State aid — Ireland — State aid C 31/07 (ex NN 17/07) — State aid to Córas Iompair Éireann Bus Companies (Dublin Bus and Irish Bus) — Invitation to submit comments pursuant to Article 88(2) of the EC Treaty (Text with EEA relevance)
Date: 2007-09-15
Institutions: European Commission
Subjects: EU financing, Ireland, State aid, bus, control of State aid

C 217/44

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Official Journal of the European Union

15.9.2007

STATE AID — IRELAND

State aid C 31/07 (ex NN 17/07) — State aid to Córas Iompair Éireann Bus Companies (Dublin Bus
and Irish Bus)

Invitation to submit comments pursuant to Article 88(2) of the EC Treaty

(Text with EEA relevance)

(2007/C 217/10)

By means of the letter dated 18 July 2007 reproduced in the authentic language on the pages following this
summary, the Commission notified Ireland of its decision to initiate the procedure laid down in Article 88(2)
of the EC Treaty concerning the abovementioned State aid/measures.

Interested parties may submit their comments on the State aid in respect of which the Commission is initi-
ating the procedure within one month of the date of publication of this summary and the following letter,
to:

European Commission
Directorate-General for Energy and Transport
Directorate A — General Affairs and Resources
Unit A4: Internal Market and Competition
Rue De Mot 28
B-1040 Brussels
Fax (32-2) 296 41 04

These comments will be communicated to Ireland. Confidential treatment of the identity of the interested
party submitting the comments may be requested in writing, stating the reasons for the request.

TEXT OF SUMMARY

ASSESSMENT OF THE AID

PROCEDURE

The Irish Coach Tourism and Transport Council has submitted a
complaint concerning alleged unlawful State aid granted to the
‘CIÉ’, Irish Transport Board)
Córas Iompair Éireann (thereinafter:
bus companies Irish Bus and Dublin Bus by the Irish government
in form of grants under the National Development Plan and in
form of annual operating grants.

DESCRIPTION OF THE AID

The beneficiaries of alleged unlawful aid are Irish Bus and Dublin
Bus. Both bus operators are limited companies 100 % owned by
CIÉ and are providing bus
long distance, urban,
suburban and regional bus services in Ireland. Irish Bus is oper-
ating also school transport services.

services

Period under examination

With respect to the compensation payments for public service
obligations,
initially based solely on the 1950 and the 1986
Transport acts, the Commission notes a substantial modification
of the compensation system has taken place in 2003, with the
introduction of yearly Memoranda of Understanding, detailing
the quality and the quantity of the services to be provided as
well as the precise amount of compensation to be paid. Hence,
the Commission considers that payments for public service
compensations as of 2003 constitute new aid in the sense of
Article 1(c) of Council Regulation (EC) No 659/1999, as the
Memoranda of Understanding substantially alter the previous
compensation mechanism.

With respect to the payments based on the National Develop-
ment Plan, the Commission considers that the National Deve-
lopment Plans 2000-2006 and 2007-2013 have substantially
altered the National Development Plan 1993-1999, and hence
are to be considered as new aid in the sense of Article 1(c) of
Regulation (EC) No 659/1999.

Existence of aid

The Irish authorities support Irish Bus and Dublin Bus in the
pursuit of their activities referring to the public bus transport
services by annual compensation payments,
funding of new
buses and investment grants for dedicated infrastructure, which
is not available to all possible operators on equal and non-discri-
minatory basis. The investment grants have been used for the
upgrading of passenger facilities such as bus stations and bus
stops of Irish Bus and the garages for the parking and mainte-
nance of bus fleets of Dublin Bus.

The Commission considers that the Irish authorities have not
yet provided enough information to draw a conclusion, that all
criteria set by the Altmark judgment (1) are fulfilled. Pursuant to
the information provided by the Irish authorities the Commis-
sion cannot exclude that the measure constitutes State aid in the
sense of Article 87(1) of the EC Treaty.

(1) Case C 280/00, Altmark Trans GmbH and Regierungspräsidium

Magdeburg [2003], ECR I-7747.

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Compatibility of aid

(a) Compensation for bus services operated under the ‘public service

obligation’ and the school transport scheme

As Irish Bus and Dublin Bus operate scheduled and other bus
services, they are undertakings which operate services in trans-
port by road. Therefore, Irish Bus and Dublin Bus fall into the
scope of Council Regulation (EEC) No 1191/69.

According to the Irish authorities, it has been imposed a public
service obligation upon CIÉ and its subsidiaries by the Transport
Acts, namely through the Transport Act, 1950 and the Trans-
port (Re-organisation of CIÉ) Act, 1986. As from year 2003 the
conditions and the amount of the annual compensation by the
Irish authorities to Dublin Bus and Irish Bus have been subject of
Memoranda of Understanding. The
Irish authorities have
declared that they do not consider the Memoranda of Under-
standing with Dublin Bus and Irish Bus as a public service
contracts. Pursuant to the information currently at its disposal,
the Commission can not exclude, that the Memoranda of Under-
standing should be considered as public service contracts.
Accordingly, it is not clear, if the State aid granted in order to
compensate these public service obligations needs to be assessed
based on sections II,
the Regulation, whose
III and IV of
comprise Articles 3 to 13, or section V of the Regulation, which
comprises Article 14.

is

its disposal,

According to Article 10 of Regulation (EEC) No 1191/69 the
amount of the compensation needs to be limited to the differ-
ence between the costs for discharging the obligation and the
revenues generated through the obligation. The Commission
thus has to verify whether the compensation paid by the Irish
authorities
limited to the difference between the costs
incurred for discharging these public service obligations and the
revenues generated through sale of bus tickets. On the basis of
the Commission has
information currently at
doubts whether Irish Bus and Dublin Bus have not been over-
compensated. Both CIÉ subsidiaries also operate services that do
not fall under what could be interpreted as a public service obli-
gation (so-called ‘commercial services’) and may use publicly
the
funded buses to operate those bus services. Therefore,
Commission is not able to conclude that the compensation is
limited to expenditures for discharging public service obliga-
tions. At this stage the Commission does not have sufficient
information at its disposal to determine whether the Irish autho-
rities have calculated the compensation for discharging the tariff
obligations in compliance with the provisions of Article 11
to 13.

the present measures are in
The Commission doubts that
compliance with the provisions of Regulation 1191/69 in case
they were to be considered compensation for discharging public
service obligations.

transport and obligations of public

tion in Article 73 (ex Article 77) of the Treaty relating to the needs of
co-ordination of
service. The
Dublin Public Transport and National Public Transport measures
accordingly comply with State Aid rules.’ In the present case the
Commission has doubts, whether the bus stations, bus stops,
garages and maintenance facilities constitute an imposed public
service obligation, or whether these measures are subject to
public service contracts.

The Commission could assess the compatibility of the infra-
structure investment grants for Irish Bus and Dublin Bus directly
on the legal basis according to Article 87(3)(c) of the EC Treaty,
‘aid to facilitate the development of certain
which stipulates that:
economic activities or of certain economic areas, where such aid does
not adversely affect trading conditions to an extent contrary to the
common interest’, may be considered to be compatible with the
common market. However, the Commission has doubts that the
measures in question are not prejudicial to the common interest
and that the above mentioned criteria have been satisfied in the
present case.

(c) Financing of Disability Awareness Training

The Irish authorities did not provide to the Commission the
necessary information concerning the modalities, duration,
budget, intensity and further conditions in order to allow it to
be able to take a position on this measure. On the basis of the
information currently at its disposal the Commission therefore
cannot conclude at this stage that all provisions of Commission
Regulation (EC) No 68/2001 are being fulfilled, and thus, the
provisions from the exemption from the notification require-
ments of Article 88(3) of the EC Treaty apply.

CONCLUSION

In view of the above, the Commission has doubts whether the
measures of Irish authorities to the benefit of Irish Bus and
Dublin Bus are in accordance with Regulation (EEC) No 1191/69.
training the
financing of disability awareness
In case of
Commission is not in the position to verify, if the individual aid
grant or the aid scheme fulfils all provisions of the Regulation
(EC) No 68/2001 and thus, the provisions from the exemption
the
from the notification requirements of Article 88(3) of
EC Treaty. That is why the Commission decides to initiate the
formal investigation procedure pursuant to Article 4(4) of Regu-
lation (EC) No 659/1999. The Commission will close the proce-
dure by issuing a final Decision.

In the light of the foregoing considerations, the Commission,
acting under the procedure laid down in Article 88(2) of the
EC Treaty, requests Ireland to submit
its comments and to
provide all such information as may help to assess the aid. The
Commission is also asking Ireland for specific information in
this regard.

(b) Financing of infrastructure

The Irish authorities stated that ‘The capital aid granted to the CIÉ
companies under the transport priority of the Economic and Social
Infrastructure Operational Programme is covered by the block exemp-

In these circumstances, the Commission considers that, in the
interest of all parties concerned,
they should be invited to
submit their comments in the context of the formal investiga-
tion procedure pursuant to Article 88(2) of the EC Treaty.

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In accordance with Article 14 of Regulation (EC) No 659/1999,
all unlawful aid can be subject to recovery from the recipient.

TEXT OF LETTER

‘(1) The Commission wishes to inform Ireland that, having
examined the information supplied by the complainant
and by your authorities on the measures referred to
above, it has decided to initiate the formal investigation
procedure laid down in Article 88(2) of the EC Treaty.

A. PROCEDURE

(2) The Irish Coach Tourism and Transport Council (hereinafter:
“the complainant”) has by letter of 8 December 2005,
registered by the Commission on 19 January 2006
(under the reference A/11401) submitted a complaint
concerning alleged unlawful State aid granted to the Córas
Iompair Éireann (hereinafter: “CIÉ”, Irish Transport Board)
bus companies Irish Bus and Dublin Bus by the Irish
government in the form of grants under the National
Development Plan and in the form of annual operating
grants. This complaint has been registered under the
number CP 23/2006.

(3) The complainant provided additional

information by
e-mails of 7 March 2006 (registered by the Commission
on the same date under reference A/15845), 13 March
2006 (registered by the Commission on the same date
under reference A/16333 and A/16337) and 27 March
2006 (registered by the Commission on the same date
under reference A/17594).

(4) By letter of 19 April 2006 (under

reference
D(2006) 208349) the Commission informed the Irish
the complaint and
authorities about
the subject of
requested information on the issues
raised by this
complaint.

the

(5) By letter of 1 May 2006, registered by the Commission
on 11 May 2006 (under the reference A/21583) the
complainant sent additional information.

(6) The Irish authorities requested by fax of 12 May 2006
the prolongation of the deadline for the response to the
request for sufficient information of 19 April 2006. By
letter of 29 May 2006 (reference D(2006) 211124) the
Commission granted the prolongation of the deadline for
the response until 27 June 2006.

(7) The complainant provided by e-mail of 24 July 2006
(registered by the Commission on the same date under
the
information
reference
concerning this case.

A/28165)

additional

(8) As the Commission had not received any answer or a
for the extension of
the deadline by
further request
the Commission reminded the Irish
20 July 2006,
authorities by
letter of 25 July 2006 (reference
D(2006) 216266) of the provisions of the Article 5(2) of
Council Regulation (EC) No 659/1999 to provide suffi-
cient information on the issues raised by the complai-
nant.

(9) The Irish authorities by letter of 27 July 2006 (registered
by the Commission on 1 August 2006 under the refer-
ence A/28824) and e-mail of 31 July 2006 (registered by
the Commission on 1 August 2006 under the reference
A/28913) provided their observations on the issues
raised by the complainant.

(10) The European Commission requested by letter of
3 August 2006 (reference 216944) additional informa-
tion on the subject matter. The Irish authorities asked by
e-mail of 5 September 2006,
the
Commission on 11 September 2006 (under the reference
the deadline for the
A/31749),
response to the letter of 3 August 2006. By letter of
13 September 2006 the Commission extended the dead-
line for the response to the request for additional infor-
mation until 27 October 2006.

for a prolongation of

registered by

(11) By e-mail of 2 October 2006, registered by the Commis-
sion on 4 October 2006 (under the reference A/33979)
the complainant
information on the
subject matter.

sent additional

(12) The Irish authorities provided additional information by
letter of 30 October 2006, registered by the Commission
on 6 November 2006 (under the reference A/36329). On
18 April 2007 a meeting took place between the Irish
authorities and the Commission concerning the issue in
question.

(13) The complainant provided by letter of 18 May 2007
additional information concerning this case. By letter of
21 May 2007, registered by the Commission on 30 May
2007 (under the reference A/33201) the Irish authorities
provided additional information.

B. DESCRIPTION OF THE FACTS

B.1. Complainant

(14) The complainant, Coach Tourism and Transport Council, is
the representative body for independent private transport
companies that operate transport services (including long
distance national and international scheduled services,
commuter, rural and urban transport services, school
transport services, incoming tourism, out bond tourism
and general hire) in Ireland on a commercial basis.

B.2. The allegations made by the complainant

the financing of
(annual operating

(15) The complaint by Coach Tourism and Transport Council
transport
the public bus
concerns
services
compensation payments,
upgrading and replacement of buses), and furthermore,
the financing of the transport infrastructure (passenger
facilities and bus garage at Harristown) and disability
awareness training in Ireland for the period 2000 to
2006. The complainant alleges that the financing of the
above mentioned measures by the Irish authorities may
involve unlawful State aid.

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(16) In particular, the complainant allege that the financing of
the public bus transport services operated by Dublin Bus
and Irish Bus does not comply with the provisions of
Council Regulation (EEC) No 1191/69, as regards the
absence of the clearly defined public service obligation
and the lack of
transparency in the method used to
provide the annual operating compensation payments.

(17) In addition, the complainant allege that the following
aspects confer a competitive advantage to Dublin Bus and
Irish Bus:

(a) financing of the expansion and upgrade of the bus
fleet as it appears that the use of the buses is not
limited to the public transport services;

(b) financing of the infrastructure not open to private

operators;

(c) financing of Disability awareness training not open to

private operators.

B.3. Beneficiaries

(18) The companies under consideration as

recipients of
alleged unlawful State aid are Irish Bus (also called “Bus
Éireann”) and Dublin Bus (also called “Bus Átha Cliath”).
These Irish bus operators are limited companies, 100 %
owned by CIÉ (2) (Córas Iompair Éireann, the Irish Trans-
port Board).

Irish Bus

(19) Irish Bus as a subsidiary of CIÉ provides bus services
throughout Ireland with the exception of Dublin City
using its own and sub-contractor resources. The provided
bus services include long distance bus services (including
Expressway and Eurolines bus services to Britain and
Europe), urban, suburban, regional city and town bus
in Athlone,
services
Balgriggan, Drogheda, Dundalk, Navan and Sligo,
commuter bus services in and radiating from Dublin,
Cork, Limerick, Galway and Waterford), school transport
services and ancillary services, such as coach and bus
contract maintenance, parcels
vehicle
hire,
delivery, etc.

(including e.g.

town services

testing,

(20) The school transport services are operated under contract
with the Department of Education and Science on a cost
recovery basis and amounted to approximately 47 % of the
total customer journeys (3) of
Irish Bus in year 2005.
During 2004 Irish Bus introduced new school transport
services, mainly in the area of transport for children with
special needs. Hence, the school transport fleet has been
upgraded by accessible vehicles for mobility-impaired
children in recent years.

Dublin Bus

(21) The prime activity of Dublin Bus is providing urban and
suburban bus services for the Dublin Metropolitan Area
(including Dublin city and county as well as contiguous
areas).
In addition, Dublin Bus operates connections
within Ireland and places outside (including a network of

(2) CIÉ is a State owned statutory corporation, which had been set up by
the Transport Act, 19502. The Transport Act, 1950 and Transport Act,
19582 set out the general duties of CIÉ and the obligations required.
Under the terms of the Transport (Re-organisation of CIÉ) Act, 19862
CIÉ had been requested to form for operational purposes three limited
liability companies: Irish Rail, Irish Bus and Dublin Bus.
(3) Annual Report and Financial Statement for year 2005,

http://www.buseireann.ie/site/about_us/annual_reports.asp

bus routes in Ireland, Airport Services, Nitelink and sight-
seeing tours).

B.4. Legal framework describing the public service

tasks

B.4.1. Transport Acts

(22) Article 15(1) of the Transport Act, 1950 has imposed on
the CIÉ as a general duty “to provide or secure or promote
the provision of an efficient,
convenient and
properly integrated system of public transport” for passengers
by road taking into account the safety of operation and
the encouragement of national economic development.

economical,

(23) Furthermore, the Transport

(Re-organisation of CIÉ) Act,
1986 defines the principal objectives and duties of Irish
Bus and Dublin Bus. Accordingly, Article 8(2) of the Trans-
port (Re-organisation of CIÉ) Act, 1986 stipulates, that “the
principal object of the Irish bus company shall be stated in its
memorandum of association to be to provide, within the State
and between the State and places outside the State, a passenger
service by road, except in so far as such a service is provided by
the Dublin bus company, and to provide ancillary services and
for those purposes to exercise functions in that behalf conferred
on the Board by the Act of 1950 or any other enactment”.

(24) Respectively, Article 8(3) of the above mentioned Trans-
port Act specifies, that “The principal object of the Dublin
bus company shall be stated in its memorandum of association
to be to provide a passenger service by road for the city and
county of Dublin and contiguous areas and to provide ancillary
services, within the State and between the State and places
outside the State, and for those purposes to exercise functions
in that behalf conferred on the Board by the Act of 1950 or
any other enactment”.

(25) In addition, according to Article 8(10) of the Transport
(Re-organisation of CIÉ) Act, 1986, CIÉ and its bus compa-
nies shall take into account the social role of this trans-
port board and the need to maintain public transport
services to the maximum extent possible within the avail-
able financial resources.

(26) Furthermore,

the Irish authorities explained,
(including the adult

that
the
standard
standard journey fares
journey fares on all categories of services and also school
child fares on city services) (4) charged by Dublin Bus and
Irish Bus are subject to the control of the Minister of Trans-
the maximum fares that could be
port
are not
charged. Furthermore, both bus operators
permitted to increase these fares without
the prior
consent of the Department of Transport. Fares charged
by private operators are not subject to any notification or
control procedures.

in terms of

(27) Since 10 January 2001 both CIÉ bus operators are
required by a Ministerial direction (5) to notify to the
Department
of Transport proposed new services or
proposed changes to existing services at least four weeks
prior to their introduction. Such notification by CIÉ bus
the
operators must be supported by full details of

(4) Irish Competition Authority — Report on bus and rail passenger trans-

port sector pursuant to section 11 of the Competition act 1991.

(5) According to the Article 26(1) of the Transport (Re-organisation of Córas
Iompair Éireann) Act, 1986, the Minister may give the Board a direction
in writing to the policy in relation to the functions of the Board and the
companies.

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services proposed. Where the Department of Transport
determines that proposed services would conflict with an
existing licensed passenger road service, CIÉ companies
are requested to formally seek the consent of the Minister
of Transport under Article 25 of the Transport Act, 1958.

(32) The related operational programmes are Operational
programme for Transport 1993-1999 and Economic and
infrastructure operational programme 2000-2006 (9)
Social
(thereinafter: “ESIOP”).

B.4.2. Memoranda of Understanding

B.5. Detailed description of the measures

(28) Since 2003, the payment of compensation to CIÉ has
been the subject of Memoranda of Understanding with each
of the CIÈ companies. The Irish authorities explained that
the Memoranda of Understanding identify the quality (incl.
customer service quality, cleanliness, bus age, accessibility,
etc.) and quantity (incl. number of buses, operated kilo-
metres, customers carried, etc.) of services to be provided
by each of the companies in return for the Exchequer
payments. Furthermore,
the financial and operational
requirements and monitoring and also reporting arrange-
ments are regulated by the Memoranda of Understanding.
Since 2005, payment of a fixed portion of the subvention
for each of the operating companies is conditional on
meeting certain performance criteria laid down in the
agreed Memoranda of Understanding.

(29) Furthermore, according to the Irish Competition Authority
Report (6), the Department of Social Community and Family
Affairs operates free travel schemes for various segments
of the population by contractual arrangement with CIÉ.
The Commission has no further information concerning
the terms of this contract.

B.4.3. Agreements concerning the school transport scheme

(30) Irish Bus operates a school transport scheme on the basis
of a contract with the Department of Education and Science
on a cost recovery basis as mentioned above. Some of
these services are sub-contracted by Irish Bus to other bus
operators. The Commission has no further information
concerning the terms of contract, the revenues and the
costs of the provided school transport services.

B.4.4. National Development Plan

(31) Operational development programmes for the recipient
companies are based on the National Development Plan
“NDP”), which runs over a period of
(thereinafter
seven years (7). The Irish NDP covers all sectors of the
economy and has as its main objectives the improvement
of the Irish economic and social infrastructure. The activi-
ties of the NDP are financed through public, private and
EU-funds (8).

(6) Irish Competition Authority — Report on bus and rail passenger trans-

port sector pursuant to section 11 of the Competition Act 1991.

(7) The NDPs in questions are the NDP for
2000-2006

and

the

recently

the period of years
published NDP

1993-1999,
2007-2013;
see: http://www.ndp.ie

(8) The European Commission approved by the decision of 7 December
2000 (SG (2000) D/109196)
the operational programme for
Economic and Social Infrastructure forming part of the Community
Support Framework for Community structureal assistance in the
Border, Midland and Western region under Objective 1 and the
Southern and Eastern region qualifying for transitional support under
Objective 1 in Ireland. The total assistance from the Structural Funds
granted
to
EUR 854,8 million. The required national participation (from the
public sector) amounts to EUR 624,7 million. This Commission Deci-
sion is without prejudice to the Commission's position on aid schemes
falling within Article 87(1) of the EC Treaty that are included in the
assistance package.

programme

operational

amounts

under

this

(33) It appears therefore from the information the Commis-
sion has at its disposal that the support granted to Irish
Bus and Dublin Bus takes several forms, which can be
categorised as following:

— Annual operating compensation for urban, suburban
and regional bus services — School transport scheme

— Grants under the National Development Plan

— Financing of new buses

— Infrastructure

— Financing of Disability Awareness Training.

B.5.1. Annual operating compensation for urban, suburban

and regional bus services

(34) The Irish government supports CIÉ in the pursuit of its
duties set up in the further above mentioned Transport
Acts through the payments of compensation.

(35) The amount of compensation is determined annually in
advance and is subject to the further above mentioned
Memoranda of Understanding. The compensation is paid on
a monthly basis to CIÉ which allocates the funds between
its bus and rail companies for loss making services.

(36) Since 1996,

the Irish authorities have provided the
following annual compensation payments to the CIÉ for
its bus operators. The Commission does not have any
information available with regard to the years 2006
and 2007:

Annual subvention payments in Million EUR

Year

Dublin Bus

Irish Bus

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

4 635

8 888

11 294

16 816

41 189

54 316

56 063

53 867

61 810

64 900

4 317

6 984

7 111

7 377

15 757

24 157

21 766

22 856

23 998

25 199

(9) The ESIOP provides for infrastructural investment in six priority areas:
national roads, public transport, environmental infrastructure, sustain-
able energy, housing and health facilities.

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(37) The annual compensation payments received during the
year in respect of urban, suburban and regional bus
services are dealt with in the profit and loss accounts (10)
as follows. The Commission does not have detailed infor-
mation regarding the years 2006-2007:

Irish Bus: Net Surplus/deficit analysis for public
services (*)

in 000 EUR

2003

2004

2005

Bus, do not receive any State support. Hence, profits
generated by those services are used to cross-subsidise
loss making services.

(39) The Irish authorities stated that, for instance in the case
of Irish Bus, the real operating costs for urban, suburban,
regional and long distance services are allocated on the
basis of metrics derived from prior period real costs,
independent studies of Irish Bus operations, number of
buses and mileage. The operating costs in the financial
statements consist of:

59 778

63 388

64 724

(a) payroll and related costs;

Revenue

Costs

Surplus/deficit
State grant

(88 780)

(90 406)

(94 055)

before

(29 002)

(27 018)

(29 331)

Annual State grant

22 856

23 999

25 200

Surplus/deficit for year

(6 146)

(3 019)

(4 131)

Surplus from Commer-
cial and School
trans-
port sector

7 693

8 795

7 656

(b) materials and services (including fuel and lubricants,
materials, road tax and licences, rent, rates and oper-
ating lease rentals, auditors'
remuneration, other
contractors, third party and employer's liability claims
etc.);

(c) depreciation (the investment grant amortisation is
subtracted from the
calculated depreciation of
tangible fixed assets in order to avoid a double-subsi-
disation).

Surplus/deficit

1 547

5 776

3 525

B.5.2. School transport scheme

(*) Including regional and city Services.
Source: Annual Reports and Financial Statements 2003-2005,
http://www.buseireann.ie/site/about_us/annual_reports.asp

(40) As regards the school transport scheme, at the current
stage the Commission does not have any information
concerning the conditions and the amount of
the
compensation paid by Irish authorities.

Dublin Bus: Net Surplus/deficit analysis for public
services (*)

B.5.3. Grants under the National Development Plan

in 000 EUR

2003

2004

2005

162 405

165 313

168 359

(212 049)

(228 469)

(235 804)

before

(49 644)

(63 156)

(67 445)

Revenue

Costs

Surplus/deficit
State grant

Annual State grant

53 867

61 810

64 900

Surplus/deficit for year

4 223

(1 346)

(2 545)

Surplus from Commer-
cial activities

3 171

3 385

4 541

Surplus/deficit

7 394

2 039

1 996

(*) Including City and suburban services.
Source: Annual Reports and Financial Statements 2003-2005,
http://www.dublinbus.ie/about_us/annual_reports.asp

(38) The Irish authorities clarified that according to the
Transport Acts the urban, suburban and regional services
(so-called “Stage Carriage and City services”) of Irish Bus
fall under a Public Service Obligation. The long distance
bus services (so called “Expressway services”) and other so
called “commercial services” (e.g. Dublin Bus tours and
international services) operated by Irish Bus and Dublin

(10) In the annual report and financial statements for the years 2000 and
2001 for both bus operators are the revenues and costs for the public
services not declared.

investments

intervention through ESIOP

(41) As described previously, among the areas benefiting from
State
are
public transport services and infrastructure. From the
information at the disposal of the Commission, it appears
that
funded the expansion and
upgrade of passengers facilities (e.g. bus stations) and
rolling stock over the period 1999 to date and 2000 for
Dublin Bus and Irish Bus, respectively, as follows (the
Commission does not have information concerning the
years 2006-2007):

the Exchequer has

Grants in Million EUR

Dublin Bus

Irish bus

Exchequer

EU-Funds

Exchequer

EU-Funds

22 535

14 862

6 478

22 065

1 461

19 900

28 014

12 691

7 262

9 611

2 816

0,635

15 062

1 356

3 332

1 509

Year

2000

2001

2002

2003

2004

2005

102 178

16 323

49 097

1 991

Total

118 501

51 088

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(42) In the financial statements the investment grants under the NDP scheme are credited to the balance
sheet position as deferred income as they become receivable. They are amortised to the profit and loss
account on the same basis as the related assets are depreciated.

(43) According to the published financial statements for 2000-2005 (the Commission does not have infor-
mation concerning the years 2006-2007), Irish Bus has since year 2000 received grants of approxi-
mately EUR 41,8 million. Furthermore, approximately EUR 5,0 million has been transferred to its
current liabilities accounts.

Irish Bus — Grants (*)

2000

2001

2002

2003

2004

2005

in EUR 000

Balance at 1 January

0

6 162

22 252

21 877

27 268

26 103

Received and receivable

6 478

17 270

2 616

8 646

2 984

3 824

Transfer to profit and loss account

(316)

(1 180)

(2 991)

(3 255)

(4 149)

(3 955)

Balance carried forward

6 162

22 252

21 877

27 268

26 103

25 972

Transfer to current liabilities

0

(1 180)

(3 113)

(4 150)

(4 850)

(4 962)

Balance at 31 December

6 162

21 072

18 764

23 118

21 253

21 010

(*) Deffered income account.
Source: Annual Reports and Financial Statements 2000-2005,
http://www.buseireann.ie/site/about_us/annual_reports.asp

(44) Dublin Bus has since 2000 received, according to the published financial statements, approximately
EUR 79,7 million. An amount of approximately EUR 11,1 million has been transferred to its current
liabilities. The Commission does not have information concerning the years 2006-2007.

Dublin Bus — Grants (*)

2000

2001

2002

2003

2004

2005

in EUR 000

Balance at 1 January

37 235

57 265

66 300

72 868

66 589

55 358

Received and receivable

24 728

17 059

17 753

6 172

3 037

10 923

Transfer to profit and loss
account (**)

(4 698)

(8 024)

(11 185)

(12 451)

(14 268)

(11 238)

Balance carried forward

57 265

66 300

72 868

66 589

55 358

55 043

Transfer to current
liabilities

(8 024)

(9 517)

(11 795)

(12 013)

(10 671)

(11 140)

Balance at 31 December

49 241

56 783

61 073

54 576

44 687

43 903

(*) Deffered income account.
(**) Transfer to profit and loss account include amortisation of capital grants and revenue grants.
Source: Annual Reports and Financial Statements 1999-2005,
http://www.dublinbus.ie/about_us/annual_reports.asp

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B.5.3.1. Financing of new buses

(45) In order to increase the attractiveness of the public transport services, to meet the increasing demand
and to improve the accessibility of the buses for people with mobility and sensory impairments the
Exchequer has funded the expansion and upgrade of rolling stock for Irish Bus and Dublin Bus as
follows (no information is available for the years 2006-2007):

Year

Exchequer
Funded

Part Ex Funded

Own resources

Exchequer
Funded

Own resources

Dublin Bus

Irish Bus

2000

2001

2002

2003

2004

2005

Total Σ

in %

Total number of new vehicles

81

45

53

0

0

20

199

38 %

37

0

0

32

0

0

69

13 %

530

107

11

0

58

36

50

262

49 %

54

70

10

38

0

0

172

41 %

94

27

0

30

68

30

249

59 %

421

The Irish authorities note, that the buses funded by the Exchequer are used for all services except on
routes which are operated as “commercial services”, e.g. Irish Bus's Expressway services and Dublin
Bus's tour buses and private hire. The Commission has no information at this stage as to whether the
Exchequer also finances buses which are used for school
transport services. According to the
report (11) provided by the Irish authorities to the Commission concerning the implementation of
Regulation (EC) No 1191/69, in 2006 Irish Bus received grants (EUR 19,2 million) for the expansion
or upgrade of the school bus fleet. Furthermore, the Irish authorities announced funding of further
upgrading and expansion of the bus fleet in the coming years (12).

(46) The Commission notes that the Irish authorities did not provide any information concerning the
amount and the aid intensity of investment grants used for financing the expansion and the upgrade
of the rolling stock of Irish Bus and Dublin Bus.

(47) According to their financial statements, Irish Bus and Dublin Bus undertook the following investments
in rolling stock to be used in all operated services (no information is available for the years
2006-2007):

Irish Bus: Road Passenger Vehicles

2000

2001

2002

2003

2004

2005

Total Σ

in EUR 000

Additions/Investments

34 346

22 590

3 804

15 517

17 498

12 466

106 221

Source: Annual Reports and Financial Statements 2000-2005,
http://www.buseireann.ie/site/about_us/annual_reports.asp

Dublin Bus: Road Passenger Vehicles

2000

2001

2002

2003

2004

2005

Total Σ

in EUR 000

Additions/Investments

55 565

18 964

14 991

22 678

10 432

20 369

142 999

Source: Annual Reports and Financial Statements 1999-2005,
http://www.dublinbus.ie/about_us/annual_reports.asp

(11) Letter of 5 April 2007 registered on 16 April 2007 under reference A/29414.
(12) See: http://www.transport.ie/press/pressrel/?lang=ENG&loc=2126

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B.5.3.2. Financing of infrastr ucture

(48) The investment grants provided by the Exchequer and
EU-Funds for the building of infrastructure have been
used for the upgrading of passenger facilities such as bus
stations and bus stops of Irish Bus and garages for the
parking and maintenance of bus fleets of Dublin Bus. The
physical access to these infrastructure facilities is limited
to Irish Bus and Dublin Bus.

Bus station and bus stops upgrades and improvement of acces-
sibility for mobility impaired people

(49) The Irish Department of Transport has in 2004 started, on
the basis of the Disability Bill 2004 — Outline Sectoral
Plan for Accessible Transport, an operational programme in
order to improve the accessibility of public transport
(upgrading of passengers' facilities including bus stations
and bus stops).

(50) Irish Bus is owner of nine bus stations located around the
country. These bus stations have been financed by Irish
Bus (apart from the investment aid grant outlined below).
As these are exclusively CIÉ facilities, the company has
not opened them to other bus operators.

(51) In the Dublin Bus area there are about 4 500 bus stops
and in the urban areas, where Irish Bus operates, there are
about 700 bus stops with further 800 bus stops in rural
areas. The Commission has no further
information
whether these bus stops are open to all competitors.

(52) The Irish government has provided Irish Bus with NDP
capital funding in order to upgrade station facilities as
part of an overall effort to increase the attractiveness of
public transport and to provide better facilities for mobi-
lity
funding
The
(EUR 7,2 million) provided for these purposes in the last
five years to Irish Bus was as follows:

impaired

people.

State

total

fied that
provide accommodation for the additional fleet.

this bus garage was necessary in order

to

(56) Furthermore, the Irish authorities stated that Dublin Bus
has financed its garage and maintenance facilities by itself
over the years.

(57) Nevertheless, the Irish authorities clarified that this bus
garage (Harristown) was financed by State resources
through the EISOP during 2001 and 2004 as part of an
integrated effort to improve public transport services in
the Greater Dublin Area. The Commission has no further
information about the total amount of State grants and
total costs of the bus garage at Harristown.

B.5.3.3. Financing

of

Disability

Awareness

Training

for

services

transport

(58) The Department of Transport is committed to develop
accessible public
the greater
number of people with mobility and sensory impair-
ments. Accordingly, the Department of Transport have
been supporting Disability Awareness Training as a key
element for the proper delivery of services by public and
private transport operators. The bus operators are using
this aid for Disability Awareness training especially aimed
at front line staff (such as drivers and ticketing staff) and
it should also be a feature of an on-the-job training for
supervisors and managers.

(59) The following bus operators have a disability awareness
training programmes in place: Irish Bus, Dublin Bus and
Veolia Transport. Disability awareness training for Railway
Procurement Agency staff is scheduled during 2006 with
some critical staff having already received training.

(a) for upgrading station facilities

EUR 2,5 million

(60) The Commission notes

that

(b) for improving accessibility

EUR 4,7 million

(53) According to the information published in the Annual
report and financial statements (13) of Irish Bus in order
to improve the accessibility of the bus stations for mobi-
lity-impaired passengers EUR 4,9 million was spent for
the refurbishment of the bus stations in Sligo, Ballina,
Letterkenny, Galway, Cork, Monaghan, Tralee and Dublin.
Further refurbishment work was carried out in 2005 in
order to improve the accessibility of Cavan Bus Station.
The costs of this project was EUR 0,37 million (14).

(54) Furthermore, in January 2005 the EUR 4 million re-deve-
lopment of
the Parnell Bus Station in Cork was
completed. The completion of a new Tralee Bus/Rail
Station was scheduled for the year end 2006. This project
to EUR 1,8 million and is funded by the
amount
NDP (15).

Bus garage facilities

(55) The bus garage at Harristown for Dublin Bus fleet was
brought into service in 2004. The Irish authorities clari-

(13) Annual Report and Financial Statement for year 2004,

http://www.buseireann.ie/site/about_us/annual_reports.asp

(14) Annual Report and Financial Statement for year 2005,

http://www.buseireann.ie/site/about_us/annual_reports.asp

(15) Annual Report and Financial Statement for year 2005,

http://www.buseireann.ie/site/about_us/annual_reports.asp

concerning either the budget of
conditions.

it has no information
the measure or the

(61) The Irish authorities stated that under the Sectoral Plan
“Transport Access for All” the Department of Transport is
now actively considering the question of providing
support for disability awareness training for the private
bus and coach operator sector and is awaiting a formal
application from the Coach Tourism and Transport Council
in that regard.

C. LEGAL ASSESMENT

(62) According to the Article 87(1) of the EC Treaty “any aid
granted by a Member State or through State resources in any
form whatsoever which distorts or threatens to distort competi-
tion 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”.

(63) Therefore,

the
it has to be examined whether,
measures the Irish government has in place to support
bus transport services constitute State aid in the sense of
Article 87(1) of the EC Treaty, and, second, should these
measures constitute State aid, whether such an aid is
compatible with the common market.

first,

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(64) The concept of State aid applies to any advantage granted
directly or indirectly,
financed out of State resources,
granted by the State itself or by any intermediary body
acting by virtue of powers conferred on it.

(65) Further, the measures can only constitute State aid if the
beneficiary performs an activity which is to be considered
the beneficiary
as an economic activity, and thus,
performing it can be regarded as an undertaking within
the meaning of Article 87(1) of the EC Treaty. The Court
of Justice (thereinafter “ECJ”) considers as an economic
activity “any activity consisting in offering goods and services
on a given market” (16).

(66) On this latter regard, the Commission notices that Dublin
Bus and Irish Bus operate bus services and receive fares,
thus, they perform an activity which has to be considered
as an economic activity.

C.1. Period under examination

(67) The Commission notes, that at the time the Transport
acts (in 1950 and 1986) and the first National Develop-
ment Plan (in 1993) described previously have been put
into effect, the market for the public transport services
(including urban,
transport
markets) had been closed for the competition throughout
the Community.

suburban and regional

(68) At the point in time these potential aid measures were
put into place, they hence did not constitute State aid, as
they did not have the potential to distort competition,
the relevant markets being closed to competition.

(69) Subsequently, in the Case Altmark Trans the Commission
argued that “… since 1995 eight Member States have volun-
tarily opened certain urban, suburban or regional
transport
markets to competition from undertakings from other Member
States and that there are a number of examples of transport
undertakings from one Member State pursuing activities in
in
another Member State. That opening up of
certain Member States shows that intra-Community trade is
not only a possibility but already a reality” (17). The Court
accepted this reasoning. Hence, the Commission in its
subsequent decision practice takes 1995 as the year at
which the market for public transport services has been
de facto opened to competition in parts of the common
market. As of 1995,
the measures mentioned in the
previous paragraph might therefore constitute State aid.

the market

(70) The Commission observes, as pointed out in Altmark
Trans, that the market for the transport services had not
been opened following a liberalisation of an activity by
Community law, but rather a result of independent and
spontaneous decisions of some Member States. Accord-
ingly, the Commission concludes that all measures which
were already in force in 1995 have to be considered as
of
constituting

existing

sense

State

the

aid

in

(16) ECJ Case C-180-184/98, Pavel Pavlov, No 75 ; Case C-35/96 Commis-

sion v Italy, No 36; Case 118/85, Commission v Italy, No 7.

Article 1(b)(v) of Regulation (EC) No 659/1999
laying down detailed rules
application of
Article 93 of the Treaty (18) (thereinafter: “Regulation (EC)
No 659/1999”).

the

for

(71) With respect to the compensation payments for public
service obligations, initially based solely on the 1950 and
the Commission notes a
the 1986 Transport acts,
substantial modification of the compensation system has
taken place in 2003, with the introduction of yearly
Memoranda of Understanding, detailing the quality and
the quantity of the services to be provided as well as the
precise amount of compensation to be paid. Hence, the
Commission considers that payments for public service
compensations as of 2003 constitute new aid in the
sense of Article 1(c) of Regulation (EC) No 659/1999, as
the Memoranda of Understanding substantially alter the
previous compensation mechanism.

(72) With respect to the payments based on the National
Development Plan, the Commission considers that the
National Development Plans 2000-2006 and 2007-2013
have substantially altered the National Development Plan
1993-1999, and hence are to be considered as new aid
in the
sense of Article 1(c) of Regulation (EC)
No 659/1999.

C.2. Compensation for public bus transport services:
operating compensation for urban, suburban
financing of new
and regional bus services,

buses and the school transport scheme

C.2.1. Existence of State aid

C.2.1.1. State resources

(73) Pursuant to the information provided by the Irish autho-
rities Dublin Bus and Irish Bus receive a financial contribu-
tion, directly by the Irish authorities or channelled
through CIÉ which comprises State resources, for costs
transport
arising from the operation of public bus
services (urban, suburban and regional connections; and
the purchase of rolling stocks) and the operation of the
school
the Commission
considers that the condition of granting aid by a Member
State or through State resources is therefore satisfied.

transport services. Therefore,

(74) The Commission invites the Irish authorities to provide
further clarifications concerning the procedure used for
in particular
financing the purchase of rolling stocks,
whether the grants are paid directly to Dublin Bus and
Irish Bus or channelled through CIÉ.

C.2.1.2. Economic advantage

(75) Furthermore,

the measure must confer an economic
advantage which the recipient undertaking would not
have obtained under normal market conditions.

(17) Case C-280/00, Altmark Trans GmbH and Regierungspräsidium

(18) Council Regulation No 659/1999 of 22 March 1999 laying down

Magdeburg, paragraph 69.

detailed rules for the application of Article 93 of the EC Treaty.

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(76) However,

Justice (ECJ),

the European Court of

in the
Altmark judgment (19), has considered 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 (…) such a measure is not caught by
Article 87(1) of
the Treaty” provided that the following
criteria are fulfilled:

“(a) First,

the recipient undertaking is actually required to
discharge public service obligations, and those obligations
have been clearly defined.

(b) Second, the parameters on the basis of which the compen-
sation is calculated have been established beforehand in an
objective and transparent manner.

(c) Third, the compensation does not exceed what is necessary
to cover all or part of the costs incurred in discharging
public service obligations, taking into account the relevant
receipts and a reasonable profit for discharging those obli-
gations.

(d) Fourth, where the undertaking which is to discharge public
service obligations, is not chosen in a public procurement
procedure,
the level of compensation needed has been
determined on the basis of an analysis of the costs which
a typical undertaking, well run and adequately provided
with means of transport so as to be able to meet the
necessary public service requirements, would have incurred
in discharging those obligations, taking into account the
relevant receipts and a reasonable profit for discharging
the obligations.” (20).

(77) At the current stage, the Commission has no information
on whether and how the Irish authorities apply the
Altmark criteria.

(78) As regard the first criterion at

the current stage the
Commission has doubts if the public service obligations
have been clearly defined (see below).

(79) As regards the second criterion, the compensation for
Irish Bus and Dublin Bus is subject to the terms of the
Memoranda of Understanding. As the Memoranda of
Understanding refer only to an overall amount that will
be paid in the corresponding year, at the current stage
the Commission does not have sufficient information at
its disposal to be able to determine whether the para-
meters on the basis of which the compensation is calcu-
lated have been established beforehand in an objective
and transparent manner. Also in case of the school trans-
port scheme, the Commission is not able to determine
the parameters on the basis of which the
whether
compensation is calculated have been established before-
hand in an objective and transparent manner.

(80) As regard the third criterion, in case of Dublin Bus the
compensation exceeds the difference between revenues
and losses in the period 2002 to 2003 (see table in point
34). The difference amounts to 0,8 % in 2002 and
8,51 % in 2003. As the third criterion requires taking
also into account
above
mentioned differences could be considered as a reason-
able profit. However, at the current stage the Commission
has not sufficient information at its disposal to determine
whether the profit margin in 2003 amounting to 8,51 %
can be considered as reasonable. Furthermore, according

reasonable profit,

the

a

(19) Case C-280/00, Altmark Trans GmbH and Regierungspräsidium

Magdeburg [2003] ECR I-7747.

(20) Ibidem, paragraph 95.

the disposal of

to the information currently at
the
Commission there are doubts on whether Dublin Bus and
Irish Bus have not been overcompensated for the purchase
of rolling stocks (see further below). Also in case of
school transport scheme, the Commission at the current
stage on basis of
its disposal cannot
information at
exclude overcompensation for these services.

(81) With regard to the fourth Altmark criterion,

the Irish
authorities have submitted that the imposition of public
service obligations on the CIÉ bus operators and the
compensation for these obligations were contained in the
Transport Act, 1950 and Transport (Re-organisation of
CIÉ) Act, 1986.

(82) As explained further above in the description of

the
measure, since 2003 the payment of compensation to
CIÉ bus operators has been the subject of Memoranda of
Understanding. On the basis of the information at its
disposal it is not clear to the Commission, if the Memor-
anda of Understanding between the Irish authorities and
both bus operators has been preceded by a public
tendering procedure. Also in case of the school transport
scheme, the Irish Department of Education and Science has
concluded a contract on the cost recovery basis. On the
basis of the information at disposal of the Commission it
is not clear, if this contract has been preceded by a public
tendering procedure.
the Memoranda of
In the event
Understanding and contract concerning the school trans-
port
scheme have not been preceded by a public
tendering procedure, the Commission invites the Irish
authorities to provide a justification.

(83) Accordingly, if Dublin Bus and Irish Bus have not been
chosen through a public procurement procedure, in order
to fulfil the fourth Altmark criterion, the Irish government
has to prove that the level of compensation needed has
been determined on the basis of an analysis of the costs
which a typical undertaking, well run and adequately
provided with means of transport so as to be able to
meet the necessary public service requirements, would
have incurred in discharging those obligations,
taking
into account the relevant receipts and a reasonable profit
for discharging the public obligations.

(84) The Commission considers that the Irish authorities have
not yet provided enough information to be able to reach
such a conclusion. Therefore,
the Commission invites
information
provide
Irish
supporting all four criteria set out in the Altmark judge-
ment.

authorities

further

to

(85) As the Commission has doubts that the Altmark criteria
have been fulfilled in the present case, the measures at
issue could confer to Dublin Bus and Irish Bus with an
advantage in the sense of Article 87(1) of the EC Treaty.

C.2.1.3. Distor tion of Competition and affect of

trade between Member States

(86) It furthermore needs to be verified whether the economic
advantage granted from State resources is liable to distort
competition and to thereby affect trade between Member
States.

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Official Journal of the European Union

C 217/55

(87) In this respect, as the Altmark judgment (21) points out:

C.2.2. Compatibility of the measure

“It is not impossible that a public subsidy granted to an
undertaking which provides only local or regional transport
services and does not provide any transport services outside
its State of origin may none the less have an effect on
trade between Member States” (22).

the supply of
that

Where a Member State grants a public subsidy to an
transport services by that
undertaking,
undertaking may for
reason be maintained or
increased with the result that undertakings established in
other Member States have less chance of providing their
transport services in the market in that Member State
(see, to that effect, Case 102/87 France v Commission
[1988] ECR 4067, paragraph 19; Case C-305/89 Italy v
Commission [1991] ECR I-1603, paragraph 26; and
Spain v Commission, paragraph 40).

In the present case, that finding is not merely hypothe-
tical, since, as appears in particular from the observations
of the Commission, several Member States have since
1995 started to open certain transport markets
to
competition from undertakings established in other
Member States, so that a number of undertakings are
already offering their urban, suburban or regional trans-
port services in Member States other than their State of
origin.

Finally, according to the Court's case-law, there is no
threshold or percentage below which it may be
considered that
trade between Member States is not
affected. The relatively small amount of aid or the rela-
tively small size of the undertaking which receives it does
not as such exclude the possibility that trade between
Member States might be affected (see Tubemeuse, para-
graph 43, and Spain v Commission, paragraph 42).

The second condition for the application of Article 92(1)
of the Treaty, namely that the aid must be capable of
affecting trade between Member States, does not therefore
depend on the local or regional character of the transport
services supplied or on the scale of the field of activity
concerned.

(88) The Commission thus considers the public financing at
issue in the current case might affect inter-state trade and
distort or
threaten to distort competition inside this
market.

C.2.1.4. Conclusion: Possible existence of State

aid

(89) Accordingly,

the Commission can not exclude at

this
stage that the measure constitutes State aid in the sense
of Article 87(1) of the EC Treaty.

(90) Therefore, the Commission invites the Irish authorities to
provide detailed information concerning the terms and
conditions of contracts for the operation of public trans-
port and school transport services including the proce-
dures under which such contracts are concluded.

(21) Case C-280/00, Altmark, cited above, paragraph 82.
(22) Case C-280/00, Altmark, cited above, paragraph 77 and following.

(91) The Irish authorities stated that “the capital aid granted to
the CIÉ companies under the transport priority of the Economic
and Social Infrastructure Operational Programme is covered by
the block exemption in Article 73 [ex Article 77] of the Treaty
relating to the needs of co-ordination of transport and obliga-
tions of public services. The Dublin Public Transport and
National Public Transport measures accordingly comply with
State Aid rules.”

(92) Article 73 of the EC Treaty contains rules for the compat-
ibility of State aid in the area of coordination of transport
and public service obligation in transport. The Commis-
sion considers in its constant practice that Article 73
constitutes lex specialis with respect to Article 87(2) and
Article 87(3), as it contains special rules for the compat-
ibility of State aid.

(93) Article 73 can not be applied directly, but only through
the
been
three Council Regulations which have
adopted under it (Council Regulations (EEC) No 1191/69,
(EEC) No 1192/69 and (EEC) No 1107/70) (23).

C.2.2.1. Relevant

Council

Regulation:

Regu-

lation (EEC) No 1191/69

(94) The beneficiaries in question — Irish Bus and Dublin Bus
— operate scheduled and other bus services, and there-
fore,
they are undertakings which operate services in
transport by road.

(95) Regulation (EEC) No 1191/69 (24) can be applied only if
the beneficiary constitutes an undertaking which operates
services in transport by rail, road or inland waterway
according to Article 1(1) subparagraph 1 of the Regu-
lation.

(96) The

Irish authorities declared that

they have not
exempted Dublin Bus and Irish Bus from the scope of the
Regulation (EEC) No 1191/69 according to Article 1(1)
subparagraph 2 of the Regulation (EEC) No 1191/69.

(97) As Irish Bus and Dublin Bus operate road transport
services within the scope of the Regulation and are not
exempted from its application, the relevant legal basis is
Regulation (EEC) No 1191/69.

C.2.2.2. The choice of the option for compensa-
(EEC)

to Regulation

according

tion
No 1191/69

(98) Article 1(3) of Regulation (EEC) No 1191/69 stipulates
the termination of all obligations inherent in the concept
the public services by the competent authorities.
of
However, according to Article 1(4) of the Regulation the
competent
the Member States may
conclude public service contracts (Section V of the Regu-
lation) or according to Article 1(5) they may decide to
maintain or to impose public service obligations for
urban,
transport
services (Section II, III and IV of the Regulation).

suburban and regional passenger

authorities of

(23) Case C-280/00, Altmark, cited above, paragraphs 101, 105, 106, 107.
(24) Of 26 June 1969 on action by Member States concerning the obliga-
tion inherent in the concept of a public service in transport by rail,
road and inland waterway (OJ L 156, 28.6.1969, p. 1), as modified by
Regulation (EEC) No 1893/91 (OJ L 169, 29.6.1991, p. 1).

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(99) Therefore,

it

is necessary to verify whether the Irish
authorities concluded public service contracts with Dublin
Bus and Irish Bus or decided to maintain the imposed
public service obligation.

C.2.2.2.1. Doubts concerning the qualification of public
contracts within the meaning of

service
Regulation (EEC) No 1191/69

(100) As described previously (see sub-section Memoranda of
Understanding) as from the year 2003 the conditions and
the amount of
the annual compensation by the Irish
authorities to Dublin Bus and Irish Bus have been subject
of Memoranda of Understanding. The Irish authorities
have declared that they do not consider the Memoranda
of Understanding with Dublin Bus and Irish Bus as public
service contracts.

(101) Article 14(1) subparagraph 1 specifies the definition of
the “public service contract” within the meaning of Regu-
lation (EEC) No 1191/69 as follows: ““A public service
contract” shall mean a contract concluded between the compe-
tent authorities of a Member State and a transport undertaking
in order to provide the public with adequate transport services”.
Furthermore, Article 14(1) subparagraph 2 and (2) identi-
fies the terms and conditions which have to be included
in the “public service contract”.

(102) The Irish authorities have explained that they do not
consider the Memoranda of Understanding with Dublin Bus
and Irish Bus to be public services contracts.

(103) However, according to the Irish Competition Authority
Report (25)
the concept of public service obligation
concerning public bus transport services has been with-
drawn in order to be replaced by public service contracts,
which specify the specific service levels and performance
standards.

(104) As described previously,

the Memoranda of Under-
standing contains quality (incl. customer service quality,
cleanliness, bus age, accessibility, etc.) and quantity (incl.
number of buses, operated kilometres, customers carried,
etc.) requirements as well as duration of services to be
provided by each of the companies in return for the
Exchequer payments. These are also conditions, which
should be covered by public service contracts. Therefore,
although the Irish authorities have provided the Commis-
sion with the Memoranda of Understanding concluded
for the year 2007 with Dublin Bus and Irish Bus, on the
the information currently at its disposal, the
basis of
Commission cannot exclude that
the Memoranda of
Understanding should be considered as public service
contracts within the meaning of the Regulation.

(105) Similarly, as regards school

transport scheme, on the
basis of
the information currently at its disposal, the
Commission is not able to qualify the Agreements
between Irish authorities with Dublin Bus and Irish Bus.

(25) Irish Competition Authority — Report on bus and rail passenger
transport sector pursuant to section 11 of the Competition Act 1991.

(106) Thus, the Commission invites Irish authorities to provide
the copies of
the concluded Memoranda of Under-
standing since the year 2003 and all other contracts
concerning public transport services and school transport
scheme, an explanation of the procedure used for the
conclusion of the Memoranda of Understanding, other
contracts and further details concerning the free travel
schemes for various segments of the population.

C.2.2.2.2. Doubts concerning the qualification of public
service obligations within the meaning of the
Regulation (EEC) No 1191/69

to maintain public

suburban and regional passenger

(107) According to Article 1(5) the Irish authorities have the
possibility
service obligations.
However, for the application of Article 1(5), it remains to
be verified whether Dublin Bus and Irish Bus provide
transport
urban,
services as defined in Article 1(2) of
the Regulation.
According to the Irish authorities, as explained above in
the description of the facts, both CIÉ operators provide
urban,
services within the
meaning of Article 1(2) of Regulation (EEC) No 1191/69,
meeting the needs of an urban centre or conurbation,
and transport needs between it and surrounding areas as
well as the need of a region.

suburban and regional

(108) Section II of Regulation (EEC) No 1191/69 contains the
common principles for the maintenance of public service
obligations. The Irish authorities have noted that they
have decided to maintain public service obligations.
Nevertheless, it needs to be verified whether they did so
in conformity with the Regulation.

(109) The Irish authorities have informed the Commission by
letter of 2 January 1975 about
the arrangements
concerning the implementation of Regulation (EEC)
No 1191/69 in order to provide procedures for the intro-
duction of request for the termination of public service
obligations, compensation and the normalization of
accounts (26).

(110) From this information,

it would appear that the Irish
authorities have decided at that stage to maintain their
various public service obligations.

(111) However,

it has to be verified whether the substantial
requirements of public service obligations as set out in
Article 2 of the Regulation are present in this case.

(112) Article 2(1) defines a “public service obligation” as an
“obligation which the transport undertaking in question, if it
were considering its own commercial interest, would not assume
or would not assume to the same extent or under the same
conditions”.

(113) According to the Irish authorities, they have imposed
public service obligations upon CIÉ and its subsidiaries
Irish Bus
and Dublin Bus by the Transport Acts,
namely through the Transport Act, 1950 and the Trans-
port (Re-organisation of CIÉ) Act, 1986.

(26) Commission Opinion 75/300/EEC of 18 April 1975 concerning the
implementation of Council Regulation (EEC) No 1191/69 of 26 June
1969 on action by Member States concerning the obligations inherent
in concept of a public service in transport by rail, road and inland
waterway, and Council Regulation (EEC) No 1192/69 of 26 June 1969
on common rules for the normalization of accounts of railway under-
takings (OJ L 137, 28.5.1975, p. 24).

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(114) The public service obligation within the meaning of the
Regulation is further clarified in Article 2(2) as “obligation
to operate, the obligation to carry and tariff obligations”.

cated in the description or have concluded public service
contracts for these purposes. Nor is it apparent how this
is done.

C.2.2.2.2.1. The public service “obligation to operate”

C.2.2.2.2.3. The public service “obligation to carry”

(115) Article 2(3) defines the obligation to operate for the
purposes of the Regulation (EEC) No 1191/69 as follows:

licence or

“[…] “the obligation to operate” means any obligation
imposed upon a transport undertaking to take, in respect
of any route or installations which it is authorised to work
by
equivalent authorisation, all necessary
measures to ensure the provision of a transport service
satisfying fixed standards of
regularity and
capacity. It also includes any obligation to operate addi-
tional services and any obligation to maintain in good
condition routes, equipment — in so far as this is surplus
to the requirements of the network as whole — and instal-
lations after services have been withdrawn.”

continuity,

(116) The obligation to operate bus

services

(see above)
imposed on Dublin Bus and Irish Bus includes besides the
urban,
services also services
“between the State and places outside the State”. The stan-
dards of regularity and capacity are fixed by means of
Memoranda of Understanding on a yearly basis.

suburban and regional

(117) Therefore, the definition of the imposed public service
“obligation to operate” can be considered in line with the
definition established under Article 2(3), if the Memor-
anda of Understanding do not constitute public service
contracts.

C.2.2.2.2.2. “Tariff obligations”

(118) Article 2(5) of the Regulation specifies the “tariff obliga-

tions” as follows:

“[…] any obligation imposed upon transport undertakings
to apply, in particular for certain categories of passenger,
for certain categories of goods, or on certain routes, rates
fixed or approved by any public authority which are
contrary to the commercial interests of the undertaking and
which result from the imposition of, or refusal to modify,
special tariff provisions.”

(119) The standard journey fares (including the adult standard
journey fares on all categories of services and also school
child fares on city services), as explained above in the
description of the facts, are subject to the control of the
Department of Transport in terms of maximum fares that
to the
can be charged and, since 2003, are subject
is
Memoranda of Understanding. Neither operator
allowed to increase these fares without the prior consent
of the Department of Transport.

(120) Therefore,

the tariff obligation imposed for standard
journey fares can be considered in line with the definition
in Article 2(5), if the Memoranda of Understanding do
not constitute public service contracts.

(121) However, according to the information currently at the
disposal of the Commission, it is not clear whether the
Irish authorities impose tariff obligations (e.g. concerning
free travel schemes) for certain passenger groups as indi-

(122) According to Article 2(4) the “obligation to carry” is
specified as an obligation “imposed upon transport undertak-
ings to accept and carry passengers or goods at specified rates
and subject to specified conditions”.

(123) The Commission has doubts if the Irish authorities have
imposed a public service obligation on Dublin Bus and/or
Irish Bus to carry mobility impaired people as a subject to
specified conditions (e.g. better accessibility of the oper-
ated bus services for mobility impaired passengers) and
to take actions in order to establish those specified condi-
tions.

C.2.2.2.3. Conclusion

(124) In the light of the above, the Commission has doubts if
the Irish authorities have opted for the possibility fore-
seen in Article 1(5) of the Regulation, which is to main-
tain imposed public
service obligations within the
meaning of the Regulation upon these transport under-
takings or concluded public service contracts within the
meaning of the Regulation.

(125) Accordingly,

it is not clear,

if the State aid granted in
order to compensate these undertakings needs to be
assessed on the basis of Section IV of the Regulation
(concerning public service obligations), which comprises
Articles 3 to 13, or of Section V of
the Regulation
(concerning public service contracts), which comprises
Article 14.

C.2.2.2.4. Compensation for public service obligation
“to operate” and “to carry” according to
Section IV of Regulation (EEC) No 1191/69

(126) According to Article 10 of Regulation (EEC) No 1191/69,
the amount of the compensation needs to be limited to
the difference between the costs for discharging the obli-
gation and the revenues generated through the obligation.

(127) The Commission thus has to verify whether the compen-
sation paid by the Irish authorities is limited to the differ-
ence between the costs incurred for discharging these
public service obligations and the revenues generated
through the sale of bus tickets.

Irish Bus

(128) The revenues generated by Irish Bus can be seen from the

table in point 37.

(129) The real annual operating costs of Irish Bus can also be

seen from the table in point 37.

(130) The compensation paid for annual operating losses is
detailed in the tables in points 36 and 37 and thus
corresponded to the difference between the attributed
costs for discharging the possible public service obliga-
tions and the revenues derived from it.

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(131) At the current stage, the Commission is not in a position to assess if the calculation and the alloca-
tion of costs and revenues are strictly limited to the costs and revenues for the discharge of public
service obligations. Accordingly, the Commission has doubts if the method used for calculation of the
compensation for discharging the possible public service obligation could be considered as being in
compliance with the provisions of Article 10 of Regulation (EEC) No 1191/69.

(132) The costs incurred for upgrading and replacing buses (used in all operated services) is detailed in the
table in point 48. According to the Irish Bus financial statement report for the periods 2000-2005
Irish Bus has in the reporting period purchased new buses to be operated in all provided services for a
total amount of EUR 106,2 million.

(133) According to the information provided by the Irish authorities, detailed in the table in point 45, the
Exchequer has funded 172 buses (41 % of the total number of purchased buses in 2000-2005) used
for operation of services under the public service obligation.

(134) Compensation for upgrading and replacement of buses:

the Commission has no information
concerning the amount of compensation paid by Irish authorities to Irish Bus for upgrading and repla-
cing its buses (for urban, suburban and regional services).

(135) The Commission, by comparing the received or receivable grants (including grants for investments in
infrastructure) as described in the published financial statements (account deferred income) and the
information provided by the Irish authorities (including also grants for investments in infrastructure),
discovered the following differences in the amounts:

Irish Bus — Received grants (including investments in infrastructure)

2000

2001

2002

2003

2004

2005

6 478

17 270

2 616

8 646

2 984

3 824

in EUR 000

6 478

19 900

3 451

16 418

3 332

1 509

Received
receivable
and
grants according financial
statements

paid

Grants
according
information provided by
Irish authorities (*)

Difference

0

(2 630)

(835)

(7 772)

(348)

2 315

(*) Including EU Funds

The Commission invites the Irish authorities to explain these differences.

(136) The Commission notes that according to the financial statements of Irish Bus the following amounts
have been transferred from the position “deferred income” (investment grants from the Irish authori-
ties are credited to this position) to the account “current liabilities”.

2000

2001

2002

2003

2004

2005

in EUR 000

Transfer to current liabilities

0

(1 180)

(3 113)

(4 150)

(4 850)

(4 962)

The Commission asks the Irish authorities to provide explanation for this transaction.

(137) According to the following calculation,

Irish Bus may have used the available grants of
EUR 43,9 million to finance 61 % of the total investment costs for upgrading and replacing its bus
fleet (including buses used for activities other than services under the possible public service obliga-
tion).

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Irish Bus

in million EUR

Received grants 2000-2005

— Investment grants for upgrading station facilities

— Investment grants for improving the accessibility

Available grants

Total investments in upgrading the bus fleet 2000-2005

Available investments in % of total investments in upgrading the bus fleet
2000-2005

51 088

2 500

4 700

43 888

71 875

61 %

As noted in the description of the measure, the Irish authorities informed the Commission that they
have financed only 33 % of the new purchased buses (see table in point 45).

(138) Accordingly, the Commission doubts whether Irish Bus has not been overcompensated for the

upgrading and replacement of its bus fleet.

Limitation of the compensation to expenditure for discharging public service obligations of Irish Bus

(139) As explained further above in the description of the measure, both CIÉ subsidiaries also operate
services that do not fall under what could be interpreted as a public service obligation (so-called
“commercial services”) and may use publicly funded buses to operate those bus services.

(140) The Irish authorities stated that the publicly funded buses are not used for so-called “commercial
services”. According to what appears in the financial reports of Irish Bus, the school transport services
are considered as “commercial services” but this is not clearly stated. Therefore, the Commission is
not able to conclude that the compensation is limited to expenditures for discharging public service
obligations.

Dublin Bus

(141) The revenues generated by Dublin Bus are set out in the table in point 37.

(142) The annual operating costs incurred by Dublin Bus are also set out in the table in point 37.

(143) Compensation for annual operating losses: the compensation paid is detailed in the tables in points 36
and 37 is stated as being the difference between the attributed costs for discharging the public service
obligations and the revenues derived there from. However, in case of Dublin Bus the compensation
clearly exceeds the difference between revenues and losses in the year 2003. The difference amounts
to 8,51 % in 2003. As a reasonable profit should also be taken into account, the above mentioned
differences may be considered as a reasonable profit. However, at the current stage the Commission
does not have sufficient information to be able to determine if profit margin for 2003 ranging as it
do at 8,51 % can be considered as reasonable.

(144) Furthermore, on the basis of the information currently at the disposal of the Commission, it is not
clear if the calculation of costs and revenues of Dublin Bus is strictly limited to the costs and revenues
for discharging the possible public service obligations. Accordingly, the Commission is not able to
conclude that the method used in calculating the compensation can be considered as being in compli-
ance with the provisions of Article 10 of Regulation (EEC) No 1191/69.

(145) The costs incurred for upgrading and replacing buses (used in all operated services) are detailed in the
table in point 48. According to the Dublin Bus financial statement report in the period 2000 to
2005, Dublin Bus has purchased new buses operated in all provided services for a total amount of
EUR 143,0 million. The Commission has no information concerning the amount of investment
related to buses used to discharge the possible public service obligation.

(146) Pursuant to the information provided by the Irish authorities, which is detailed in the table in
point 45, the Exchequer has funded the total investment costs for 199 buses (38 % of the total
number of purchased buses) and partial investment costs for 69 buses (13 % of the total number of
purchased buses) used for operation of services under the possible public service obligation.

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(147) Compensation for upgrading and replacement of buses: as in the case of Irish Bus, apart form the
global figures previously cited the Commission has no information concerning the amount of public
financing paid to Dublin Bus for upgrading and replacing its fleet. Therefore the following calculations
should be considered only as an approximation under the assumption of same costs for all purchased
buses.

(148) The Commission, by comparing the received or receivable grants (including grants for investments in
infrastructure) according to the published financial statements (account “deferred income”) and the
information (also including grants for investments in infrastructure) provided by the Irish authorities
noted the following differences between both amounts (showed in the table below). The Commission
invites the Irish authorities to explain these differences.

Dublin Bus — Received grants (including investments in infrastructure)

2000

2001

2002

2003

2004

2005

24 728

17 059

17 753

6 172

3 037

10 923

in EUR 000

37 397

23 526

28 014

12 691

7 262

9 611

receivable
and
Received
grants according financial
statements

paid

Grants
according
information provided by
Irish authorities (*)

Difference

(12 669)

(6 467)

(10 261)

(6 519)

(4 225)

1 312

(*) Including EU Funds

(149) The Commission notes, that according to the financial statements of Dublin Bus the following
amounts have been transferred from the position “deferred income” (investment grants from Irish
authorities are credited to this position) to the account “current liabilities”.

2000

2001

2002

2003

2004

2005

in EUR 000

Trasfer to current liabilities

(8 024)

(9 517)

(11 795)

(12 013)

(10 671)

(11 140)

The Commission asks the Irish authorities to provide explanation for this transaction.

(150) The Commission has currently at its disposal only the information concerning the total amount of
the paid out grants (excluding the annual compensation for operating costs) for the period 2000 to
2005 of EUR 118,5 million. The Commission has no further detailed information about the break-
down of this compensation, how much was used for operational purposes and how much for invest-
ments. Nevertheless, taking into account that it would appear that approximately 50 % (38 % full
and 13 % partially) of the purchased buses have been funded by Exchequer, this would mean that
Dublin Bus used EUR 71,5 million for financing the purchase of new buses and EUR 47,0 million in
order to finance its bus garage facilities (see table below). However, according to the published finan-
cial statements Dublin Bus has spent only EUR 22,8 million in total for investments in “Plant and
Machinery”.

Dublin Bus

Received grants 2000-2005

— Investment grants in infrastructure

Availabale Investment grants

Total investments in upgrading the bus fleet 2000-2005

Available investments grants in % of total investments in upgrading the
bus fleet 2000-2005

in million EUR

118 501

47 001

71 500

142 999

~ 50 %

(151) Accordingly, the Commission has doubts whether Irish Bus has not been overcompensated for the

upgrading and replacement of its bus fleet.

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Conclusions

(152) The Commission invites the Irish authorities to provide
further information for the period 2000 up to date for
payments under the National Development Plan and for
the period 2003 up to date for the payments under the
Memoranda of Understanding, relating in particular to:

(a) total annual amount of grants paid by the Irish
the

to Irish Bus and Dublin Bus

for

authorities
purchase of new buses;

(b) total annual amount used for financing new rolling
stock used for the operation of a possible public
service obligation;

(c) information concerning quality requirements

for
buses taking into account that these buses are used
for different services under a possible public service
obligation, explanation of the development of these
quality requirements, average investment costs for the
new buses meeting these quality requirements, a
financial
calculation of
burden meeting these quality requirements imposed
by the Irish authorities, number of buses per different
services in total, number of buses whose have already
been meeting the quality requirements and number
of buses whose have to be replaced because of lack
in meeting the quality requirements in the corre-
sponding periods and in the future;

resulting additional

the

(d) information about the increase in demand and the
routes etc.,
changes in the frequency,
which made necessary the increase in the bus fleet of
both operators, the number of additional buses in
order to meet this quantity obligation, the average
investment costs per bus;

timetables,

(e) explanation how the Irish authorities assure that the
buses used for services under the possible public
service obligation will not be used for other activities.

C.2.2.2.5. Compensation for tariff obligations according
to Regulation (EEC) No 1191/69

(153) Article 9 of the Regulation indicates that “the amount of
financial burdens devolving upon
compensation in respect of
undertakings by reason of the application to passenger trans-
port of transport rates and conditions imposed in the interests
of one or more particular categories of person shall be deter-
mined in accordance with the common procedures laid down in
Articles 11 to 13”.

(154) At this stage the Commission does not have sufficient
information at its disposal to determine whether the Irish
authorities have calculated the compensation for dischar-
ging the tariff obligations in compliance with the provi-
sions of Article 11 to 13. The Commission invites there-
fore the Irish authorities to provide additional informa-
tion concerning the calculation of the compensation for
discharging the tariff obligations.

C.2.2.2.6. Compensation for public

contract
according to Section V of the Regulation
(EEC) No 1191/69

service

(155) In the event that the Memoranda of Understanding and
the contracts concerning the school transport scheme

constitute public service contracts,
the compensation
payments might be State aid compatible with the
common market based on Article 14 of Regulation (EEC)
No 1191/69.

(156) The Commission notes

that both the objective (to
provide sufficient transport services) and the content of
public service contracts (standards for continuity, regu-
larity, capacity and quality; setting of tariffs and condi-
tions of service for certain routes and/or certain cate-
gories of passengers; adaptation of service level to real
from those which can be
needs) are not different
imposed upon transport operators by the means of
service obligations. The
unilaterally imposed public
Commission furthermore notes
cannot be
excluded that the price set in a public service contract
does not correspond to the market price, and hence that
it might encompass State aid.

that

it

the

public

inherent

in the notion of

(157) With respect to State aid implications of public service
contracts, the Commission first of all notes that the goal
of
legislator, when adopting Regulation (EEC)
No 1191/69, was to define under which conditions “the
aid […] which corresponds to the reimbursement of certain
services”
obligations
mentioned in Article 73 EC Treaty are compatible with
the common market. Both the application of Article 73
EC Treaty and the application of Regulation (EEC)
No 1191/69 presuppose the existence of an aid in the
sense of Article 87(1) EC Treaty. If the content of the
contracts can be covered by the notion of Article 73
“obligations inherent in the notion of public services”, the form
of the instrument, that is contract or unilaterally imposed
obligation, should not be,
in itself, an obstacle for
declaring potential State aid inherent in the contract price
compatible with the common market. Indeed, the deci-
sive element for qualifying a service, be it imposed by a
Member State or agreed in a contract, as a public service
obligation is the substance of the service, and not the
form in which it is organised (27). In the light of these
considerations, the Commission concludes that from a
legal point of view, there is no reason why State aid
inherent in the price paid for a public service contract
could not be declared compatible with the common
market by the Commission.

(158) As Article 14 of Regulation (EEC) No 1191/69 does not
contain any precise conditions for declaring State aid
inherent in the price paid for a public service contract
compatible with the common market, the Commission
considers that the general principles derived from the
EC Treaty, the jurisprudence of the Community courts
and the Commission's decision practice in other areas
than public transport
shall be applied for deciding
whether such State aid can be declared compatible with
the common market.

(27) Cf.

in this regard, the judgment of the Court of 24 July 2003,
C-280/00, Altmark Trans, which concerned a German public service
contract, a fact which did not bar the Court from making an analysis
State aid — non State aid based on the content, and not on matters of
the Commission Decision 2005/842/EC of
form; Article 4 of
28 November 2005 on the application of Article 86(2) of
the
EC Treaty to State aid in the form of public compensation granted to
certain undertakings entrusted with the operation of services of
general economic interest (JO L 312, 29.11.2005, p. 67), also disre-
garding the formal means.

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(159) These general principles have been summarized by the
Commission in a general manner in the Community
framework for State aid in the form of public service
obligations (28). With respect to the compatibility of State
in the price paid for a public service
aid inherent
contract,
the
following:

framework foresees

this Community

is
The amount of compensation may not exceed what
necessary to cover the costs incurred in discharging the
public service obligations, taking into account the relevant
receipts and reasonable profit for discharging those obliga-
tions. The amount of compensation includes all the advan-
tages granted by the State or through State resources in
any form whatsoever. The reasonable profit may include all
or some of the productivity gains achieved by the undertak-
ings concerned during an agreed limited period without
reducing the level of quality of the services entrusted to the
undertaking by the State.

(160) Hence,

the compensation payments

foreseen by the
Memoranda of Understanding, under the condition that
these Memoranda of Understanding are to be qualified as
public service contracts, could be declared compatible
with the common market, if they do not “not exceed what
is necessary to cover the costs incurred in discharging the public
service obligations, taking into account the relevant receipts and
reasonable profit for discharging those obligations”.

(161) Based on the information provided by the Irish authori-
ties,
this
the Commission cannot determine whether
condition is met. The doubts of the Commission in this
regard are identical to the doubts explained above in
Section C.2.2.2.4.

C.2.2.3. Conclusion

(162) The Commission doubts that the present measures are in
compliance with the provisions of Regulation (EEC)
No 1191/69 in case they were to be considered compen-
sation for discharging public service obligations.

C.3. Financing of dedicated infrastructure

C.3.1. Existence of State aid

(163) As previously described, the financing of the dedicated
infrastructure covers the following measures: bus stations,
bus stops, garages and maintenance facilities.

(164) In the present case, the State has financed assets that are
dedicated to Irish Bus and Dublin Bus and used for the
economic activity of these bus operators and that are not
available to other operators on an equal and non-discri-
minatory basis.

C.3.1.1. State resources

(165) On the basis of the information currently at the disposal
of the Commission, Irish Bus and Dublin Bus received a
contribution directly by the Irish authorities through
State resources for a part of costs arising from the provi-
sion of passenger and garage facilities. Thus the Commis-
sion considers that the condition of granting aid by a
Member State or through State resources is satisfied.

(28) JO C 297, 29.11.2005, p. 4.

C.3.1.2 Economic advantage

(166) The measure must confer an economic advantage which
the recipient undertaking would not have obtained under
normal market conditions.

(167) The Commission has developed a constant practice with
regards to the assessment of State financing of infrastruc-
ture. The financing and supervision of the building of
transport
of
economic policy and land planning deriving out of the
State's sovereignty (29). Member States are free to choose
the mode as well as the geographical or economical
configurations for the realisation of such a project.

infrastructure

a measure

constitutes

(168) Nevertheless, the question arises as to whether the way a
State finances or builds an infrastructure in the frame-
work of its public policy may amount to State aid for
some companies. This question may arise at
three
different levels: the level of the users, the level of the
builder of the infrastructure and the level of the manager
of the infrastructure (30).

(169) In the present case, the user and the manager of the infra-
structure appear to be identical, as the infrastructure in
question is managed and used exclusively by Irish Bus and
Dublin Bus. As Irish Bus and Dublin Bus do not raise any
income out of the managing of the infrastructure, for the
purpose of
they can therefore only be
considered as users of the infrastructure.

case

this

Economic advantage for the builder of the infrastruc-
ture

(170) In the present case, the Commission has no indication
that the construction companies involved in the construc-
tion of the different infrastructure elements under assess-
ment might have received an advantage.

Economic advantage for the user of the infrastruc-
ture

(171) As regards the user of the infrastructure, the Commission
notes that the infrastructure in question is managed by
Irish Bus and Dublin Bus, and that use seems to be exclu-
sively confined to these undertakings.

infrastructure

through State

(172) The Commission considers in general that the financing
of
resources does not
amount to States aid to users provided that infrastructure
is a public good and is open without discrimination to all
users in accordance with Community legislation, and
does not favour one user in particular (31). In the present
case, this condition seems not to be fulfilled, as the infra-
structure in question, which is financed through State
resources, exclusively benefits Irish bus and Dublin bus.

(29) See e.g. Decision in State aid case 713/97 Rion Antirion motorway
bridge, point 37 and Decision in State aid case N 478/04 Irish Rail,
point 30; Decision N 597/07 Thessaloniki submerged tunnel project.
(30) See See e.g. Decision in State aid case 713/97 Rion Antirion motorway
bridge, point 39, Decision in State aid case N 60/06, Project Main Port
Development Rotterdam, point 39; Decision N 597/07 Thessaloniki
submerged tunnel project; Decision in State aid case N 478/04, Irish Rail,
point 26 with further references.

(31) See e.g. Decision in State aid case 713/97 Rion Antirion motorway
bridge, point 38, Decision in State aid case N 60/06, Project Main Port
Development Rotterdam, point 40; Decision in State aid case N 478/04,
Irish Rail, point 26 with further references.

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(173) The Commission concludes that the measure at issue
could confer to Dublin Bus and Irish Bus an advantage in
the sense of Article 87(1) of the EC Treaty.

C.3.1.3. Distor tion of Competition and affect of

trade between Member States

(174) It furthermore needs to be verified whether the economic
advantage granted from State resources is liable to distort
competition and to affect trade between Member States.

(175) As pointed out further above the Commission considers
the measure might affect inter-state trade and distort or
threaten to distort competition inside this market.

C.3.1.4. Conclusion: Possible existence of State

aid

(176) Accordingly,

the Commission cannot exclude that the
measure constitutes State aid in the sense of Article 87(1)
of the EC Treaty.

C.3.2. Compatibility of the measure

Position of the Irish authorities:

(177) The Irish authorities stated that “The capital aid granted to
the CIÉ companies under the transport priority of the Economic
and Social Infrastructure Operational Programme is covered by
the block exemption in Article 73 (ex Article 77) of the Treaty
relating to the needs of co-ordination of transport and obliga-
tions of public
service. The Dublin Public Transport and
National Public Transport measures accordingly comply with
State Aid rules.”

Position of the European Commission:

(178) As already discussed further above, Article 73 contains
special rules for the compatibility of State aid in the area
of coordination of transport and public service obliga-
tions in transport and constitutes a lex specialis with
respect to Article 87(2) and (3), as well as Article 86(2),
as it contains special rules for the compatibility of State
aid. Article 73 cannot be applied directly, but only by
means of the three Council Regulations which have been
(EEC)
adopted on its basis
(EEC)
No
No 1107/70) (32). As discussed further above Regulation
(EEC) No 1191/69 can be applied to Irish Bus and Dublin
Bus.

(Council Regulations
and
1192/69

(EEC) No

1191/69,

(181) Therefore, the Commission invites the Irish authorities to
provide further clarifications concerning the definition of
the public service obligation for the infrastructure dedi-
cated to Irish Bus and Dublin Bus and detailed information
concerning the paid compensation.

(182) In the case that the infrastructure dedicated to Irish Bus
and Dublin Bus is part of the public service contracts, the
Commission invites
to provide
further clarifications concerning the terms and the condi-
tions of the compensation set out in these contracts.

the Irish authorities

C.3.2.1. Compatibility according to Ar ticle 87

(3)(c) of the EC Treaty

(183) In case the State aids concerning the dedicated infrastruc-
ture can not be considered as aid for the provision of
certain transport
services within the meaning of
Article 73 EC and the implementing Regulations, the
Commission could assess the compatibility of the infra-
structure investment grants for Irish Bus and Dublin Bus
directly on the legal basis according to Article 87(3)(c) of
the EC Treaty, which stipulates that: “aid to facilitate the
development of
certain
economic areas, where such aid does not adversely affect trading
conditions to an extent contrary to the common interest”, may
be considered to be compatible with the common
market.

certain economic activities or of

(184) According to established Commission practise (33),
Commission will in particular examine whether:

the

(a) the construction and operation of the infrastructure
meets a clearly defined objective of common interest
(regional development, accessibility, etc.) and the
infrastructure is necessary and proportional to the
objective which has been set;

(b) all potential users of the infrastructure have access to

it in an equal and non-discriminatory manner;

(c) the development of trade is not affected to an extent

contrary to the Community interest.

(a) The construction and operation of the infrastructure meets
a clearly defined objective of general interest (regional devel-
opment, accessibility, etc.) and the infrastructure is necessary
and proportional to the objective which has been set

(179) However, in the present case the Commission has doubts,
whether the State aids concerning the dedicated infra-
structure can be considered as aid for the provision of
certain transport
services within the meaning of
Article 73 EC and the implementing Regulations.

(180) At present the Commission has difficulties to see how the
construction of bus stations, bus stops, garages and of
maintenance facilities could form part of an imposed
public service obligation or a public service contract with
respect to transport services.

(32) Case C-280/00, Altmark, cited above, paragraphs 101, 105, 106, 107.

(185) As described further above the motivation of the Irish
authorities in granting the financial support provided by
financing the present infrastructure measures are regional
development, increase of the accessibility of certain areas,
the mobility of mobility impaired people,
increase of
environmental protection by the promotion of public
transport.

(33) Community guidelines on financing of airports and start-up aid to
airlines departing from regional airports, OJ C 312, 9.12.2005, p. 1,
see paragraph 53; Commission decision: N 149/06 Traffic guarantee
for M3 Clonee to North of Kells and N7 Limerick Southern Ring Road
Phase II of 16 May 2006 (OJ C 209, 31.8.2006, p. 7).

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(186) Therefore, these infrastructure investments, in particular
bus stops and bus stations, could be considered as objec-
tive of general
interest. Accordingly the Commission
could conclude that the public funding provided for by
the present measures meets the clearly defined objectives
of regional policy and or improving the public transport
passenger
the Commission has
doubts, whether the financing of garages and mainte-
nance facilities can be considered as objective of general
interest. Furthermore, the Commission invites the Irish
authorities to provide further information concerning the
definition of the objective of general interest.

facilities. However,

(187) As previously described,

the Commission has only
limited information concerning the contribution of Irish
Bus and Dublin Bus and the aid intensities. Therefore, the
Commission invites
to provide
further information concerning the necessity and the
proportionality of
the financed infrastructure to the
objectives which have been set.

the Irish authorities

(b) All potential users of the infrastructure have access to it in

an equal and non-discriminatory manner

(188) As stated by the Irish authorities the infrastructure is not
open (in particular physical access) to all potential users,
private coach and bus operators. Therefore, the infrastruc-
ture seems to have been financed and constructed for the
exclusive benefit of one operator and might have a discri-
minatory impact on the operation of bus services.

(c) The development of

trade is not affected to an extent

contrary to the Community interest

(189) As previously described, in competition terms the infra-
structure it not open to all possible competitors of Irish
Bus or Dublin Bus and therefore it might have a discrimi-
natory character for other bus operators from Ireland and
other EU Member States.

(190) Therefore, it is the Commission's view that the present
measures might have a negative impact on competition
and that it might be altered to an extent contrary the
common interest as a consequence of the public finan-
cing afforded by the measure in question.

(191) Consequently,

the Commission has doubts

the
measures in question are not prejudicial to the common
interest and that the above mentioned criteria have been
satisfied in the present case.

that

C.4. Financing of Disability Awareness Training

(192) The Irish authorities did not provide to the Commission
the necessary information concerning the modalities,
duration, budget,
intensity and further conditions in
order to allow it to be able to take a position on this
measure.

Doubts as to the presence of aid

(193) As

the Disability Awareness Training is apparently
financed by the Irish authorities,
it is likely to involve
State resources. The Commission however invites the
Irish authorities to provide more details on the form and
modalities of the measure in order to be able to take
final conclusions on this point.

(194) As regards the presence of an advantage, the Commission
notes that the public financing of training that should
normally be financed by undertakings may give them an
advantage. Nevertheless, the Commission notes that this
training might have a social character and might improve
the mobility of the disabled people.

(195) At

the current stage,

the Commission does not has
the
enough details as to the form and intensity of
measure,
the transport of
disabled people, the existence of obligations as regards
the transport of disabled people, etc. in order to take a
position on this issue at this stage.

the market significance of

(196) Hence, the Commission has doubts as to the presence of
State aid in this measure within the meaning of
Article 87(1) of the EC Treaty.

Compatibility of the aid

(197) If the Commission were to come to the conclusion of the
presence of State aid in this measure, it would assess its
the
compatibility according to Article 87(3)(c) of
the
“aid to facilitate
EC Treaty, which stipulates that:
development of
certain
economic areas, where such aid does not adversely affect trading
conditions to an extent contrary to the common interest”, may
be considered to be compatible with the common
market.

certain economic activities or of

the

Commission

(198) The Commission considers that
is

the appropriate legal
framework
(EC)
No 68/2001 (34) on the application of Articles 87 and 88
of the EC Treaty to training aid of 12 January 2001
(thereinafter “Regulation (EC) No 68/2001”) amended by
the Regulation (EC) No 363/2004 (35) of 25 February
2004 and Regulation (EC) No 1976/2006 (36) of
20 December 2006.

Regulation

(199) Article 3(1) of this Regulation for aid granted to indivi-
dual beneficiaries outside any scheme and Article 3(2) of
the Regulation (EC) No 68/2001 for training aid schemes
stipulate, that an individual aid or an aid scheme fulfilling
all provisions of the Regulation (EC) No 68/2001 shall be
compatible with the common market within the meaning
of Article 87(3) of the EC Treaty and shall be exempt
from the notification requirements of Article 88(3) of the
EC Treaty provided that
the
scheme contains an express reference to the Regulation
(EC) No 68/2001, by citing its title and publication refer-
ence in the Official Journal of the European Communities.

the individual aid or

(34) OJ L 10, 13.1.2001, p. 20.
(35) OJ L 63, 28.2.2004, p. 20.
(36) OJ L 368, 23.12.2006, p. 85.

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(200) According to Article 4(1) the exempted training must

fulfil conditions laid down in Article 4(2) to (7).

Regulation does not apply, if the “aid granted to one enter-
prise for a single training project exceeds EUR 1 000 000”.

(201) Aid intensity:

In order to determine the eligible aid
intensities, it is necessary to distinguish between “specific
training” (Article 4, paragraph 2) and “general training”
(Article 4, paragraph 3). The “Disability Awareness
Training” in the present case seems to correspond to the
definition of “general training” set out in Article 2(e) of the
Regulation (EC) No 68/2001 as it involves “tuition which
is not applicable only or principally to the employee's present or
future position in the assisted firm, but which provides qualifi-
cations that are largely transferable to other firms or fields of
work and thereby substantially improve the employability of the
employee”. Therefore, the eligible aid intensity shall not
exceed 50 % for large enterprises and 70 % for small and
medium-sized enterprises (excluding the regional bonuses
training given to disadvantaged
and the bonus
for
workers). However, on the basis of
the information
currently at its disposal, the Commission is not able to
verify whether the aid intensity for the “Disability Aware-
ness Training” is in compliance with the above mentioned
ceilings or not.

(202) Eligible costs: At this stage the Commission does not
have sufficient information at its disposal to determine if
the publicly funded costs
“Disability Awareness
Training” comply with the definition of the eligible costs
as set out in Article 4(7) of Regulation (EC) No 68/2001.

for

(203) Cumulation rule: Article 6 stipulates following cumula-

tion requirements:

“1. The aid ceilings fixed in Articles 4 and 5 shall apply
is
is partly

regardless of whether
financed entirely from State resources or
financed by the Community.

for the project

the support

2. Aid exempted by this Regulation shall not be cumu-
lated with any other State aid within the meaning of
Article 87(1) of the Treaty, or with other Community
funding, in relation to the same eligible costs, if such
cumulation would result in an aid intensity exceeding
that fixed by this Regulation.”

At this stage the Commission does not have sufficient
information at its disposal to verify if the provisions set
out in Article 6 have been respected.

stage

(204) Conclusion: On the basis of the information currently at
its disposal the Commission therefore cannot conclude at
this
all provisions of Regulation (EC)
No 68/2001 are being fulfilled. Therefore, the Commis-
sion invites the Irish authorities to provide the Commis-
sion with further information concerning the Disability
Awareness Training.

that

(205) Furthermore, the Commission reminds the Irish authori-
ties, that according to Article 5 the exemption from the

D. CONTRIBUTION FROM THE EUROPEAN REGIONAL

DEVELOPMENT FUND

“ERDF”)

(206) As concerns contributions from the European Regional
Development Fund (thereinafter:
for activities
carried out under the NDP for the financing of infrastruc-
ture, the Commission wishes to recall that the Structural
Funds operate on a decentralized basis whereby the
Member State is responsible for selecting and managing
individual projects and shall have the responsibility for
the implementation and financial control of assistance.
To that end the Member State shall, among other things,
ensure that assistance is managed in accordance with all
the applicable Community rules and that funds are used
in accordance with sound financial management (37).

(207) For

2000-2006)

this purpose, Paragraph 3.4.4 (Public Transport
Priority
to Decision
in Annex
C(2004) 5741 (38) amending Articles 2 and 3 of Decision
C(2000) 3446 states that “no State assistance incompatible
with the State aid rules is being provided under this Priority”.

II

(208) However, in respect of the investment grants used for the
financing of public transport services and infrastructure
which are eligible for co-financing under the ERDF and
the possibility that certain elements of such grants may
constitute State aid in the meaning of Article 87(1) of the
EC Treaty, the Commission wishes to remind the Irish
authorities that Article 4 of Decision C(2000) 3446 of
7 December 2000, as follows, remains of application:

“[Decision C(2000) 3446] is without prejudice to the
falling within
Commission's positions on aid schemes
Article 87(1) of the Treaty that are included in the assis-
tance package and which have not yet been approved by
the Commission. Submission of the application for assis-
tance,
for
payment by the Member State does not replace the notifi-
cation required by Article 88(3) of the Treaty.”

the Programming Complement or a request

aid

financing

of State

“Community
falling within
Article 87(1) of the Treaty, granted under aid schemes or
in individual cases, requires prior approval by the Commis-
sion under Article 88 of the Treaty, except where the aid
falls within the de minimis rule or is exempted under an
exemption regulation adopted by the Commission under
Council Regulation (EC) No 994/98 of 7 May on the
application of Articles 87 and 88 to certain categories of
horizontal aid [footnote 2: OJ L 142, 14.5.1998, p. 1.].
In the absence of such exemption of approval, aid is illegal
and subject to the consequences set out in the procedural
regulation for State aid, and its co-financing would be
treated as an irregularity within the meaning of Articles
38 and 39 of Regulation (EC) No 1260/1999.”

(37) Article 8(3) and Article 38 of Regulation (EC) No 1260/1999.
(38) Commission Decision C(2004) 5741 of 27 December 2004 amending
Decision C(2000) 3446 approving the Economic and Social Infra-
structure Operational Programme for Community structural assis-
tance under Objective 1 and under Objective 1 transitional support in
Ireland.

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“Consequently, the Commission will not accept requests for
interim and final payments under Article 32 of the Regu-
lation for measures being cofinanced with new or altered
aid, as defined in the procedural regulation for State aid,
granted under aid schemes or in individual cases, until such
aid has been notified to and formally approved by the
Commission.”

E. CONCLUSIONS

acting under

(209) In the light of the foregoing considerations, the Commis-
sion,
laid down in
Article 88(2) of the EC Treaty, requests Ireland to submit
its comments and to provide all such information as may
help to assess the measures, within one month of the
date of receipt of this letter.

the procedure

(210) The Commission wishes

Ireland

to remind

that
Article 88(3) of the EC Treaty has suspensory effect, and
would like to draw attention to Article 14 of Council
Regulation (EC) No 659/1999, which provides that in
case of negative decisions, the Member State shall take all
necessary measures to recover the aid from the benefici-
aries unless this would be contrary to a general principle

of Community law. The same article provides that the aid
to be recovered pursuant to a recovery decision shall
include interest which shall be payable from the date on
which the unlawful aid was at the disposal of the benefi-
ciary until the date of its recovery. The interest shall be
calculated in conformity with the provisions laid down in
Chapter V of Commission Regulation (EC) No 794/2004
of 21 April 2004 implementing Council Regulation (EC)
No 659/1999 laying down detailed rules for the applica-
tion of Article 93 of the EC Treaty.

it

Journal of

in the Official

(211) The Commission inform Ireland that it will notify inter-
ested parties by publishing this letter and a meaningful
summary of
the European
Communities. It will also inform interested parties in the
EFTA countries, which are signatories to the EEA Agree-
ment, by publication of a notice in the EEA Supplement
to the Official Journal of the European Communities and will
inform the EFTA Surveillance Authority by sending a
copy of this letter. All such interested parties will be
invited to submit their comments within one month of
the date of such publication.’