Case T-289/03

British United Provident Association Ltd (BUPA) and Others

v

Commission of the European Communities

(State aid – Risk equalisation scheme introduced by Ireland on the private medical insurance market – Aid system – Services of general economic interest – Article 86(2) EC – Commission decision not to raise objections – Action for annulment – Admissibility – Principles of necessity and proportionality)

Summary of the Judgment

1. Preliminary rulings – Interpretation – Temporal effects of judgments by way of interpretation

(Arts 86(2) EC, 87(1) EC, 231 EC and 234 EC)

2. Competition – Undertakings entrusted with the operation of services of general economic interest – Definition of services of general economic interest – Member States’ discretion

(Arts 5 EC, 16 EC, 86(2) EC and 87(1) EC; Commission communication 2001/C 17/04, point 22)

3. Competition – Undertakings entrusted with the operation of services of general economic interest – Definition of services of general economic interest – Interpretation of the criterion of general interest

(Arts 86(1) and (2) EC and 87(1) EC; Commission communication 2001/C 17/04, points 14 and 15)

4. Competition – Undertakings entrusted with the operation of services of general economic interest – Definition of services of general economic interest – Universal and compulsory nature

(Arts 86(2) EC and 87(1) EC; Commission communication 2001/C 17/04, points 14 and 15)

5. Competition – Undertakings entrusted with the operation of services of general economic interest – Compensation for the costs generated by the public service mission – Member States’ discretion

(Arts 86(2) EC and 87(1) EC)

6. Competition – Undertakings entrusted with the operation of services of general economic interest – Compensation for the costs generated by the public service mission

(Arts 86(2) EC and 87(1) EC)

7. State aid – Commission decision adopted pursuant to Article 87 EC in conjunction with Article 86(2) EC

(Arts 86(2) EC and 87(1) EC)

8. State aid – Examination by the Commission – System of aid intended to ensure the provision of a mission of general economic interest

(Arts 86(2) EC and 87(1) EC)

9. Actions for annulment – Pleas in law – Pleas that may be raised against a Commission decision on State aid

(Arts 86 EC, 87 EC, 88 EC, 226 EC and 230 EC)

10. State aid – Examination by the Commission – Preliminary stage and inter partes stage

(Art. 88(2) and (3) EC; Council Regulation No 659/1999, Arts 4(4) and 13(1))

1. The interpretation which the Court of Justice gives, on a reference for a preliminary ruling, of a provision of Community law is limited to clarifying and defining the meaning and scope of that provision as it ought to have been understood and applied from the time of its entry into force. It follows that the provision as thus interpreted may, and must, be applied even to legal relationships which arose and were established before the judgment in question and it is only exceptionally that, in application of a general principle of legal certainty which is inherent in the Community legal order, the Court may decide to restrict the right to rely upon a provision, which it has interpreted, with a view to calling in question legal relationships established in good faith. However, such a restriction may be allowed only in the actual judgment ruling upon the interpretation sought. Those considerations, which derive from case-law dealing, in particular, with the national courts’ duty to apply Community law, apply mutatis mutandis to the Community institutions when they, in turn, are required to implement the provisions of Community law which are subsequently interpreted by the Court of Justice.

It follows that, since the Court of Justice did not place any temporal limitation on the scope of its judgment of 24 July 2003 in Case C‑280/00 Altmark, the criteria for the interpretation of Article 87(1) EC laid down in that judgment, the scope of which to a large extent overlaps that of the criteria of Article 86(2) EC, are fully applicable, in accordance with the spirit and the purpose which prevailed when they were laid down, in a manner adapted to the particular facts of the present case, for the purpose of adjudicating on the validity of a Commission decision adopted before delivery of that judgment and declaring that a State measure necessary for the protection of a mission of general economic interest could not be characterised as State aid.

(see paras 158-160)

2. Member States have a wide discretion to define what they regard as services of general economic interest. That prerogative is confirmed by the absence of any competence specially attributed to the Community and by the absence of a precise and complete definition of the concept of service of general economic interest in Community law. The determination of the nature and scope of a mission involving the provision of a service of general economic interest in specific spheres of action which either do not fall within the powers of the Community, within the meaning of the first paragraph of Article 5 EC, or are based on only limited or shared Community competence, within the meaning of the second paragraph of that article, remains, in principle, within the competence of the Member States. That division of powers is also reflected, generally, in Article 16 EC, which provides that, given the place occupied by services of general economic interest in the shared values of the Union as well as their role in promoting social and territorial cohesion in the Union, the Community and the Member States, each within their respective powers and within the scope of application of the Treaty, are to take care that such services operate on the basis of principles and conditions which enable them to fulfil their missions. The Member State’s power to define services of general economic interest is not, however, unlimited and cannot be exercised arbitrarily for the sole purpose of removing a particular sector from the application of the competition rules.

Consequently, the control which the Community institutions are authorised to exercise over the use of the discretion of the Member State in determining a service of general economic interest is limited to ascertaining whether there is a manifest error of assessment.

Even though the Member State has a wide discretion when determining what it regards as services of general economic interest, that does not mean that it is not required, when it relies on the existence of and the need to protect a mission involving the provision of a service of general economic interest, to ensure that that mission satisfies certain minimum criteria common to every mission involving the provision of a service of general economic interest within the meaning of the Treaty, and to demonstrate that those criteria are indeed satisfied in the particular case. These are, notably, the presence of an act of the public authority entrusting the operators in question with such a mission and the universal and compulsory nature of that mission. Conversely, the lack of proof by the Member State that those criteria are satisfied, or failure on its part to observe them, may constitute a manifest error of assessment, in which case the Commission is required to make a finding to that effect, failing which the Commission itself makes a manifest error. Furthermore, the Member State must indicate the reasons why it considers that the service in question, because of its specific nature, deserves to be characterised as a service of general economic interest and to be distinguished from other economic activities. In the absence of such reasons, even a marginal review by the Community institutions with respect to the existence of a manifest error by the Member State in the context of its discretion would not be possible.

(see paras 166-169, 172)

3. The provision of a service of general economic interest must, by definition, assume a general or public interest. Thus, services of general economic interest are distinguished in particular from services in the private interest, even though that interest may be more or less collective or be recognised by the State as legitimate or beneficial. In addition, the general or public interest must not be reduced to the need to subject the market concerned to certain rules or the commercial activity of the operators concerned to authorisation by the State. The mere fact that the national legislature, acting in the general interest in the broad sense, imposes certain rules of authorisation, of functioning or of control on all the operators in a particular sector does not in principle mean that there is a mission involving the provision of a service of general economic interest.

On the other hand, the recognition of a mission involving the provision of a service of general economic interest does not necessarily presume that the operator entrusted with that mission will be given an exclusive or special right to carry it out. It follows from a reading of paragraph 1 together with paragraph 2 of Article 86 EC that a distinction must be drawn between a special or exclusive right conferred on an operator and the mission involving the provision of a service of general economic interest which, where appropriate, is attached to that right. The grant of a special or exclusive right to an operator is merely the instrument, possibly justified, which allows that operator to perform a mission involving the provision of a service of general economic interest. Therefore, the Commission’s finding, based on paragraphs 14 and 15 of the Commission communication on services of general interest, that the attribution of a mission involving the provision of a service of general economic interest may also consist in an obligation imposed on a large number of, or indeed on all, the operators active on the same market, is not vitiated by an error. In that case, there can be no requirement that each of the operators subject to that obligation be separately entrusted with that mission by an individual act or mandate.

(see paras 178-179, 183)

4. As regards the characterisation of a service of general economic interest, it does not follow from Community law that the service in question must constitute a universal service in the strict sense. In effect, the concept of universal service, within the meaning of Community law, does not mean that the service in question must respond to a need common to the whole population or be supplied throughout a territory. Although those characteristics correspond to the classical type of service of general economic interest, and the one most widely encountered in Member States, that does not preclude the existence of other, equally lawful, types of service of general economic interest which the Member States may validly choose to create in the exercise of their discretion. Accordingly, the fact that the obligations associated with the service of general economic interest in question have only a limited territorial or material application or that the services concerned are enjoyed by only a relatively limited group of users does not necessarily call in question the universal nature of a mission involving the provision of a service of general economic interest. Furthermore, the universality criterion does not require that the service in question be free of charge or that it be offered without consideration of economic profitability and the fact that the price of the service provided is neither regulated nor subject to a ceiling does not affect its universal nature. The fact that certain potential users do not have the necessary financial resources to take advantage of the service does not undermine its universal nature provided that the service in question is offered at uniform and non-discriminatory rates and on similar quality conditions for all customers.

The compulsory nature of the service in question is an essential condition of the existence of a mission involving the provision of a service of general economic interest within the meaning of Community law. That compulsory nature must be understood as meaning that the operators entrusted with the mission involving the provision of a service of general economic interest by an act of a public authority are, in principle, required to offer the service in question on the market in compliance with the obligations associated with the provision of a service of general economic interest which govern the supply of that service. From the point of view of the operator entrusted with such a mission, that compulsory nature – which in itself is contrary to business freedom and the principle of free competition – may consist, inter alia, particularly in the case of the grant of an exclusive or special right, in an obligation to exercise a certain commercial activity independently of the costs associated with that activity. In such a case, that obligation constitutes the counterpart of the protection of the mission involving the provision of a service of general economic interest and of the associated market position by the act which entrusted the mission. In the absence of an exclusive or special right, the compulsory nature of such a mission may lie in the obligation borne by the operator in question, and provided for by an act of a public authority, to offer certain services to every citizen requesting them.

However, the binding nature of the mission involving the provision of a service of general economic interest does not presuppose that the public authorities impose on the operator concerned an obligation to provide a service having a clearly predetermined content. In effect, the compulsory nature of that mission does not preclude a certain latitude being left to the operator on the market, including in relation to the content and pricing of the services which it proposes to provide. In those circumstances, a minimum of freedom of action on the part of operators and, accordingly, of competition on the quality and content of the services in question is ensured, which is apt to limit, in the community interest, the scope of the restriction of competition which generally results from the attribution of a mission involving the provision of a service of general economic interest, without any effect on the objectives of that mission.

It follows that, in the absence of an exclusive or special right, it is sufficient, in order to conclude that a service is compulsory, that the operator entrusted with a particular mission is under an obligation to provide that service to any user requesting it. In other words, the compulsory nature of the service and, accordingly, the existence of a mission involving the provision of a service of general economic interest are established if the service-provider is obliged to contract, on consistent conditions, without being able to reject the other contracting party. That element makes it possible to distinguish a service forming part of a mission involving the provision of a service of general economic interest from any other service provided on the market and, accordingly, from any other activity carried out in complete freedom.

(see paras 186-190, 202-203)

5. The parameters on the basis of which the compensation for discharging a mission involving the provision of a service of general economic interest is calculated must be established in advance in an objective and transparent manner. However, that condition does not prevent the national legislature from allowing the national authorities a certain discretion. On the contrary, the Member State has a wide discretion not only when defining a mission involving the provision of a service of general economic interest but also when determining the compensation for the costs, which calls for an assessment of complex economic facts. It is precisely because the determination of the compensation is subject to only restricted control by the Community institutions that that condition requires that those institutions must be in a position to verify the existence of objective and transparent parameters, which must be defined in such a way as to preclude any abusive recourse to the concept of service of general economic interest on the part of the Member State. In that regard, the complexity of the economic and mathematical formulae which govern the calculations to be carried out does not by itself affect the precise and clearly-determined nature of the relevant parameters.

Control, by both the Commission and the Court, of the necessity and the proportionality of the compensation for discharging a mission involving the provision of a service of general economic interest is necessarily restricted. Given the discretion enjoyed by the Member State in defining such a mission and the conditions of its implementation, including the assessment of the additional costs incurred in discharging the mission, which depends on complex economic facts, the scope of the control which the Commission is entitled to exercise in that regard is limited to one of manifest error. Furthermore, it follows that the Court’s review of the Commission’s assessment in that regard must also observe the same limit and that, accordingly, its review must be confined to ascertaining whether the Commission properly found or rejected the existence of a manifest error by the Member State.

Furthermore, that review implies that the Community judicature determines whether the evidence adduced by the applicant is sufficient to render implausible the assessments of the complex economic facts made in the contested decision. Subject to that review of plausibility, it is not the Court’s role to substitute its assessment of the relevant complex economic facts for that made by the institution which adopted the decision. In such a context, review by the Court consists in ascertaining that the Commission complied with the rules of procedure and the rules relating to the duty to give reasons and also that the facts relied on were accurate and that there has been no error of law, manifest error of assessment or misuse of powers.

As regards, more particularly, review of the proportionality of the compensation for discharging a mission involving the provision of a service of general economic interest, as established by an act of general application, that review is limited to ascertaining whether the compensation provided for is necessary in order for that mission to be capable of being performed in economically acceptable conditions or, conversely, whether the measure in question is manifestly inappropriate by reference to the objective pursued.

(see paras 209, 214, 217, 220-222)

6. In the context of the necessarily restricted control, by both the Commission and the Court, of the necessity and the proportionality of the compensation for discharging a mission involving the provision of a service of general economic interest, there is no scope for calling in question either the validity of the objectives pursued or the lawfulness of the rules governing the functioning of a risk equalisation system on the private medical insurance system of a Member State where insurers, in discharging a mission involving the provision of a service of general economic interest, must comply with obligations relating to community rating, open enrolment, lifetime cover and minimum benefits for every insured person, irrespective of his age, sex or health status, and providing, in substance, for payment of a charge by insurers whose risk profile is healthier than the average market risk profile and for a corresponding payment of compensation to insurers whose risk profile is less healthy than the average market risk profile. Although the purpose of such compensation is not to compensate for any costs or additional costs associated with the supply of certain services, but only to equalise the additional burdens which are supposed to result from a negative risk profile differential by comparison with the average market risk profile, those burdens none the less represent the additional costs which the insurer must assume on a market subject to open enrolment and community rating as a consequence of its obligation to cover high-risk persons without fixing the amount of the premiums according to the risk insured.

As the operation of such a system is radically different from that of the compensation that formed the subject-matter of the judgment of 24 July 2003 in Case C-280/00 Altmark, it cannot strictly fulfil the third condition laid down in that judgment, which requires that it be possible to determine the costs occasioned by the performance of the mission involving the provision of a service of general economic interest. None the less, the quantification of the additional costs incurred by the insurers benefiting from that compensation, in the form of a comparison between their actual risk profile and an average market risk profile in light of the amounts paid by all insurers is consistent with the purpose and the spirit of the condition concerned in so far as the compensation is calculated on the basis of elements which are specific, clearly identifiable and capable of being controlled. Nor, since such compensation does not aim to compensate for the costs directly linked to the supply of the mission involving the provision of a service of general economic interest, which would correspond to the situation specifically envisaged by the third condition laid down in Altmark, is there any need to take into consideration the receipts obtained for those services in order to establish any actual additional costs incurred in making that supply, since a strict application of the condition concerned, which is aimed at a different form of compensation, would not take account of the particular nature of the functioning of the risk equalisation system in question. Neither the purpose nor the spirit of that condition requires that receipts be taken into account in a system of compensation which operates independently of receipts.

Last, regard being had to the neutrality of the compensation system concerned by reference to the receipts and profits of the insurers, and to the particular nature of the additional costs linked with a negative risk profile, the fourth condition laid down in Altmark, in that, in the absence of a mission of general interest being entrusted to an undertaking on the basis of a public tendering procedure, it requires a comparison of the costs and receipts directly linked to the supply of the service, cannot be applied strictly either, although the Commission is none the less required to satisfy itself that the compensation provided for does not entail the possibility of offsetting any costs that might result from inefficiency on the part of the insurers.

(see paras 229, 235-238, 241, 246, 249)

7. It does not follow either from the relevant legislation or from the case-law that the formulation of the operative part of decisions adopted pursuant to Article 87 EC in conjunction with Article 86(2) EC must of necessity meet specific requirements. It is also necessary, in order to assess the actual legal scope of an act, the operative part of which is indissolubly linked to the statement of reasons for it, that, when it has to be interpreted, account must be taken of the reasons which led to its adoption. Accordingly, although it might appear desirable, in the interest of clarity and legal certainty, that the Commission should expressly mention in the operative part of the act the Treaty provisions which it is applying, the failure to do so does not constitute an error of law provided that it is quite clear upon reading the statement of reasons in conjunction with the operative part of the act precisely what those provisions are.

(see para. 260)

8. As regards a general system of aid, that is to say, a system based on a number of provisions of general application, the implementation of which is indeed predetermined, to a certain extent, by objective and transparent criteria, but not predictable in every detail, and having as its object the protection of a mission of general economic interest, the Commission’s review in that regard, which has the joint basis of Article 87 EC and Article 86(2) and (3) EC, in particular its review of the necessity of the notified system, is necessarily limited to ascertaining whether, first, the system in question is founded on economic and factual premisses which are manifestly erroneous and whether, second, the system is manifestly inappropriate for achieving the objectives pursued.

It is in that context that the Court, for its part, must examine whether the Commission’s assessment in that regard is sufficiently plausible to support the necessity for the system in question. Within the framework of that review, it is appropriate first of all to examine whether the market dysfunctions on which the Member State relies in order to justify the establishment and protection of the mission involving the provision of a service of general economic interest in question were sufficiently plausible and also to assess whether the Commission could reasonably consider that such a system was by nature necessary and appropriate in order to resolve the problems referred to. It is then for the Court to ascertain whether, in this case, the Commission’s assessment on those points is well founded by reference to current conditions and probable developments in the market concerned as they appeared at the time of adoption of the contested decision in the light of all the information which the Commission had, or ought reasonably to have had, at its disposal.

As regards, in particular, the extent of the Commission’s review, the Commission cannot take the place of the Member State in the exercise of the wide discretion which the latter enjoys. Thus, in assessing whether the measure in question is necessary, the Commission has no power to ascertain, on the basis of the available data, whether the market might actually develop in a certain way and whether the application of the regulatory instruments envisaged by the notified system will thereby become indispensable, at a given moment, to ensure the achievement of the mission involving the provision of a service of general economic interest in question. In effect, the review of necessity does not require that the Commission be convinced that the Member State, in the light of present or future market conditions, cannot abandon the notified measures, but is limited to ascertaining whether there has been a manifest error in the exercise of the wide discretion of the Member State as regards the way of ensuring that the mission involving the provision of a service of general economic interest may be achieved under economically acceptable conditions.

Last, if that review on the part of the Commission is restricted, that circumstance must also be taken into account in the context of the review of the legality of the Commission’s assessment carried out by the Community judicature. That review by the Court must be even more restricted because the Commission’s assessment relates to complex economic facts. That applies especially to the review based on the principle of proportionality, in particular where the contested act concerns State measures of general scope. In effect, such review by the Court must be limited to determining whether those measures are manifestly inappropriate by reference to the objective pursued.

(see paras 265-269)

9. In the context of an action for annulment of a Commission decision on State aid, the applicant has no standing to raise pleas alleging infringement of provisions of Community law distinct from those coming under Articles 87 EC and 88 EC, read together, where appropriate, with Article 86 EC. Any requirement that the Commission should adopt a definitive position, in proceedings relating to aid, on the existence or non-existence of an infringement of those other provisions would run counter to, first, the procedural rules and guarantees – which in part differ significantly and imply distinct legal consequences – specific to the procedures specially established for control of the application of those provisions and, second, the principle of autonomy of administrative procedures and remedies. Furthermore, even in the guise of an action for annulment of a decision on State aid, an individual lacks standing to act, in view of the discretionary power of the Commission in that context, against the Commission’s failure to initiate infringement proceedings under Article 226 EC or to adopt a position in respect of a possible infringement by a Member State of the provisions of the Treaty.

As against that finding, no valid reliance can be placed on the case-law to the effect that it follows from the general scheme of the Treaty that the procedure under Article 88 EC must never produce a result which is contrary to the specific provisions of the Treaty, since the Commission is required to make an assessment by reference to the relevant provisions which are not, strictly speaking, covered by the law on aid only where certain aspects of the aid in issue are so closely linked to its object that any failure on their part to comply with those provisions would necessarily affect the compatibility of the aid with the common market.

Furthermore, the discretion which Article 88 EC confers on the Commission in relation to aid does not permit it to authorise Member States to derogate from provisions of Community law other than those relating to the application of Article 87(1) EC. It follows, first, that the Commission cannot adopt a definitive position in a procedure relating to aid as to compliance with other provisions of Community law where such compliance must be controlled under a different procedural regime and, second, that, as the adoption of a definitive and legally binding Commission decision must be limited to the aid aspects, only those aspects, and not the aspects relating to other provisions of Community law which do not constitute the necessary support for the operative part of its decision, are capable of having adverse effects. It follows, a fortiori, that the complete failure to mention provisions other than those relating to State aid both in the operative part and in the grounds of a decision adopted pursuant to Articles 87 EC and 88 EC and, where appropriate, Article 86(2) EC, is not capable of adversely affecting an individual and of conferring on him an interest in bringing an action.

Last, the wording of Article 86(2) EC in fine does not invalidate that assessment. The criterion of an effect on trade to such an extent as would be contrary to the interests of the Community does not mean that the Commission is under an obligation to ascertain, definitively and comprehensively, whether the notified State measures infringe other provisions of Community law, which, moreover would deprive Article 86(2) EC of any practical effect as a derogation from the rules of the Treaty. Such a derogation could never be effective if its application were at the same required time to ensure full compliance with the rules from which it is supposed to derogate.

(see paras 313-316, 318-319)

10. The procedure under Article 88(2) EC is obligatory where the Commission experiences serious difficulties in establishing whether or not aid is compatible with the common market. The Commission cannot therefore limit itself to the preliminary procedure under Article 88(3) EC and take a favourable decision on a State measure unless it is in a position to reach the firm view, following an initial examination, that the measure cannot be classified as aid within the meaning of Article 87(1) EC or that the measure, while constituting aid, is compatible with the common market. On the other hand, if the initial examination results in the Commission taking the contrary view to the aid’s compatibility with the common market, or if it does not put the Commission in a position to overcome all the problems raised by its assessment of the compatibility of the measure in question with the common market, the Commission has a duty to obtain all the necessary views and, to that end, to initiate the procedure under Article 88(2) EC.

That duty to initiate the formal investigation procedure applies in particular when the Commission, having analysed to the appropriate standard, on the basis of the information provided by the Member State concerned, the State measure in issue, entertains doubts as to the existence of aid elements for the purposes of Article 87(1) EC and as to their compatibility with the common market.

(see paras 329-330)

JUDGMENT OF THE COURT OF FIRST INSTANCE (Third Chamber, Extended Composition)

12 February 2008( )

(State aid – Risk equalisation scheme introduced by Ireland on the private medical insurance market – Aid system – Services of general economic interest – Article 86(2) EC – Commission decision not to raise objections – Action for annulment – Admissibility – Principles of necessity and proportionality)

In Case T‑289/03,

British United Provident Association Ltd (BUPA), established in London (United Kingdom),

BUPA Insurance Ltd, established in London,

BUPA Ireland Ltd, established in Dublin (Ireland),

represented by N. Green QC, K. Bacon and J. Burke, Barristers, and B. Amory, lawyer,

applicants,

v

Commission of the European Communities, represented initially by N. Khan and J. Flett, then by N. Kahn and T. Scharf, acting as Agents,

defendant,

supported by

Kingdom of the Netherlands, represented by N. Bel, acting as Agent,

by

Ireland, represented by D. Hagan, acting as Agent, with G. Hogan SC and E. Regan, Barrister,

and by

Voluntary Health Insurance Board, established in Dublin, represented by D. Collins, G. FitzGerald and D. Clarke, Solicitors, and P. Gallagher SC,

interveners,

APPLICATION by, inter alia, BUPA Ireland Ltd, a provider of private medical insurance services in Ireland, for annulment of the Commission’s Decision C(2003) 1322 final of 13 May 2003 not to raise objections, under Article 4(2) and (3) of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article [88 EC] (OJ 1999 L 83, p. 1), concerning the establishment of a risk equalisation scheme (RES) in the Irish health insurance market (State aid N 46/2003 – Ireland),

THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (Third Chamber, Extended Composition),

composed of M. Jaeger, President, V. Tiili, J. Azizi, E. Cremona and O. Czúcz, Judges,

Registrar: J. Palacio González, Principal Administrator,

having regard to the written procedure and further to the hearing on 7 March 2007,

gives the following

Judgment

Legal background

I – Treaty provisions

1 Article 16 EC provides:

‘Without prejudice to Articles 73, 86 and 87, and given the place occupied by services of general economic interest in the shared values of the Union as well as their role in promoting social and territorial cohesion, the Community and the Member States, each within their respective powers and within the scope of application of this Treaty, shall take care that such services operate on the basis of principles and conditions which enable them to fulfil their missions.’

2 Under the first paragraph of Article 43 EC: ‘[R]estrictions on the freedom of establishment of nationals of a Member States in the territory of another Member State shall be prohibited. Such prohibition shall also apply to restrictions on the setting-up of agencies, branches or subsidiaries by nationals of any Member State established in the territory of any Member State.’

3 Pursuant to the first paragraph of Article 49 EC, ‘restrictions on freedom to provide services within the Community shall be prohibited in respect of nationals of Member States who are established in a State of the Community other than that of the person for whom the services are intended’.

4 Article 86 EC provides:

‘1. In the case of public undertakings and undertakings to which Member States grant special or exclusive rights, Member States shall neither enact nor maintain in force any measure contrary to the rules contained in this Treaty, in particular to those rules provided for in Article 12 and Articles 81 to 89.

2. Undertakings entrusted with the operation of services of general economic interest … shall be subject to the rules contained in the Treaty, in particular to the rules on competition, in so far as the application of such rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them. The development of trade must not be affected to such an extent as would be contrary to the interests of the Community.

3. The Commission shall ensure the application of the provisions of this Article and shall, where necessary, address appropriate directives or decisions to Member States.’

5 Article 87(1) EC provides:

‘Save as otherwise provided in this Treaty, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the common market.’

6 Article 88(2) and (3) EC provides:

‘2. If, after giving notice to the parties concerned to submit their comments, the Commission finds that aid granted by a State or through State resources is not compatible with the common market having regard to Article 87, or that such aid is being misused, it shall decide that the State concerned shall abolish or alter such aid within a period of time to be determined by the Commission.

…

3. The Commission shall be informed, in sufficient time to enable it to submit its comments, of any plans to grant or alter aid. If it considers that any such plan is not compatible with the common market having regard to Article 87, it shall without delay initiate the proceedings provided for in paragraph 2. The Member State concerned shall not put its proposed measures into effect until this procedure has resulted in a final decision.’

7 Article 152(1) and (5) EC provides:

‘1. A high level of human health protection shall be ensured in the definition and implementation of all Community policies and activities.

Community action, which shall complement national policies, shall be directed towards improving public health, preventing human illness and diseases, and obviating sources of danger to human health. …

…

5. Community action in the field of public health shall fully respect the responsibilities of the Member States for the organisation and delivery of health services and medical care. …’

II – Regulation (EC) No 659/1999

8 Article 4(3) and (4) of Council Regulation (EC) No 659/1999 laying down detailed rules for the application of Article [88 EC] (OJ 1999 L 83, p. 1) provides:

‘3. Where the Commission, after a preliminary examination, finds that no doubts are raised as to the compatibility with the common market of a notified measure, in so far as it falls within the scope of Article [87](1) [EC], it shall decide that the measure is compatible with the common market (hereinafter referred to as a “decision not to raise objections”). The decision shall specify which exception under the Treaty has been applied.

4. Where the Commission, after a preliminary examination, finds that doubts are raised as to the compatibility with the common market of a notified measure, it shall decide to initiate proceedings pursuant to Article [88](2) [EC] (hereinafter referred to as a “decision to initiate the formal investigation procedure”).’

III – Directive 92/49/EEC

9 Article 54(1) of Council Directive 92/49/EEC of 18 June 1992 on the coordination of laws, regulations and administrative provisions relating to direct insurance other than life assurance and amending Directives 73/239/EEC and 88/357/EEC (OJ 1992 L 228, p. 1; ‘the third non-life insurance directive’) provides:

‘Notwithstanding any provision to the contrary, a Member State in which contracts covering the risks in class 2 of point A of the Annex to Directive 73/239/EEC may serve as a partial or complete alternative to health cover provided by the statutory social security system may require that those contracts comply with the specific legal provisions adopted by that Member State to protect the general good in that class of insurance, and that the general and special conditions of that insurance be communicated to the competent authorities of that Member State before use.’

IV – Communication from the Commission on services of general interest in Europe

10 According to point 14 of the communication from the Commission on services of general interest in Europe (OJ 2001 C 17, p. 4, ‘the communication on services of general interest’):

‘Services of general economic interest are different from ordinary services in that public authorities consider that they need to be provided even where the market may not have sufficient incentives to do so. … [I]f the public authorities consider that certain services are in the general interest and market forces may not result in a satisfactory provision, they can lay down a number of specific service provisions to meet these needs in the form of service of general interest obligations. … The classical case is the universal service obligation … [that is to say] the obligation to provide a certain service throughout the territory at affordable tariffs and on similar quality conditions, irrespective of the profitability of individual operations.’

11 Point 15 of the communication on services of general interest states:

‘Public authorities may decide to apply general interest obligations on all operators in a market or, in some cases, to designate one or a limited number of operators with specific obligations, without granting special or exclusive rights. In this way, the greatest competition is allowed and users retain maximum freedom with regard to choice of service provider. …’

12 Point 22 of the communication on services of general interest is worded as follows:

‘Member States’ freedom to define [services of general economic interest] means that Member States are primarily responsible for defining what they regard as [such] services … on the basis of the specific features of the activities. This definition can only be subject to control for manifest error. They may grant special or exclusive rights that are necessary to the undertakings entrusted with their operation, regulate their activities and, where appropriate, fund them. In areas that are not specifically covered by Community regulation Member States enjoy a wide margin for shaping their policies, which can only be subject to control for manifest error. Whether a service is to be regarded as a service of general interest and how it should be operated are issues that are first and foremost decided locally. The role of the Commission is to ensure that the means employed are compatible with Community law. However, in every case, for the exception provided for by Article 86(2) [EC] to apply, the public service mission needs to be clearly defined and must be explicitly entrusted through an act of public authority (including contracts). … This obligation is necessary to ensure legal certainty as well as transparency vis-à-vis the citizens and is indispensable for the Commission to carry out its proportionality assessment.’

13 Point 23 of the communication on services of general interest states:

‘Proportionality under Article 86(2) [EC] implies that the means used to fulfil the general interest mission shall not create unnecessary distortions of trade. Specifically, it has to be ensured that any restrictions to the rules of the EC Treaty, and in particular, restrictions of competition and limitations of the freedoms of the internal market do not exceed what is necessary to guarantee effective fulfilment of the mission. The performance of the service of general economic interest must be ensured and the entrusted undertakings must be able to carry the specific burden and the net extra costs of the particular task assigned to them. The Commission exercises this control of proportionality, subject to the judicial review of the Court …, in a way that is reasonable and realistic, as illustrated by the use it actually makes of the decision-making powers conferred to it by Article 86(3) [EC].’

Facts

I – Creation of a risk equalisation scheme in the Irish private medical insurance market

14 Private medical insurance (‘PMI’) was formally introduced in Ireland in 1957 with the establishment of the Voluntary Health Insurance Board (‘the VHI’), which had the essential purpose of enabling persons not eligible under the public sickness insurance scheme to obtain cover for the costs of hospitalisation. At the time the VHI was the only operator licensed by the Minister for Health to provide private medical insurance services (‘PMI services’). Since 1987 the VHI, at the request of the Minister for Health, has offered an insurance policy called ‘Plan P’, which provides cover for hospital charges incurred in public hospitals and to which approximately 1% of the Irish population subscribe.

15 Since 1991 the public health insurance system, which is essentially financed through general taxation, has provided cover for the entire Irish population irrespective of the income of the persons concerned. Thus, the principal role of insurers active on the Irish PMI market (‘PMI insurers’) now consists in providing alternative cover to that provided by the public health insurance system.

16 The Irish PMI market was liberalised following the enactment in 1994 of the Health Insurance Act, 1994 and in 1996 of the Voluntary Health Insurance (Amendment) Act, 1996 and also the adoption of the implementing provisions contained in the 1996 Health Insurance Regulations. Those regulations can be subdivided into a number of regulations, namely the Health Insurance Act 1994 (Open Enrolment) Regulations 1996, the Health Insurance Act 1994 (Lifetime Cover) Regulations 1996 and the Health Insurance Act, 1994 (Minimum Benefit) Regulations, 1996.

17 BUPA Ireland, which was set up in conformity with that legislation, has been operating on the Irish PMI insurance market since 1 January 1997. Since then, with a market share of approximately 15% by members and 11% by receipts at the time when the application in the present case was lodged, it has been the VHI’s main competitor on the Irish PMI market, while the VHI has retained approximately 85% by receipts and approximately 80% by members. At the present time some 50% of the Irish population has PMI cover.

18 The Health Insurance Act, 1994 and the Health Insurance Regulations 1996 also authorised the Minister for Health to order and regulate, inter alia, the establishment of a ‘Risk Equalisation Scheme’ (‘RES’). In 1997 the Minister for Health set up an Advisory Group with the mandate to make recommendations on the establishment of a RES. In its report of 1998 the Advisory Group concluded that it was necessary to set up a RES. In 1999 the Minister for Health published first a technical paper for consultation and then a White Paper proposing a RES.

19 On 2 March 1999, BUPA Ireland lodged a complaint with the Commission against the implementation of the proposed RES on the ground that it infringed, in particular, Article 87(1) EC. Between March 1999 and April 2003 BUPA Ireland supplemented that complaint by submitting a number of memoranda, reports and documents to the Commission.

20 In 2001, the Health Insurance Act, 1994 was amended by the Health Insurance (Amendment) Act, 2001, which authorised the Minister for Health to implement the RES and established the Health Insurance Authority (‘the HIA’). The HIA was given the task of advising the Minister on the commencement of payments under the RES (‘the RES payments’ or ‘the equalisation payments’) and of administering those payments through a fund specially set up for that purpose.

21 The statutory instrument authorising the establishment of the RES entered into force on 1 July 2003.

22 In October 2004, a new PMI insurer, Vivas Healthcare, entered the Irish PMI market and under Section 12B of the Health Insurance Act, 1994, as amended, was exempt from RES payments for three years.

23 On 29 April 2005, the HIA recommended, on the basis of its report of April 2005 establishing a ‘risk differential’ of 4.7%, that the Minister for Health should commence the RES payments.

24 BUPA Insurance Ltd and BUPA Ireland lodged an application before the High Court (Ireland) against the Irish legislation governing the RES and the HIA’s recommendation of 29 April 2005. By judgment of 24 May 2005, varied on 30 May and 29 December 2005, the High Court dismissed the application for an injunction against the Minister for Health prohibiting him from ordering commencement of the RES payments, but none the less suspended implementation of the RES payments by the applicants pending judgment on the substance in the main proceedings.

25 On 27 June 2005, the Minister for Health decided not to follow the HIA’s recommendation of 29 April 2005. Following a new recommendation by the HIA, the Minister for Health decided on 23 December 2005 to set the date for commencement of the RES payments at 1 January 2006, subject to suspension of implementation of those payments by the applicants, as ordered by the High Court.

26 By judgment of 23 November 2006, the High Court disposed of the substance of the case and dismissed the applicants’ application.

II – The functioning of the RES

A – The objective of the RES

27 The RES is essentially a mechanism which provides for payment of a charge to the HIA by PMI insurers whose risk profile is healthier than the average market risk profile and for a corresponding payment by the HIA to PMI insurers whose risk profile is less healthy than the average market risk profile. Those payments are made through a fund specially established for that purpose and administered by the HIA (Article 12 of the RES).

B – Activation of the RES payments

28 Under the relevant statutory instrument, the RES payments become payable following the stages outlined below.

29 PMI insurers subject to the RES are required to submit to the HIA returns covering six-month periods, the first return covering the half year commencing 1 July 2003 (Article 9 of the RES). On the basis of those returns, the HIA examines and evaluates the distribution of risks among PMI insurers and submits a report and, if necessary, makes a recommendation to the Minister for Health (Article 10 of the RES).

30 On the basis of that report and, where appropriate, a recommendation from the HIA, the Minister for Health decides whether it is appropriate to commence RES payments. His decision is subject to the following conditions (Article 10 of the RES):

– where the risk differential between operators is under 2% RES payments are not commenced;

– where the risk differential is between 2 and 10% the Minister for Health decides, on the recommendation of the HIA, whether or not to commence RES payments;

– where the risk differential between operators is more than 10%, the Minister for Health will, in principle, commence RES payments, unless there are good reasons for not doing so.

C – Method of calculation of RES payments

31 The method of calculating RES payments payable following a decision to commence those payments is set out in the Second Schedule to the RES and explained in greater detail in the Guide to the Risk Equalisation Scheme, 2003 as prescribed in Statutory Instrument No 261 of 2003, July 2003 (‘the RES guide’).

32 Determination of RES payments is directly linked to the differential between the risk profiles of the PMI insurers, the assessment of which involves consideration of a number of risk factors. Those factors include, first, the age and sex of the persons covered and, if appropriate, a weighting (between 0 and 50%) known as the ‘health status weight’, which is based on hospital bed utilisation. The HIA has not thus far applied that weighting, which is currently zero, and has based its assessment of risk differentials between PMI insurers solely on the factors of the age and sex of the persons covered.

33 According to the RES guide (page 14 et seq.), the principle governing the calculation of RES payments is that each PMI insurer must bear the costs which it would have had to bear if its own risk profile had been equivalent to the average market risk profile. The costs relating to the insurer’s real risk profile and to the average market risk profile are calculated according to the age and sex of the persons covered. For that purpose, those persons are first divided into different age and sex cells in order to identify the sum of the costs generated by those cells respectively and to determine the actual average cost per person covered within each cell. According to Article 3 of the RES, the costs to be taken into account in that context are exclusively those generated by claims (claims costs) submitted to PMI insurers during the reference period for payment of the fees due for medical services received during a hospital stay. Subsequently, the HIA determines the average market risk profile for each age and sex cell, in comparison to the total population insured in the market, on the basis of data provide by the PMI insurers. That average market risk profile is then substituted for the real risk profile of the PMI insurers by age and sex cell in order to identify the hypothetical costs that those insurers would have incurred if they had actually had such an average market risk profile. The cost differential determined on the basis of the comparison between the actual costs (on the basis of the insurer’s real risk profile) and the hypothetical costs (on the basis of the insurer’s average market risk profile) ultimately provides the basis for calculating the equalisation payments, as referred to in paragraph 27 above. Those payments must correspond precisely to that cost differential and may be adjusted, by application of the ‘zero sum adjustment factor’, to ensure that the system is self-financing.

34 Although in theory the RES is intended to apply to every PMI insurer active on the Irish market, the parties are agreed that as matters currently stand its application would essentially lead to a transfer of funds from BUPA Ireland for the benefit of the VHI.

III – Contested decision

35 On 23 January 2003, the Irish authorities formally notified the RES to the Commission pursuant to Article 88(3) EC.

36 By Decision C(2003) 1322 final of 13 May 2003 (State aid N 46/2003-Ireland; ‘the contested decision’), the Commission decided not to raise objections, under Article 4(2) and (3) of Regulation No 659/1999, concerning the establishment of the RES in Ireland.

37 Article 1 of the operative part of the contested decision states:

‘The [RES] involves payments which are limited to the minimum necessary to compensate [PMI] insurers for [SGEI] obligations and therefore does not involve State aids in the sense of Article 87(1) EC.’

38 In the presentation of the facts relating to the RES at recitals 17 to 30 to the contested decision, the Commission described in detail the scope and the functioning of the RES. Recitals 20 to 30 to that decision describe the conditions for the commencement of the RES (recitals 20 to 24) and the criteria and method of calculation of the RES payments (recitals 25 to 30).

39 In its legal assessment, the Commission concluded that the notified measure ‘[did] not constitute State aid within the meaning of Article 87(1) EC or [could] be declared compatible with the common market pursuant to Article 86(2) [EC]’ (recitals 37 and 61 to the contested decision).

40 In support of that appraisal, the Commission essentially considered, initially, that the RES fulfilled in principle the conditions set out in Article 87(1) EC. It observed in that regard that the RES payments came from public resources, originating in a fund established by national legislation, financed by compulsory contributions and controlled by the public authorities, which in practice benefited the VHI, an undertaking in a dominant position with an 85% market share, to compensate it for the costs which it would normally have had to bear. The Commission considered that those payments were capable of affecting competition and intra-Community trade and that the RES could therefore be qualified as State aid (recital 39 to the contested decision).

41 However, the Commission concluded that the compensation provided by the RES none the less did not constitute State aid within the meaning of Article 87(1) EC, since according to the case-law of the Court of Justice (Case C‑53/00 Ferring [2001] ECR I‑9067, paragraph 27), it was intended as compensation for the obligations of services in the general economic interest (‘SGEI obligations’) imposed on all insurers active on the Irish PMI market, namely obligations designed to ensure that all persons living in Ireland would receive a minimum level of PMI services at an affordable price and on similar quality conditions. The Commission observed (at recitals 40 and 41 to the contested decision) that that objective would be achieved by establishing solidarity between policy-holders and that, in particular:

– the open enrolment requirement, that is to say, the obligation for the PMI insurer to offer a PMI contract to any person requesting such a contract, independently of his age, sex or health status, ensured that old or chronically ill persons were not excluded from PMI;

– the lifetime cover requirement ensured that insurers would not reject the policy-holders when they became sick or old;

– community rating imposed upon the insurers the obligation to apply the same premium to all policy-holders for the same type of product irrespective of their health status, age or sex; premiums would therefore be fixed at a higher rate than young persons would have to pay for PMI services priced on the basis of risk assessment and premiums paid by old or sick persons would be much more affordable than if they were fixed by reference to the risk covered; thus, community rating constituted the very basis of inter-generational solidarity and provided all insured persons with the certainty that the advent of a chronic illness or serious injury would not render the cost of cover unaffordable;

– last, the regulations on minimum benefits ensured that the products proposed would respect certain minimum quality standards, although PMI insurers were free to design their insurance products.

42 As regards the applicants’ denial, in their complaint, that the obligations referred to in paragraph 41 above constitute SGEI obligations, the Commission considered, in essence, that the national authorities were entitled to take the view that certain services were in the general interest and must be provided by means of SGEI obligations when market forces were not sufficient to ensure that they would be provided. The Commission further observed that in the absence of harmonisation at Community level in the medical insurance sector, the national authorities were competent to impose SGEI obligations on all operators on the relevant market. In that regard, the Commission observed that the freedom left to operators in Ireland to fix prices and define their insurance products did not call into question the fact that the obligations laid down by the relevant legislation constituted SGEI obligations in so far as the obligations served to achieve the objectives of a mission of general economic interest (‘SGEI mission’), such as access by anyone living in Ireland to a certain level of PMI services at affordable prices and on similar conditions of quality. In that regard, the Commission considered that the Irish authorities had not made a manifest error by qualifying as SGEIs certain services going beyond those offered by the public social security scheme and accepted, in consequence, that the obligations at issue in the present case might be qualified as SGEI obligations within the meaning of Community law (recitals 42 to 49 to the contested decision).

43 The Commission then found, in substance, that the application of the RES was strictly necessary in order to maintain stability on the relevant market, to neutralise the differential in risk profiles between PMI insurers and to compensate for the discharge of the SGEI obligations in question. It thus concluded that the RES was proportionate (recitals 50 to 59 to the contested decision).

44 As regards the necessity of the RES, the Commission observed that economic studies had highlighted the fact that in a community rated system, and notwithstanding the open enrolment obligation, PMI insurers would, in the absence of the RES, have a strong incentive to target, using selective marketing strategies, for example, low-risk, healthy consumers in order to be able to charge a lower community rate then their competitors. The Commission also observed that, in those circumstances, even in the absence of active risk selection, consumers would be likely to change insurers, which could give rise to spiralling costs for PMI insurers whose risk profile is made up of a greater proportion of insured persons in poor health.

45 As regards the Irish PMI market, the Commission considered, in light of the Report of the Society of Actuaries in Ireland of April 2002 and the available data, that the situation could change and lead to a ‘spiralling down’ since some PMI insurers had attempted to attract young and presumably healthier consumers, by means of a strategy based on risk selection rather than one of quality or efficiency (footnote 9 to the contested decision). Consequently, the Commission concluded that although such market instability had not yet been observed, the danger of risk selection on the Irish PMI market based on community rating could not be excluded, so that it was necessary to maintain stability on that market by introducing the RES, which ensured an appropriate distribution of risks on that market. In fact, in a PMI market with a risk-based rating, the RES would not be necessary (recitals 50 to 52 to the contested decision).

46 As regards the proportionality of the RES, the Commission observed, in substance, that an unequal distribution of risks among PMI insurers did not lead automatically to the activation of the RES, but that the RES would be activated when certain conditions were met and, in particular, when certain percentages of risk differential were reached. It further observed that the RES limited transfers of payments between PMI insurers to the level strictly necessary to neutralise the differential between their risk profiles. It considered that a system which compensates PMI insurers for expenditure incurred in covering ‘bad’ risks in excess of the market average was strictly necessary to compensate for the SGEI obligations with which they are entrusted, which prohibit them from setting premiums by reference to the risk insured and from rejecting ‘bad’ risks.

47 The Commission also observed that not all payments by PMI insurers to insured persons were equalised, as the RES provided for a specific ceiling corresponding to the level of benefits received by most insured persons on the Irish PMI market, to the exclusion of ‘luxury’ services. It also observed that the RES took account of the average costs of the insurer generated by claims for reimbursement in such a way as to avoid an equalisation of the average cost per cell of insured persons and to allow the PMI insurers to keep the benefit of their own efficiencies. Last, the Commission considered that the RES limited the application of the health status weight, for the purpose of determining the risk profile, to 50% of the observed use of hospital facilities (also called ‘market experience’), which was an additional guarantee to encourage insurers to promote shorter hospital stays, early detection and best practice generally. The Commission noted that, in consequence, the RES never equalised the entire market risk differential (recitals 27, 28 and 53 to 57 to the contested decision).

48 The Commission concluded that, even if the compensation for SGEI obligations must be regarded as State aid within the meaning of Article 87(1) EC, the aid element was compatible with the common market under Article 86(2) EC, without prejudice to its compatibility with other rules of Community law, in particular with the third non-life insurance directive, examination of which must take place in the appropriate procedures (recitals 60 and 61 to the contested decision).

49 By letter of 2 June 2003, in response to the applicants’ letter of 7 May 2003, the Commission informed the applicants that it had concluded that the RES did not constitute State aid within the meaning of Article 87(1) EC or could be declared compatible with the common market pursuant to Article 86(2) EC.

50 By letter of 6 June 2003, the Commission, at the applicants’ request, sent the applicants a copy of the contested decision, which they received on 11 June 2003.

51 By letter of 23 July 2003, the Commission confirmed to the applicants that the contested decision involved rejection of their complaint and, in response to a further request, sent them a list of seven economic studies submitted in support of the notification by the Irish authorities, which, according to the Commission, were ‘publicly available’.

Procedure and forms of order sought by the parties

52 By application lodged at the Registry of the Court of First Instance on 20 August 2003, the applicants brought the present action. Pursuant to Article 14(1) of the Rules of Procedure of the Court of First Instance, the Court decided to allocate the case to a chamber of extended composition.

53 By separate document lodged at the Court Registry on the same date, the applicants requested the Court, in accordance with Article 76a of the Rules of Procedure, to adjudicate under an expedited procedure. By letter of 5 September 2003, the defendant submitted its observations on that request. By letter of 23 September 2003, the Court informed the applicants that it had decided to reject the request for an expedited procedure.

54 By documents lodged at the Court Registry on 27 November and 12 and 17 December 2003 respectively, Ireland, the Kingdom of the Netherlands and the VHI requested leave to intervene in the proceedings in support of the defendant. By orders of 3 February and 2 April 2004, the President of the Third Chamber (Extended Composition) of the Court granted, first, Ireland and the Kingdom of the Netherlands, and then the VHI, leave to intervene in support of the form of order sought by the defendant.

55 By letter of 28 April 2004, Ireland objected to a request for confidential treatment submitted by the applicants and requested the Court to communicate to it a complete set of all the procedural documents. By order of 4 March 2005, the President of the Third Chamber (Extended Composition) of the Court rejected the applicants’ request for confidential treatment vis-à-vis Ireland and ordered that a complete version of the procedural documents be sent to that Member State.

56 The interveners lodged their statements in intervention and the applicants lodged their observations on those statements within the prescribed periods.

57 By separate document registered at the Court Registry on 22 June 2005, the applicants submitted an application for interim measures pursuant to Articles 242 EC and 243 EC, which was registered as Case T‑289/03 R, seeking suspension of the implementation of Article 1 of the contested decision. By letter of 1 July 2005, the applicants withdrew their request for interim measures. By order of 12 September 2005, the President of the Court ordered that Case T‑289/03 R be removed from the register and reserved the decision on costs.

58 On 19 January 2006, the applicants lodged a request for priority treatment under Article 55(2) of the Rules of Procedure. The defendant, Ireland and the VHI submitted their observations on that request.

59 Upon hearing the report of the Judge Rapporteur, the Court (Third Chamber, Extended Composition) decided to open the oral procedure and to give the case priority treatment pursuant to Article 55(2) of the Rules of Procedure and, in the context of the measures of organisation of procedure provided for in Article 64 of the Rules of Procedure, invited the parties to answer a number of written questions before the hearing. The parties answered those questions within the periods prescribed.

60 The parties submitted oral argument and their answers to the oral questions put by the Court at the hearing on 7 March 2007.

61 The applicants claim that the Court should:

– annul the contested decision;

– order the defendant to pay the costs;

– declare the arguments which Ireland and the VHI derive from Article 87(1) EC inadmissible;

– order the interveners to pay the costs.

62 The defendant and the supporting interveners contend that the Court should:

– dismiss the action;

– order the applicants to pay the costs.

Law

I – Admissibility

A – Arguments of the parties

63 In the rejoinder, the defendant challenges the admissibility of the action on the ground that the applicants are not individually or directly concerned by the contested decision for the purposes of the fourth paragraph of Article 230 EC.

64 The defendant claims, first, that the RES applies to all PMI insurers active on the Irish market and therefore applies to objectively determined situations and produces legal effects only with respect to categories of persons envisaged in the abstract. As may be seen from the HIA’s report of 28 April 2004 to the Minister for Health, which was communicated to the Commission on 14 May 2004, and contrary to the assertion in the application that only the applicants and the VHI are subject to the RES, a third PMI insurer, the Electricity Supply Board’s Staff Medical Provident Fund (‘the SMPF’) is also subject to the RES. Accordingly, the applicants are not individually concerned by virtue of attributes peculiar to them or by reason of a factual situation which differentiates them from all other persons (Case C‑50/00 P Unión de Pequeños Agricultores v Council [2002] ECR I‑6677, paragraph 36), nor are they in a position comparable to that giving rise to the judgment of 16 May 1991 in Case C‑358/89 Extramet Industrie v Council [1991] ECR I‑2501. The fact that it is possible to determine, at a given moment, the likely identity of the beneficiaries of the RES does not alter the general character of the scheme in question.

65 The defendant further maintains that the adoption of the contested decision did not necessarily result in the application of the RES, which still required a recommendation from the HIA and ministerial approval of that recommendation (Case T‑9/98 Mitteldeutsche Erdöl-Raffinerie v Commission [2001] ECR II‑3367, paragraph 51). The defendant explained at the hearing that the applicants were not directly concerned by the contested decision since the application of the RES depended on intermediate measures to be taken by the Irish authorities and amenable to appeal before the national courts.

66 In its observations on the plea alleging failure to initiate the formal investigation procedure provided for in Article 88(2) EC, the defendant further submits that the essential aim of the action is to challenge the substance of the contested decision. The action cannot therefore be declared admissible on the ground that the applicants are seeking to protect their procedural rights in accordance with Article 88(2) EC, as recognised in Case C‑198/91 Cook v Commission [1993] ECR I‑2487.

67 The applicants maintain that the plea of inadmissibility raised by the defendant is contrary to Article 48(2) of the Rules of Procedure in that it was raised out of time in the rejoinder. Furthermore, the commencement of the RES had the inevitable consequence that payments were made by BUPA Ireland for the benefit of the VHI and the contested decision was adopted at the end of the preliminary examination procedure under Article 88(3) EC. However, the applicants do not dispute the fact that the SMPF is also subject to the RES and that it may even benefit from a transfer of funds in the context of the application of the RES.

68 The applicants conclude that, in accordance with the case-law, they are individually and directly concerned by the contested decision. Furthermore, their action is also based on the plea alleging failure to initiate the formal investigation procedure under Article 88(2) EC and seeks to ensure respect for their procedural rights. They rely on the judgment in Case T‑157/01 Danske Busvognmænd v Commission [2004] ECR II‑917, paragraph 41), where the Court held that an applicant is entitled to plead any of the grounds of illegality set out in the second paragraph of Article 230 EC, provided that they concern the total or partial annulment of the contested decision.

B – Findings of the Court

1. Admissibility of the plea of inadmissibility

69 In response to the applicants’ argument that the plea of inadmissibility was raised out of time, by reference to Article 48(2) of the Rules of Procedure, the Court observes that in any event a plea of inadmissibility alleging that the applicant lacks locus standi is a plea of inadmissibility that is a matter of public policy, for the purposes of Article 113 of the Rules of Procedure, which the Court may examine of its own motion at any stage of the proceedings and independently of the pleas and arguments put forward by the parties (see, to that effect, Case T‑141/03 Sniace v Commission [2005] ECR II‑1197, paragraphs 20 to 22, and Case T‑210/02 British Aggregates v Commission [2006] ECR II‑2789, paragraph 57). It is also claimed that the defendant raised in the rejoinder a new fact of which it was informed by Ireland only on 14 May 2004, namely that a third PMI insurer, the SMPF, was also subject to the RES payments obligation.

70 The Court must therefore examine the merits of the plea of inadmissibility raised by the defendant.

2. The merits of the plea of inadmissibility

a) Whether the applicants were individually concerned

71 The defendant does not accept, primarily, that the applicants were individually concerned, for the purposes of the fourth paragraph of Article 230 EC, by the contested decision.

72 In that regard, according to a consistent body of case-law, persons other than those to whom a decision is addressed may claim to be individually concerned only if that decision affects them by reason of certain attributes which are peculiar to them or by reason of circumstances in which they are differentiated from all other persons and by virtue of these factors distinguishes them individually just as in the case of the person addressed by such a decision (Case 25/62 Plaumann v Commission [1963] ECR 95, at 107; Cook v Commission, paragraph 66 above, paragraph 20; and Case C‑298/00 P Italy v Commission [2004] ECR I‑4087, paragraph 36). With more specific regard to a Commission decision on State aid, it must be borne in mind that in the procedure for reviewing State aid provided for in Article 88 EC, a distinction must be drawn between the preliminary procedure for reviewing the aid established in Article 88(3) EC, which is intended merely to allow the Commission to form a prima facie opinion on the partial or complete conformity of the aid in question, and the investigation stage referred to in Article 88(2) EC. It is only in connection with the latter investigation, which is designed to enable the Commission to be fully informed of all the facts of the case, that the EC Treaty imposes an obligation on the Commission to give the parties concerned notice to submit their comments (Cook v Commission, paragraph 66 above, paragraph 22; Case C‑225/91 Matra v Commission [1993] ECR I‑3203, paragraph 16; Case C‑367/95 P Commission v Sytraval and Brink’s France [1998] ECR I‑1719, paragraph 38; and Case C‑78/03 P Commission v Aktionsgemeinschaft Recht und Eigentum [2005] ECR I‑10737, paragraphs 33 and 34).

73 Where, without initiating the formal investigation procedure provided for in Article 88(2) EC, the Commission finds, by decision adopted on the basis of Article 88(3) EC, that an aid is compatible with the common market, the persons intended to benefit from those procedural guarantees may secure compliance with them only if they are able to challenge that decision before the Community Courts (Cook v Commission, paragraph 66 above, paragraph 23; Matra v Commission, paragraph 72 above, paragraph 17; and Commission v Sytraval and Brink’s France, paragraph 72 above, paragraph 40). For those reasons, the Courts will declare admissible an application for annulment of such a decision brought by a ‘party concerned’ within the meaning of Article 88(2) EC where the applicant intends, by bringing the action, to ensure that the procedural rights which he derives from that provision are protected (Cook v Commission, paragraph 66 above, paragraphs 23 to 26, and Matra v Commission, paragraph 72 above, paragraphs 17 to 20). The ‘parties concerned’ for the purposes of Article 88(2) EC who are entitled under the fourth paragraph of Article 230 EC to institute proceedings for annulment are any persons, undertakings or associations whose interests may be affected by the grant of aid, in particular undertakings competing with the recipients of the aid and trade associations (Commission v Sytraval and Brink’s France, paragraph 72 above, paragraph 41, and Commission v Aktionsgemeinschaft Recht und Eigentum, paragraph 72 above, paragraphs 35 and 36).

74 On the other hand, if the applicant challenges the substance of the decision appraising the aid as such, the mere fact that it may be regarded as concerned within the meaning of Article 88(2) EC cannot suffice to render the action admissible. The applicant must then demonstrate that it has a particular status within the meaning of the case-law established in Plaumann v Commission, paragraph 71 above. That applies in particular where the applicant’s market position is substantially affected by the aid to which the decision at issue relates (see Commission v Aktionsgemeinschaft Recht und Eigentum, paragraph 72 above, paragraph 37 and the case-law there cited).

75 In the present case, the applicants contest, in particular by their first and second pleas, the substantive legality of the contested decision, while only their sixth plea goes to the failure to open the formal investigation procedure and thus failure to respect the procedural guarantees provided for in Article 88(2) EC from which the applicants might have benefited as concerned parties. In that last plea, the applicants claim, moreover, that the Commission ought to have initiated the formal investigation procedure owing to the doubts as to whether the RES was compatible with the common market on account of the factual and economic complexity of the case.

76 As regards, first, the applicants’ capacity to secure respect for their procedural rights, it is not disputed by the defendant that the applicants, and in particular BUPA Ireland, as the VHI’s main competitor on the Irish PMI market, are ‘parties concerned’ within the meaning of the case-law cited at paragraph 69 above. The fact that in this case the applicants were able, after lodging their complaint against the RES in 1999, that is to say, before the Commission initiated its examination of the RES notified by Ireland in 2003, to put forward their arguments even during the preliminary examination procedure under Article 88(3) EC cannot deprive them of the right to respect for the procedural guarantee expressly conferred on them by Article 88(2) EC (see, to that effect, Case T‑34/02 Le Levant 001 and Others v Commission [2006] ECR II‑267, paragraphs 94 to 98). It follows that the applicants have locus standi in so far as they seek to secure respect for their procedural rights under Article 88(2) EC.

77 As regards, next, the applicants’ locus standi to challenge the substance of the contested decision, the defendant is wrong to claim that the applicants are not individually distinguished, within the meaning of the Plaumann case-law cited at paragraph 69 above, by the contested decision.

78 So far as, first of all, BUPA Ireland is concerned, it is common ground that even though the RES is in theory intended to apply to all insurers active on the Irish PMI market, BUPA Ireland is the VHI’s main competitor on the Irish PMI market, on which the VHI occupies a dominant position, and, moreover, that the application of the RES would necessarily give rise, initially, to RES payments being made by BUPA Ireland for the sole benefit of the VHI, through the fund administered by the HIA. In those circumstances, the contested decision not only substantially affects BUPA Ireland in its competitive position on the Irish PMI market but is also aimed at BUPA Ireland, at the time of its adoption, as the only net contributor to the fund set up for the RES. In that regard, the defendant’s argument that the circle of persons concerned by the RES and, accordingly, the scope of the contested decision also extends to the SMPF, cannot be upheld, a fortiori because there is no suggestion that that fact is capable of altering the burden imposed on BUPA Ireland as the only net contributor. It should be added that it is on account of the fear of such a substantial effect on its competitive situation, even to the point of having to leave the Irish PMI market, that BUPA Ireland lodged a complaint with the Commission and that it was the only interested third party to have played an active part, following a dispute lasting approximately three years, in the procedure leading to the adoption of the contested decision, the content of which it determined, at least in part (see, in particular, paragraphs 33 to 35 and 42 to 49 of the contested decision).

79 The Court concludes from the foregoing that BUPA Ireland has thus established the existence of a set of facts constituting a special situation which distinguishes it, from the viewpoint of the contested decision, from any other economic operator (see, to that effect, judgment of 16 May 1991 in Extramet Industrie v Council, paragraph 64 above, paragraph 17). It follows that the contested decision distinguishes BUPA Ireland as an addressee.

80 As regards, next, whether the first and second applicants are individually affected, it is sufficient to note that the considerations set out at paragraphs 78 and 79 above apply mutatis mutandis, since, at the time of lodging the present application and until the present, those applicants, together with BUPA Ireland, formed a group of undertakings in which the first applicant, British United Provident Association Ltd, wholly controls its subsidiaries BUPA Insurance Ltd (the second applicant) and BUPA Ireland (the third applicant) (see, by analogy, Case T‑112/97 Monsanto v Commission [1999] ECR II‑1277, paragraphs 57 and 58, a point not taken in the appeal in Case C‑248/99 P France v Monsanto and Commission [2002] ECR I‑1).

b) Whether the applicants were directly concerned

81 As to the issue of direct concern raised by the defendant, it has consistently been held that the contested measure must directly produce effects on the legal situation of the person concerned and its implementation must be purely automatic and follow solely from the Community rules, without the application of other intermediate measures. In the case of a decision authorising aid, the same applies where the possibility that the national authorities will decide not to grant the aid authorised by the contested Commission decision is purely theoretical and there is no doubt that those authorities intend to act in that way (see, to that effect, Mitteldeutsche Erdöl-Raffinerie v Commission, paragraph 65 above, paragraphs 47 and 48; Case T‑435/93 ASPEC and Others v Commission [1995] ECR II‑1281, paragraphs 60 and 61; and Case T‑442/93 AAC and Others v Commission [1995] ECR II‑1329, paragraphs 45 and 46; see also Case C‑386/96 P Dreyfus v Commission [1998] ECR I‑2309, paragraphs 43 and 44).

82 In the present case, it follows from the events preceding the adoption of the contested decision, and in particular from the steps taken following the liberalisation of the Irish PMI market, including the setting-up of the HIA (see paragraph 18 et seq. above), that the Irish authorities firmly intended to implement the RES, the mechanism of which was rediscussed and revised on a number of occasions, the only questions that remain open being the precise date on which the RES would become applicable and the RES payments commence together with the determination of the amounts of those payments. Therefore, at the time of adoption of the contested decision, the possibility that the Irish authorities would decide not to implement the RES was purely theoretical, as the delay in implementing it was attributable solely to the actions brought by the applicants before the High Court against the implementing measures provided for in the relevant national legislation.

83 Consequently, it is appropriate to reject the defendant’s argument that the adoption of the contested decision did not necessarily have as a consequence the application of the RES, on the ground that the Irish authorities had to take certain intermediate measures that were amenable to appeal.

84 It follows that the applicants are directly and individually concerned, within the meaning of the fourth paragraph of Article 230 EC, by the contested decision and that the application must be declared admissible in its entirety.

85 The plea of inadmissibility raised by the defendant must therefore be rejected.

II – Substance

A – Preliminary observation

86 The applicants raise seven pleas in law in support of their application, namely, first, misapplication of Article 87(1) EC; second, misapplication of Article 86(2) EC; third, an error of law in failing to examine the legality of the RES under Article 86(1) EC in conjunction with Article 82 EC; fourth, an error of law in failing to examine the legality of the RES under Articles 43 EC and 49 EC; fifth, an error of law and a failure to state reasons regarding the failure to carry out a proper examination of the legality of the RES in the light of the third non-life insurance directive; sixth, unlawful failure to open a formal investigation procedure under Article 88(2) EC; and, seventh, breach of the obligation to state reasons under Article 253 EC.

87 The Court notes, by way of preliminary observation, that the arguments which the parties put forward in connection with the first and second pleas overlap to a significant extent. They raise, in particular, the question of the existence of an SGEI mission and also the question whether the RES is necessary for the purpose of discharging that mission and whether it is proportionate. It is therefore appropriate to begin by setting out the substance of all of those arguments so that they can properly be taken into account in the examination of those two pleas.

B – First and second pleas

1. Arguments of the parties

a) The plea alleging misapplication of Article 87(1) EC

i) Arguments of the applicants





1) General observations

88 The applicants submit, by way of preliminary observation, that by their first plea they take exception to Article 1 of the contested decision, which states that the RES ‘does not involve State aids in the sense of Article 87(1) EC’. They observe that the defendant puts forward no defence to that plea, so that the decision ought to be annulled on that ground alone.

89 The applicants further observe that the Commission correctly stated, at recital 39 to the contested decision, that in principle the RES satisfies the criteria set out in Article 87(1) EC and could therefore be qualified as State aid. At recitals 61 and 62 to the contested decision, however, the Commission wrongly considered that the RES nevertheless did not constitute State aid within the meaning of that provision because it compensated for SGEI obligations. However, in this case the conditions for financial compensation for SGEI obligations, as recognised by the Court of Justice (Ferring, paragraph 41 above, paragraph 27, and Case C‑280/00 Altmark Trans und Regierungspräsidium Magdeburg [2003] ECR I‑7747, ‘Altmark’, paragraphs 87 to 93), are not satisfied. In particular, in Altmark the Court of Justice held that where a State measure must be regarded as compensation for the services provided by the recipient undertakings in order to discharge public service obligations, so that those undertakings do not enjoy a real financial advantage and the measure thus does not have the effect of putting them in a more favourable competitive position than the undertakings competing with them, such a measure is not caught by Article 87(1) EC (Altmark, paragraph 87). Furthermore, according to the Court of Justice, in that connection four cumulative conditions must be satisfied (Altmark, paragraphs 88 to 93; ‘the Altmark conditions’), and they are not satisfied in this case.

90 In that regard, the defendant’s attempt to avoid annulment of the contested decision by relying solely on Article 86(2) EC cannot succeed since the operative part of that decision makes no reference to Article 86(2) EC and the reason stated in that regard, at recital 61 to that decision, is not sufficient. Even to the extent to which the conditions for the application of Article 86(2) EC are equivalent to those applicable to Article 87(1) EC, which the defendant does not dispute, the defendant’s argument cannot succeed since it does not in any event demonstrate the existence of an SGEI obligation which would justify the RES or that the RES is proportionate within the meaning of Altmark and Article 86(2) EC.

91 In that context, the applicants further claim that, unlike the defendant and the Kingdom of the Netherlands, Ireland and the VHI seek to defend the legality of the contested decision by asserting that the Altmark conditions are satisfied. Under Article 116(3) of the Rules of Procedure, however, interveners must accept the case as they find it at the time of their intervention and thus cannot alter the framework of the dispute (Case T‑243/94 British Steel v Commission [1997] ECR II‑1887, paragraph 70) as defined by the applicants and the defendant in their pleadings. However, since the defendant has failed to submit argument based on Article 87(1) EC, the framework of the dispute at the time of the intervention related only to Article 86(2) EC. In the applicants’ submission, it follows that the arguments of Ireland and the VHI concerning Article 87(1) EC must be declared inadmissible.

92 In any event, the defects in the reasoning in the contested decision cannot be cured retroactively in the course of the proceedings by new legal and factual arguments put forward by the interveners (Case T‑5/02 Tetra Laval v Commission [2002] ECR II‑4381, paragraphs 255, 271 and 282; Opinion of Advocate General Fennelly in Joined Cases C‑15/98 and C‑105/99 Italy and Sardegna Lines v Commission [2000] ECR I‑8855, at I‑8894, point 70). On that ground, the arguments put forward by Ireland and the VHI must in any event be rejected as unfounded.

93 Last, with respect to Ireland’s statement in intervention, the applicants maintain that, under Article 116(4)(b) of the Rules of Procedure and the case-law (Case T‑84/96 Cipeke v Commission [1997] ECR II‑2081, paragraphs 31 and 34), the substantive arguments in Annexes 4, 7, 9 and 10 to that statement in intervention are admissible only in so far as they are set out in the statement in intervention itself.

94 The applicants maintain that in the present case the four cumulative Altmark conditions are not satisfied so far as the RES is concerned. They contend, moreover, that the Commission completely failed to examine the second, third and fourth conditions, after having accepted, without making a proper evaluation, the Irish authorities’ position on the first condition.

2) The first condition: there must be actual and clearly-defined SGEI obligations

95 The applicants refer to the first condition laid down by the Court of Justice in Altmark (paragraph 89), namely that the recipient undertaking must actually have public service obligations to discharge, and those obligations must be clearly defined.

96 The applicants maintain that, owing in particular to the close connection between Article 87(1) EC and Article 86(2) EC, the concept of public service obligation used by the Court of Justice is equivalent to that of an SGEI obligation (Opinion of Advocate General Tizzano in Ferring, paragraph 41 above, ECR I‑9069, points 51 and 60, and Opinion of Advocate General Jacobs in Case C‑126/01 GEMO [2003] ECR I‑13769, at I‑13772). The Commission itself recognised in the contested decision that those two concepts are equivalent. Moreover, the Commission has explained publicly that those two concepts refer to services with special characteristics which the public needs (Commission report on the state of play in the work on the guidelines for State aid and [SGEIs], section 2) which do not benefit specific categories of service users (Commission non-papers on services of general economic interest and State aid, 12 November 2002, p. 21) and which, therefore, have the following common elements: universal service, continuity, quality of service, affordability, as well as user and consumer protection (Commission Green Paper on services of general interest, 21 May 2003, COM(2003) 270 final, paragraph 49).

97 In the applicants’ submission, in light of the case-law on SGEI obligations, the conditions mentioned above imply a further essential characteristic, namely that since the service in question is a universal service the provision of the service must be obligatory (Case 172/80 Züchner [1981] ECR 2021, paragraph 7; Case C‑170/90 Merci Convenzionali Porto di Genova [1991] ECR I‑5889, paragraph 27; Case C‑393/92 Almelo [1994] ECR I‑1477, paragraph 48; Case C‑242/95 GT-Link [1997] ECR I‑4449; and Case C‑266/96 Corsica Ferries France [1998] ECR I‑3949, paragraph 45).

98 The applicants further maintain that, in light of the specific and limited definition of the concept of an SGEI obligation, while any State regulation which imposes obligations on an undertaking may be regarded as being in the general or public interest, it does not follow that all such obligations are SGEI obligations in the strict sense, for which the State may legitimately compensate the undertakings concerned. In accordance with the case-law and the Commission’s practice when taking decisions, a distinction must be drawn between the creation of SGEI obligations and the control and regulation of the activities of undertakings (Case 7/82 GVL v Commission [1983] ECR 483, paragraphs 31 and 32, and Case C‑18/88 GB-Inno-BM [1991] ECR I‑5941, paragraph 22; Commission Decision 97/606/EC of 26 June 1997 pursuant to Article [86(3) EC] on the exclusive right to broadcast television advertising in Flanders (OJ 1997 L 244, p. 18); and Case T‑266/97 Vlaamse Televisie Maatschappij v Commission [1999] ECR II‑2329). In the applicants’ submission, if that were not the case and if Member States were not required to respect that precise and limited definition of the concept of an SGEI obligation, they would be able to evade the application of Article 87(1) EC and compensate for all kinds of obligations imposed on undertakings in the public interest.

99 The applicants submit that the concept of an SGEI obligation is a concept of Community law which must be interpreted objectively in the same way as the concept of State aid within the meaning of Article 87(1) EC, of which it forms an integral part (Case 173/73 Italy v Commission [1974] ECR 709, paragraph 13, and Case C‑83/98 P France v Ladbroke Racing and Commission [2000] ECR I‑3271, paragraph 25; and Opinion of Advocate General Jacobs in GEMO, paragraph 96 above, point 73). That is confirmed by the case-law according to which the concept of an SGEI within the meaning of Article 86(2) EC is to be interpreted strictly (GT‑Link, paragraph 97 above, paragraph 50, and Case C‑157/94 Commission v Netherlands [1997] ECR I‑5699, paragraph 37), in order to ensure that the Member States cannot easily escape the application of the rules on State aid.

100 Although a Member State is free to determine, in the exercise of its discretion, the way in which it proposes to provide and regulate the provision of an SGEI (Report from the Commission on the state of play in the work on the guidelines for State aid and SGEIs, section 4.1; Commission Decision SG (99) D/10201 of 14 December 1999 on State aid No NN 88/98 – United Kingdom), the qualification of an SGEI obligation is subject to strict control by the Community institutions (Case 41/83 Italy v Commission [1985] ECR 873, paragraph 30).

101 In that regard, the applicants dispute the assertions of the defendant and the interveners that, first, the concept and application of an SGEI obligation are subject to control only for manifest error and, second, the definition of the scope of that concept is essentially a matter within the discretion of the Member States. Moreover, the case-law on which the interveners rely (Case C‑67/96 Albany [1999] ECR I‑5751, paragraph 104, and Case T‑106/95 FFSA and Others v Commission [1997] ECR II‑229, paragraph 137) confirms, on the contrary, the applicants’ argument. Last, the applicants maintain that the interveners put forward no argument capable of calling in question the Community definition of the concept of an SGEI obligation.

102 The applicants contend that in the present case the first Altmark condition is not satisfied because there are no SGEI obligations connected with the RES. The Commission’s finding to the contrary at recital 49 to the contested decision is incorrect in two respects.

103 The applicants first of all maintain that the Commission did not undertake an assessment of whether the SGEI obligations invoked by the Irish authorities, namely the requirements of open enrolment, community rating, lifetime cover and minimum benefits (‘the PMI obligations’) actually and objectively constituted SGEI obligations. In reality, the Commission avoided that question by incorrectly taking the view that the matter came within the competence of the Irish authorities and that its control was limited to a control of manifest errors on the part of those authorities in the exercise of their competence. By adopting that approach, the Commission ignored the need for a strict and objective Community definition of SGEI obligations and unlawfully delegated to the Irish authorities the power to define what constituted such obligations. The Commission thus failed to exercise the degree of control required by Article 87(1) EC.

104 The applicants further maintain that the PMI obligations are not in the nature of an SGEI obligation, for the reasons set out below.

105 First, in accordance with the case-law and the Commission’s practice in taking decisions, the PMI obligations are simply normal regulatory obligations attached to the authorisation to provide a service and to the control by the public authorities of the activity of the operators concerned. The regulations in issue do not impose on the operators concerned the