which grants it. The Belgian authorities are of the opinion that only the Loi CPAS can be used to entrust ‘basic social missions’ to public hospitals. In their view, as far as the public hospitals alone are concerned, the LCH in fact merely supplements the Loi CPAS (see Article 147 LCH). The essential, or ‘basic’, mission of the IRIS-H is defined by or under the Loi CPAS and is therefore not ‘common’ to all hospitals. According to them, this mission is not economic in nature. Hence, the IRIS-H are established under the Loi CPAS and, once set up, expected to abide by the LCH's additional rules (133).

(96) With respect to CBI's observations concerning the universal care mission, the Belgian authorities observe that CBI limits the universal care mission, which it alleges to be common to all hospitals, solely to emergencies and post-emergencies. In this way, the Belgian authorities consider that CBI would implicitly recognise that private Brussels hospitals have no obligation to treat patients outside of emergency and ‘post-emergency’ cases, which nonetheless account for the bulk of care provided for needy people. Furthermore, the Belgian authorities argue that CBI's reference to the public interest mission described in Article 2 of the LCH does not provide a basis for any such obligation. According to them being entrusted with a basic hospital mission is not sufficient in order to be similarly entrusted with the mission of providing care to all persons in all situations and regardless of their ability to pay. The mere fact that there are specific rules governing emergencies amply demonstrates this. The Belgian authorities argue that a general interest mission cannot be implied, but is imposed. In their view, it was necessary to lay down specific requirements for emergencies because there is no mention of emergencies in the LCH definition of the basic hospital mission. Indeed, the Belgian authorities argue that the Law of 8 July 1964 (134) and its implementing decrees deal with emergency medical assistance (135) and emergency services (including ambulances). On this basis, some hospitals, both public and private, carry out certain tasks in the field of emergency medical assistance.

(97) However, the Belgian authorities argue that the obligation to provide emergency care in both public and private hospitals is not conferred by the LCH. It is, instead, a general obligation to assist persons in danger. According to the Belgian authorities, hospitals are required to provide assistance in cases of medical emergency, according to their structure and available expertise (136). Both public and private hospitals are subject to this obligation, as indeed is everyone else, by virtue of their duty to assist persons in danger. The Belgian authorities also explain that under Article 422 ter of the Belgian Criminal Code, this obligation only applies in emergency situations, and particularly in medical emergencies of a life-threatening nature. However, they point out that in all other (i.e. non-emergency) situations hospitals that have not been entrusted with a universal care mission, are not obliged to treat patients if these cannot pay for the treatment. Finally, the Belgian authorities observe that while Belgian hospitals are naturally not allowed to discriminate based on a patient's wealth (and hence on the pure fact that someone is poor), they cannot be forced to provide care for free if a patient cannot or will not pay in a non-emergency situation.

(98) In their comments to CBI's observations, the Belgian authorities also put into context CBI's reference to a judgment of the Brussels Court of First Instance (see recital 72). According to the Belgian authorities, the judgment referred to by CBI only concerns a very specific case of urgent medical aid (137) provision for an undocumented migrant who needed psychiatric care. They point out that the IRIS-H do not provide this type of care. In their view, this judgment actually confirms that urgent medical aid for undocumented migrants is normally either provided by hospitals established by a CPAS or by hospitals with which the CPAS have concluded an agreement (138). Finally, the Belgian authorities point out that CBI does not justify, or even attempt to justify, an alleged obligation for private hospitals to treat all patients for ‘post-emergencies’. According to the Belgian authorities, no such ‘post-emergency’ obligation exists for private hospitals while the IRIS-H are obliged to treat all patients in all circumstances, even if there is no medical emergency.

7. ASSESSMENT OF THE MEASURES

7.1. Scope of this decision

(99) The complaint made reference to an aid measure of approximately EUR 100 million in the context of the restructuring operation that led to the creation of the IRIS-H (see Section 2.2). However, as explained in Section 3.1 of the opening decision, the Commission only took action with respect to the restructuring aid after the limitation period for the recovery of this aid had expired. Therefore, this aid measure was not included in the scope of the formal investigation carried out by the Commission and will hence not be addressed further in this decision.

(100) Apart from the measure covered by the limitation period, the complaint formally targeted (i) the funds distributed by the FRBRTC to the municipalities in charge of the IRIS-H and (ii) the special subsidies (of up to EUR 10 million per year) granted to these municipalities by the Brussels Capital Region on the basis of the Ordonnance of 13 February 2003.

(101) These two types of funds are however awarded only to the municipalities in charge of the IRIS-H and not to the IRIS-H themselves. They are in reality only financing flows between the Brussels Capital Region and the six Brussels municipalities in charge of the IRIS-H and therefore do not constitute State aid to the IRIS-H.

(102) It is true that the Commission's 2009 annulled decision tended to confuse the FRBRTC payments and the deficit compensation mechanism of Article 109 LCH and did not separate the assessment of the compensation parameters of these two measures (139). Furthermore, the FRBRTC funds are used by the municipalities to compensate the deficit of the IRIS-H (140) and the municipalities had the obligation to pay the FRBRTC funds to the IRIS-H within a maximum period of seven working days (141).

(103) Nevertheless, on the basis of the information received in reply to its opening decision and as explained below (see recital 230) the financial transfers from the FRBRTC and the Brussels Capital Region to the municipalities in charge of the IRIS-H are necessary since these municipalities have insufficient own resources to fulfil the municipal deficit compensation obligation towards the IRIS-H. It is in this context that both the FRBRTC and the Brussels Capital Region have required the Brussels municipalities to almost immediately upon receipt of these transfers make the FRBRTC funds and the special subsidies available to the IRIS-H. Regardless of this pass-on obligation, it is only the respective municipalities that have the obligation to compensate the deficits of the IRIS-H and these hospitals have no right to any compensation from the Brussels Capital Region or the FRBRTC. Likewise, the IRIS-H have been entrusted with certain obligations by the municipalities only and not by the Brussels Capital Region (see Section 7.3.4.1). Therefore, it is only the deficit compensation payments from the municipalities to the IRIS-H, whether financed on the basis of the municipalities' own resources or from funds provided to the municipalities by the Brussels Capital Region, that can be qualified as State aid within the meaning of Article 107(1) TFEU.

(104) The Commission concludes that the intra-State financing (from the Brussels Capital Region, whether directly or indirectly via the FRBRTC, to the municipalities) is only a funding source for the municipal deficit compensation payments and does not constitute a measure of which the IRIS-H can benefit in addition to this deficit compensation. For this reason, the money flows between the Brussels Capital Region and the respective Brussels municipalities and their legal bases (e.g. the Ordonnance of 13 February 2003) will not be assessed as such in this decision. Instead, in this decision the Commission will assess the municipal deficit compensation payments of which the IRIS-H benefit, and for which the municipalities rely to a large extent on the intra-State financing they received from the Brussels Capital Region (142). However, while not further pursuing the measures that are formally targeted by the complainant, the State aid assessment of the municipal deficit compensation will materially fully address the complainant's State aid concerns since it will de facto also cover the funds that were granted by the Brussels Capital Region directly or via the FRBRTC as the municipalities use them entirely for the deficit compensation of the IRIS-H. For this reason, the overcompensation tests that are described below (see Tables 9 to 13 in Section 7.3.5) also identify the deficit compensation payments that were financed using FRBRTC funds and special subsidies from the Brussels Capital Region. Finally, it should be underlined that the part of the municipal deficit compensation payments that was funded by the Brussels Capital Region or via the FRBRTC was insufficient (143) to cover the entire deficits incurred by the IRIS-H and these payments have at no point in time in the period 1996-2014 lead to a situation where any of the IRIS-H was actually overcompensated and would have had to repay (part of) the deficit compensation (see also recitals 234 and 238).

(105) The Commission will therefore assess the deficit compensation awarded by the municipalities to the IRIS-H since 1996 (144). On that basis, Figure 1 below summarises the public financing that is in scope of this decision (in the full line rectangle) and also indicates the intra-State financing measures that were targeted in the complaint (in the dashed line rectangle). More detail on these measures will be provided in Section 7.3.5 below. Figure 1 Financing flows and scope of this decision

7.2. State aid within the meaning of Article 107(1) TFEU

(106) Article 107(1) TFEU provides that ‘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 production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market’. Accordingly, a measure constitutes State aid if the following four cumulative conditions are met (145): (a) the measure must give a selective economic advantage to an undertaking; (b) the measure must be financed through State resources; (c) the measure must distort or threaten to distort competition; (d) the measure must have the potential to affect trade between Member States.

7.2.1. Selective economic advantage to an undertaking

7.2.1.1. The notion of undertaking

General principles

(107) Public funding granted to an entity can only qualify as State aid if that entity is an ‘undertaking’ in the sense of Article 107(1) TFEU. The Court of Justice has consistently defined undertakings as entities engaged in economic activity (146). The qualification of an entity as an undertaking thus depends on the nature of its activity, with no regard to the entity's legal status or the way in which it is financed (147). An activity must generally be considered to be economic in nature where it consists in offering goods and services on a market (148). An entity that carries out both economic and non-economic activities is to be regarded as an undertaking only with regard to the former (149). The mere fact that an entity does not pursue a profit does not necessarily mean that its operations are not of an economic nature (150).

Medical services

(108) Where healthcare is provided by hospitals and other healthcare providers against remuneration (151), be it directly from the patients or from other sources, it must generally be considered to constitute an economic activity (152). The financing which the IRIS-H receive through various allowances from the federal or federated authorities (e.g., see recital 46(a), (d), (e) as regards public financing available to all hospitals and recital 44 as regards the deficit compensation for the IRIS-H), together with direct payments by patients (see recital 46(c)) and payments by the INAMI (see recital 46(b)) remunerates the IRIS-H for the medical services rendered and can therefore, in this context, be considered as constituting the economic consideration for the hospital services provided. In such a system, there is a certain degree of competition between hospitals concerning the provision of healthcare services. The fact that a hospital providing such services against remuneration is public does not render that hospital's activities non-economic in nature (153).

(109) In the present case, the main activities of the IRIS-H are hospital activities consisting of the provision of healthcare services. These hospital activities carried out by the IRIS-H are also provided by other types of bodies or entities, in particular clinics, private hospitals and other specialised centres, including the private hospitals of the complainants. Therefore, these hospital activities carried out by the IRIS-H against remuneration and in a competitive environment must be regarded as economic in nature.

(110) The solidarity aspects underpinning the Belgian national healthcare system do not call into question the economic nature of such hospital activities. Indeed, it is recalled that with regard to a national health system, which is managed by ministries and other bodies and operates ‘according to the principle of solidarity in that it is funded from social security contributions and other State funding and in that it provides services free of charge to its members on the basis of universal cover’, the CFI held that the management bodies in question were not acting as undertakings in their management of that national health system (154). However, the Commission considers that there is a need to differentiate between the management of the national health system, carried out by public bodies implementing for this purpose the prerogatives of the State, and the provision of hospi