3.

Assessment of the measure During the privatisation process, Combus received financial support from the Danish State in 1999 and 2001. The question therefore arises of whether these two injections constitute State aid and whether they constitute a single measure or two separate measures. According to the Court of First Instance (CFI), the relevant considerations for determining this are ‘the chronology of the capital injections in question, their purpose, and the subsidiary's situation at the time when each decision to make an injection was made.’ (2) The Commission has insufficient information to determine whether the two payments constitute two phases of a single financing operation or not. This financing does not constitute aid within the meaning of Article 87(1) of the EC Treaty if the Danish State acted like a private investor in a market economy. The Danish Government considers that ‘the principle of the rational market investor also applies to a situation, where injection of fresh capital is based upon considerations of protecting the credibility of the Government (parent company) in the market, cf. judgement of March 21, 1991 in case C-303/88, Italy v. Commission, Rep. 1991 I, page 1433, para. 21,’ and that for Combus to have gone bankrupt, as would inevitably have been the case had the payments not been made, would have tarnished the Danish State's reputation for professional investment. It concludes that a private investor in its position would have acted the same way. The Commission has doubts as to whether a private investor would have acted this way in the same situation. It draws the Danish authorities' attention to the fact that the Court accepts concern for the State's reputation as grounds for injecting capital only if at the same time there is a prospect of the company achieving viability and profitability, in the long term at least, something which has not been demonstrated conclusively. Accordingly, the Commission cannot rule out the possibility of one or both of the payments, whether they form a single measure or two separate measures, constituting State aid under Article 87(1). Such aid could be compatible with the common market by virtue of Regulation No 1191/69 or Article 87(3)(c) of the EC Treaty, as specified by the guidelines on State aid for rescuing and restructuring firms in difficulty. (3) 1. Compatibility by virtue of Regulation No 1191/69 Regulation No 1191/69 gives Member States a choice between two methods of organising public services in the transport sector: — via public service contracts, as defined in Article 1(4) and Section V of the Regulation, or — by imposing public service obligations on transport undertakings, in the manner defined in Article 1(5) and Sections II, III and IV of the Regulation. With regard to bus transport, Denmark has opted for public service contracts. According to the CFI, the conclusion of a public service contract leaves no room for compensation for the imposition of a public service obligation. (4) If it transpires that the price agreed between the two parties to a public service contract is too low, the undertaking handling the contract is entitled, in accordance with Article 14(4) to (6) of Regulation No 1191/69, to terminate the contract subject to three months' notice. The competent authorities may require the undertaking to continue to perform the contract for one year, subject to compensation calculated in the manner specified in Sections II, III and IV of the Regulation. These are the only circumstances in which can there be compensation for the imposition of a public service obligation within the context of a public service contract arrangement. Combus has not terminated its public service contracts; accordingly, the financing received by Combus cannot be deemed to be compatible with the common market by application of Sections II, III and IV of Regulation No 1191/69. The Commission therefore rules out the possibility of the financing being compatible with the common market on the basis of Regulation No 1191/69. 2. Compatibility by virtue of Article 87(3)(c) of the EC Treaty, as specified by the guidelines on State aid for rescuing and restructuring firms in difficulty Section 3.2 of the guidelines specifies the following conditions for authorising restructuring aid: — the firm must be deemed to be in difficulty (a) — the restructuring plan must restore the long-term viability of the firm within a reasonable timescale (b) — measures must be taken to mitigate as far as possible any adverse effects of the aid on competitors (c) — the aid must be limited to the strict minimum needed to enable restructuring to be undertaken (d) — the Commission must be put in a position to make certain that the restructuring plan is being implemented properly, through detailed regular reports (e) — the restructuring aid should be granted once only (f) Combus is a firm in difficulty within the meaning of the guidelines (a). The Danish Government has put forward a restructuring plan for Combus. The CFI has found that ‘the Commission's reasoning [in its initial decision] must be considered as expressing serious doubt as to Combus' viability for the purposes of [Article 87 of the EC Treaty] and the Guidelines, a doubt which the Commission did not, however, believe it was bound to clarify since Article 73 EC seemed to it to be a sufficient legal basis for the authorisation of the aid in question. Since that latter provision may not be so relied on …, the payment of the DKK [X] is no longer validly authorised in the contested decision. … Consequently, Combus's viability cannot in any manner be considered as established.’ (5) In the light of the Court's conclusion, the Commission cannot but register its doubts as to Combus' economic viability following the planned restructuring (b). The Danish authorities consider that, as an exception to the rule, measures to mitigate as far as possible any adverse effects of the aid on competitors are not necessary in this instance, as Combus' contracts are gradually coming to an end (at the end of 2003 around 50 % of them had expired, with the last one due to end in 2006) and Arriva, the company to which Combus was sold following restructuring, is not planning to maintain a market share equivalent to the combined market shares of Arriva and Combus at the time of the takeover (around 50 %). The Commission doubts whether the particular circumstances of the case warrant not taking measures to mitigate, as far as possible, any adverse effects of the aid on competitors, particularly in view of the fact that Combus' competitors, represented by the Danske Busvognmaend, decided to challenge the Commission Decision authorising the aid (c). The Commission also doubts whether the measure(s) is/are limited to the strict minimum needed to enable restructuring to be undertaken. The Danish authorities contend that the aid will enable Arriva to achieve 10 % profitability on the invested capital and that this would be the minimum acceptable level for this type of investment. The Commission notes that, at this stage, it does not possess the information it needs in order to check whether the public aid is limited to the strict minimum necessary to enable Combus' restructuring to be undertaken (d). The Danish Government agreed to provide the Commission with an annual report enabling it to assess whether the restructuring plan is being implemented in accordance with the undertakings given by the Danish authorities. The Commission has received the reports for 2001 and 2002, which show that the restructuring plan has been adhered to (e). Combus has not received restructuring aid previously. If the two payments form two tranches of the same aid or if, at the time of the first or the second payment, the Danish State acted as a private investor would have done in a market economy, the Commission finds that the ‘one time, last time’ principle has been observed. If the two payments have to be considered as being two separate measures, and if the Danish State failed to act as a private investor would have done in a market economy in making either the first or the second payment, the ‘one time, last time’ principle has not been observed (f).