WRITTEN QUESTION P-1739/96 by Georg Jarzembowski (PPE) to the Commission (17 June 1996)

Subject: Regulation (EEC) No 1893/91

In the answer given on 12 September 1995 by Commissioner Kinnock, on behalf of the Commission, to my Written Question P-2295/95 ((OJ C 340, 18.12.1995, p.29. )) concerning Regulation (EEC) No 1893/91 ((OJ L 169, 29.6.1991, p.1. )), he said that the Commission would examine once more with the German authorities the complex legal and accounting issues relating to possible cross-subsidies.

1. Has that examination now taken place? If so, what is now the detailed and substantive answer to the written question referred to above which I tabled in 1995?

I should also like an answer to the following question:

Is the concept of 'independent profitability', which is laid down in a legally and practically watertight form in the second sentence of Section 8(4) of the Passenger Carriage Act (PBefG), compatible with the provisions of Regulation (EEC) No 1893/91 on public service obligations, with particular regard to that part of the definition which equates with internally generated revenue external financing in the form of equity capital transfers from the national budget or profit transfers from state-run undertakings or state-controlled affiliated companies that are interdependent as regards capital?

2. If that examination has not yet taken place, when will it, and when will I receive a definitive and substantive answer?

Answer given by Mr Kinnock on behalf of the Commission (11 July 1996)

As already stated in answer to the Honourable Member's Written Question E-0381/95 ((OJ C 270, 16.10.1995. )), the provisions of Article 1(1), second sub-paragraph of Regulation (EEC) No 1191/69 ((OJ L 156, 28. 6.1969. )), as amended by Regulation (EEC) No 1893/91 enable Member States to exclude from the scope of the Regulation undertakings with activities covering exclusively the operation of urban, suburban or regional services.

An exemption which is provided by the order amending the order of the Federal government, dated 29 November 1994 cited in the Honourable Member's question, has apparently not been extended after 31 December 1995. This implies that the German federal authorities have decided to terminate, as from 1996, the exclusion of the above transport undertakings from the general application of the Community legislation. In this case, the provisions of Regulation (EEC) No 1191/69 apply to the undertakings hitherto exempted under that order, which operate urban, suburban and regional passenger transport services.

Therefore, payments to compensate public service obligations, which have to be in compliance with the provisions of Regulation 1191/69, are subject to post notification to the Commission, according to its Article 17(1) and (2). In particular, as Article 1(5) of the Regulation provides, in the case of imposition of a public service obligation, that the methods of compensation laid down in Section II, III and IV are applicable. As far as the compensation payments are concerned, Articles 10-13 set out common procedures. In addition Article 1(5), second sentence, specifies that:

'where a transport undertaking not only operates services subject to public service obligations, but also engages in other activities, the public services must be operated as separate divisions meeting at least the following conditions:

a) [-]

b) expenditure shall be balanced by operation revenue and payments from public authorities without any possibility of transfer from or to another sector of the undertaking's activity'.

Financial transactions which are not directly related to the deficit caused by the operation of the imposed public service obligations are not covered by the above mentioned rules of Regulation (EEC) No 1191/69. That means in particular that capital increases financed through the public budget or cross-subsidisation of the transport activity from another sector of the undertaking, are not per se exempted from the application of the state aid rules pursuant to Article 92 of the EC Treaty. However, one would have to decide in each individual case whether Article 92 applies. Firstly it has to be analysed if the investment goes beyond what a private investor would have done operating under normal market economy conditions. Secondly it has to be checked if the aid distorts or threatens to distort competition and if it affects trade between Member States. With regard to the kind of aid in question, which according to the Honourable Member relates to urban, suburban and regional transport, these last conditions may not always be fulfilled.

Specific answers can only be given case by case, on the basis of information notified to the Commission by the Member State concerned, pursuant to Article 93(3) of the EC Treaty.