CELEX: 62009CJ0140
Language: en
Date: 2010-06-10
Title: Judgment of the Court (Fourth Chamber) of 10 June 2010. # Fallimento Traghetti del Mediterraneo SpA v Presidenza del Consiglio dei Ministri. # Reference for a preliminary ruling: Tribunale di Genova - Italy. # State aid - Subsidies paid to a maritime transport undertaking discharging public service obligations - National Law providing for the possibility of making payments on account prior to the approval of an agreement. # Case C-140/09.

Case C-140/09
      Fallimento Traghetti del Mediterraneo SpA
      v
      Presidenza del Consiglio dei Ministri
      (Reference for a preliminary ruling from the Tribunale di Genova)
      (State aid – Subsidies paid to a maritime transport undertaking discharging public service obligations – National law providing for the possibility of making payments on account prior to the approval of an agreement)
      Summary of the Judgment
      1.        Preliminary rulings – Jurisdiction of the Court – Limits – Assessment of whether a particular grant of aid is compatible with
            the common market – Not covered
      (Arts 88 EC and 234 EC)
      2.        State aid – Concept – Subsidies paid to an undertaking required to discharge public service obligations, pursuant to national
            legislation providing for payments on account before an agreement is approved
      (Art. 87 EC)
      1.        The Court does not have jurisdiction to rule upon the compatibility of a national measure with European Union law. Nor does
         the Court have jurisdiction to rule on the compatibility of State aid or of an aid scheme with the common market, for that
         assessment falls within the exclusive competence of the European Commission, subject to review by the Court. Nor does it have
         jurisdiction to give a ruling on the facts in an individual case or to apply the European Union law rules it has interpreted
         to national measures or situations, those questions being matters for the exclusive jurisdiction of the national court.
      
      However, the Court does have jurisdiction to give the national court full guidance on the interpretation of European Union
         law in order to enable it to determine the issue of compatibility of a national measure with that law for the purposes of
         deciding the case before it. In the area of State aid, the Court has jurisdiction, in particular, to give the national court
         guidance on interpretation in order to enable it to determine whether a national measure may be classified as State aid under
         European Union law.
      
      (see paras 22, 24)
      2.        European Union law must be interpreted to the effect that subsidies paid to an undertaking required to discharge public service
         obligations, pursuant to national legislation providing for payments on account before an agreement is approved, without the
         prior establishment of precise and stringent criteria, constitute State aid if those subsidies are liable to affect trade
         between Member States and distort or threaten to distort competition, which it is for the national court to determine.
      
      Admittedly, when a State measure must be regarded as compensation for the services provided by the recipient undertakings
         in order to discharge public service obligations, so that those undertakings do not enjoy a real financial advantage and the
         measure thus does not have the effect of putting them in a more favourable competitive position than the undertakings competing
         with them, such a measure does not constitute State aid under European Union law. However, for such compensation to escape
         classification as State aid in a particular case, a number of conditions must be satisfied.
      
      First, the undertaking receiving such compensation must actually have public service obligations to discharge, and the obligations
         must be clearly defined. Second, the parameters on the basis of which the compensation is calculated must be established in
         advance in an objective and transparent manner, to avoid it conferring an economic advantage that could favour the recipient
         undertaking over competing undertakings. Third, the compensation is not to exceed what is necessary to cover all or part of
         the costs incurred in the discharge of public service obligations, taking into account the relevant receipts and a reasonable
         profit for discharging those obligations. Fourth, the compensation must be determined on the basis of an analysis of the costs
         that a typical undertaking, well run and adequately provided with the requisite means in order 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.
      
      Subsidies not fulfilling all those conditions cannot escape classification as State aid under European Union law. The fact
         that the subsidies were paid on account, pending approval of the agreements which, moreover, were concluded and took effect
         only many years later, is of no consequence. Such a fact does not eliminate the advantage conferred on the recipient undertaking
         or the effects which an advantage of that kind may have on competition, for not all the conditions referred to have been fulfilled.
      
      It is for the national court to determine whether those subsidies are liable to affect trade between Member States and distort
         or threaten to distort competition. 
      
      (see paras 35-40, 44-45, 52, operative part)
JUDGMENT OF THE COURT (Fourth Chamber)
      10 June 2010 (*)
      
      (State aid – Subsidies paid to a maritime transport undertaking discharging public service obligations – National Law providing for the possibility of making payments on account prior to the approval of an agreement)
      In Case C‑140/09,
      REFERENCE for a preliminary ruling under Article 234 EC from the Tribunale di Genova (Italy), made by decision of 27 February
         2009, received at the Court on 17 April 2009, in the proceedings
      
      Fallimento Traghetti del Mediterraneo SpA
      v
      Presidenza del Consiglio dei Ministri,
      THE COURT (Fourth Chamber),
      composed of J.-C. Bonichot, President of the Chamber, C. Toader, K. Schiemann, P. Kūris (Rapporteur) and L. Bay Larsen, Judges,
      Advocate General: N. Jääskinen,
      Registrar: M.-A. Gaudissart, Head of Unit,
      having regard to the written procedure and further to the hearing on 11 February 2010,
      after considering the observations submitted on behalf of:
      –        Fallimento Traghetti del Mediterraneo SpA, by V. Roppo, P. Canepa and S. Sardano, avvocati,
      –        the Italian Government, by G. Palmieri, acting as Agent, and G. De Bellis, avvocato dello Stato,
      –        the European Commission, by V. Di Bucci and E. Righini, acting as Agents,
      having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,
      gives the following
      Judgment
      1        This reference for a preliminary ruling concerns the interpretation of the European Union law on State aid.
      
      2        The reference has been made in the context of proceedings between Fallimento Traghetti del Mediterraneo SpA (‘TDM’), a maritime
         transport undertaking in liquidation, and the Presidenza del Consiglio dei Ministri, concerning compensation for the damage
         which TDM allegedly suffered as a result of an incorrect interpretation by the Corte suprema di cassazione (Supreme Court
         of Cassation) of the European Union rules on competition and State aid, and because of that court’s refusal to bring the matter
         before the Court of Justice in accordance with the third paragraph of Article 234 EC.
      
       National legal context
      3        The subsidies at issue in the main proceedings were granted to Tirrenia di Navigazione SpA (‘Tirrenia’), a shipping company
         competitor of TDM, under Law No 684 of 20 December 1974 on the restructuring of shipping services of major national interest
         (GURI No 336 of 24 December 1974, ‘Law No 684’), and more specifically Article 19 thereof.
      
      4        Article 7 of Law No 684 provides as follows:
      
      ‘The Minister for Merchant Shipping is authorised to grant subsidies for the provision of the services referred to in the
         preceding article, by concluding annual ad hoc agreements, in consultation with the Minister for the Treasury and the Minister
         for State Investments.
      
      The subsidies referred to in the preceding paragraph must provide, over a period of three years, for operation of the services
         under conditions of economic equilibrium. On a prospective basis, such subsidies are to be determined by reference to net
         income, the amortisation of investments, operating costs, organisational costs and financial burdens.
      
      …’
      5        Article 8 of Law No 684 provides:
      
      ‘The services linking the larger and smaller islands, referred to in Article 1(c), and any extensions which are technically
         and economically necessary, must satisfy requirements relating to the economic and social development of the regions concerned,
         particularly the Mezzogiorno.
      
      The Minister for Merchant Shipping is consequently authorised to grant subsidies for the provision of those services, by concluding
         ad hoc agreements, in consultation with the Minister for the Treasury and the Minister for State Investments, for a period
         of twenty years.’
      
      6        In accordance with Article 9 of Law No 684:
      
      ‘The agreements under the preceding article must stipulate:
      1)      the routes to be served;
      2)      the frequency of each service;
      3)      the types of vessel allocated to each route;
      4)      the subsidy, which must be determined on the basis of net income, the amortisation of investments, operating costs, organisational
         costs and financial burdens.
      
      Before 30 June each year, the subsidy to be paid for the year shall be adjusted whenever, during the previous year, at least
         one of the economic components specified in the agreement was subject to variation by more than one twentieth of the value
         used for the same item when determining the previous year’s subsidy.’
      
      7        Article 18 of Law No 684 provides:
      
      ‘The financial burden arising from the application of the present Law is to be met in the sum of ITL 93 billion by the amounts
         already entered in Chapter 3061 of the Ministry for Merchant Shipping’s estimate of expenditure for the financial year 1975
         and by those which will be entered in the corresponding chapters for successive financial years.’
      
      8        Article 19 of Law No 684 provides as follows:
      
      ‘Until the date of approval of the agreements provided for under the present Law, the Minister for Merchant Shipping shall,
         in agreement with the Minister for the Treasury, make in deferred monthly instalments payments on account which may not in
         the aggregate exceed [ninety] per cent of the total amount indicated in Article 18.’
      
      9        Law No 684 was subject to an implementing measure, Presidential Decree No 501 of 1 June 1979 (GURI No 285 of 18 October 1979),
         Article 7 of which states that the payments on account referred to in Article 19 of that Law are to be paid to the undertakings
         providing services of major national interest until the date on which the documents relating to the conclusion of the new
         agreements are registered by the court of auditors.
      
       The dispute in the main proceedings and the question referred for a preliminary ruling
      10      As may be seen from the judgment in Case C-173/03 Traghetti del Mediterraneo [2006] ECR I-5177, to which the dispute in the main proceedings has already given rise and to which reference is made for
         a fuller account of the facts and the procedure prior to that judgment, TDM and Tirrenia are two maritime transport undertakings
         which, in the 1970s, ran regular ferry services between mainland Italy and the islands of Sardinia and Sicily. In 1981, TDM
         brought proceedings against Tirrenia before the Tribunale di Napoli (Naples District Court) seeking compensation for the damage
         which it claimed to have suffered as a result of the low-fare policy operated by Tirrenia between 1976 and 1980.
      
      11      TDM submitted that there had been unfair competition and alleged infringement of Articles 85, 86, 90 and 92 of the EEC Treaty
         (subsequently Articles 85, 86, 90 and 92 of the EC Treaty and now Articles 81 EC, 82 EC, 86 EC and, after amendment, 87 EC
         respectively). In particular, it maintained that Tirrenia had abused its dominant position on the market in question by operating
         with fares well below cost owing to its having obtained public subsidies, the legality of which was doubtful under European
         Union law. However, its action was dismissed by decision of 26 May 1993, upheld on appeal by judgment of the Corte d’appello
         di Napoli (Naples Court of Appeal) of 13 December 1996.
      
      12      The appeal brought against that judgment by the administrator of TDM was dismissed by judgment of the Corte suprema di cassazione
         of 19 April 2000, which, in particular, refused to accede to the administrator’s request to submit questions of interpretation
         of European Union law to the Court of Justice, on the ground that the approach adopted by the court ruling on the substance
         complied with the relevant provisions and was consistent with the Court’s case-law.
      
      13      By writ of summons of 15 April 2002, the administrator of TDM, an undertaking which had in the meantime been put into liquidation,
         instituted proceedings against the Italian Republic before the Tribunale di Genova (Genoa District Court) for compensation
         from that Member State for the damage allegedly suffered by that undertaking as a result of the errors of interpretation of
         the European Union rules on competition and State aid committed by the Corte suprema di cassazione and of the breach of its
         obligation to make a reference for a preliminary ruling pursuant to the third paragraph of Article 234 EC. The alleged damage
         consists in the loss of the opportunity to obtain, by the proceedings brought against Tirrenia, compensation for the injurious
         effects of what TDM claims was unfair competition by Tirrenia. 
      
      14      On 14 April 2003, the Tribunale di Genova made the reference for a preliminary ruling to the Court of Justice which gave rise
         to the judgment in Traghetti del Mediterraneo, in which the Court held:
      
      ‘Community law precludes national legislation which excludes State liability, in a general manner, for damage caused to individuals
         by an infringement of Community law attributable to a court adjudicating at last instance by reason of the fact that the infringement
         in question results from an interpretation of provisions of law or an assessment of facts or evidence carried out by that
         court. 
      
      Community law also precludes national legislation which limits such liability solely to cases of intentional fault and serious
         misconduct on the part of the court, if such a limitation were to lead to exclusion of the liability of the Member State concerned
         in other cases where a manifest infringement of the applicable law was committed, as set out in paragraphs 53 to 56 of the
         judgment in Case C‑224/01 Köbler [2003] ECR I‑10239’.
      
      15      Further to that judgment, by decision of 27 February 2009 the Tribunale di Genova found that the ‘State judiciary [had] acted
         unlawfully’, and by a separate order directed that the proceedings should continue so that the claim for damages from that
         unlawful conduct might be heard. It was at that stage of the proceedings that, uncertain as to the interpretation of the European
         Union law on State aid, the Tribunale di Genova made a further reference to the Court.
      
      16      In support of its reference for a preliminary ruling, the Tribunale di Genova states that it does not perceive in the legislation
         and case-law of the European Union an unequivocal answer to the question of whether the conduct engaged in at that time by
         Tirrenia, inter alia as a result of the subsidies at issue, distorted competition in the common market. Although in its judgment
         of 19 April 2000 the Corte suprema di cassazione ruled out that possibility on the basis that those subsidies benefited an
         activity of cabotage, taking place within a single Member State, the Tribunale di Genova is none the less of the opinion that
         the question has arisen as to whether Law No 684, in particular Article 19 thereof, is compatible with Articles 86 EC to 88
         EC.
      
      17      First, the Tribunale di Genova is uncertain whether State aid, paid on account, is lawful, in the absence of precise and stringent
         criteria capable of ensuring that the aid does not distort competition. It observes that the payment of such aid may lead
         to the award of State subsidies without any prior examination of the financial management of the beneficiary undertaking,
         which might prompt that undertaking, on the basis of such aid, to adopt commercial policies capable of eliminating competition.
         It points out that, in the light of the dicta of the Corte suprema di cassazione, it is important to answer that question with reference to the fact that the undertaking
         receiving the subsidies at issue was required to apply tariffs imposed by the administrative authority.
      
      18      Second, the Tribunale di Genova is of the opinion that, in the light of Case C‑280/00 Altmark Trans and Regierungspräsidium Magdeburg [2003] ECR I‑7747, and in view of the routes served by Tirrenia which must be taken into consideration in order to resolve
         the dispute in the main proceedings, namely the Genoa–Cagliari and Genoa–Porto Torres routes, and of the fact that those municipalities
         are within the territory of the European Union, the question of distortion of competition may indeed arise as a result of
         the impact of the subsidies at issue on trade between Member States. It states that any assessment on that point is a matter
         for the Court of Justice.
      
      19      It is against that background that the Tribunale di Genova decided to stay the proceedings and refer the following question
         to the Court for a preliminary ruling:
      
      ‘Is national legislation on State aid of the kind laid down in Law No 684 …, in particular in Article 19 thereof, which provides
         for the possibility of the payment of State aid – albeit only on account – in the absence of agreements and without the prior
         establishment of precise and stringent criteria capable of ensuring that payment of the aid cannot give rise to distortion
         of competition, compatible with the principles of Community law and, in particular, with the provisions laid down in Articles
         86 EC, 87 EC and 88 EC and in Title V (formerly Title IV) of the Treaty and, in that regard, may importance be attached to
         the fact that the beneficiary is required to apply tariffs imposed by the administrative authority?’
      
       The question referred for a preliminary ruling
       The subject-matter, wording and admissibility of the question 
      20      It is clear from the order for reference that the Tribunale di Genova has already ruled, in the main proceedings, on the liability
         of the Italian State as a result of the failure of the Corte suprema di cassazione to seek a preliminary ruling from the Court
         pursuant to the third paragraph of Article 234 EC, recognising that: first, there was a rule of law intended to confer rights
         on individuals; second, the breach of that rule of law was sufficiently serious; and, third, there was a direct causal link
         between the breach of the obligation incumbent on the State and the alleged damage consisting in a loss of opportunity for
         TDM to succeed in its action against Tirrenia. In that context, the Tribunale di Genova also accepted, it seems, by referring
         to Case C-39/94 SFEI and Others [1996] ECR I-3547, that a court could, applying its national law, hold that the recipient of State aid unlawfully paid has
         incurred non‑contractual liability.
      
      21      Nevertheless, before ruling on the claim for damages for the loss cited by TDM, the Tribunale di Genova asks the Court whether
         national legislation of the kind laid down in Law No 684, in particular in Article 19 thereof, is compatible with European
         Union law. In addition, as is apparent not from the question referred but from the grounds of the order for reference as set
         out at paragraphs 16 and 18 above, the Tribunale di Genova asks essentially whether the subsidies at issue in the main proceedings
         affected trade between Member States and distorted competition, leaving the assessment of that point to the Court.
      
      22      As regards the wording of the question itself and the questions raised by the national court, it is to be borne in mind, first,
         that the Court does not have jurisdiction to rule upon the compatibility of a national measure with European Union law (see,
         inter alia, Case C-118/08 Transportes Urbanos y Servicios Generales [2010] ECR I-0000, paragraph 23 and case-law cited). Nor does the Court have jurisdiction to rule on the compatibility of
         State aid or of an aid scheme with the common market, since that assessment falls within the exclusive competence of the European
         Commission, subject to review by the Court (see Case C‑237/04 Enirisorse [2006] ECR I-2843, paragraph 23). The Court also has no jurisdiction to give a ruling on the facts in an individual case or
         to apply the European Union law rules which it has interpreted to national measures or situations, since those questions are
         matters for the exclusive jurisdiction of the national court (see Case C‑451/03 Servizi Ausiliari Dottori Commercialisti [2006] ECR I-2941, paragraph 69 and case-law cited).
      
      23      It follows that, in the present case, the Court does not have jurisdiction to give a ruling on the compatibility of Law No
         684 with European Union law or on the compatibility of the subsidies at issue in the main proceedings with the common market
         nor to assess the facts of the main proceedings in order to determine whether the subsidies have affected trade between Member
         States and distorted or threatened to distort competition.
      
      24      However, the Court does have jurisdiction to give the national court full guidance on the interpretation of European Union
         law in order to enable it to determine the issue of compatibility of a national measure with that law for the purposes of
         deciding the case before it (see Enirisorse, paragraph 24, and Transportes Urbanos y Servicios Generales, paragraph 23). In the area of State aid, the Court has jurisdiction, inter alia, to give the national court guidance on
         interpretation in order to enable it to determine whether a national measure may be classified as State aid under European
         Union law (see, to that effect, in particular, Case C‑53/00 Ferring [2001] ECR I‑9067, paragraph 29; Enirisorse, paragraphs 25 and 51; Servizi Ausiliari Dottori Commercialisti, paragraphs 54 and 72; Case C‑206/06 Essent Netwerk Noord and Others [2008] ECR I‑5497, paragraph 96; and Case C‑222/07 UTECA [2009] ECR I-1407, paragraphs 41 and 47).
      
      25      It must be observed, second, that, although the Tribunale di Genova seems already to have found that the subsidies at issue
         in the main proceedings constitute State aid, its doubts, as set out at paragraphs 16 to 18 of this judgment, relate to the
         actual conditions for the existence of State aid under European Union law, as will be established when the substance of the
         claim is examined. 
      
      26      On the other hand, although the Commission proposes that guidance be given to the Tribunale di Genova in relation, first,
         to the concept of new aid subject to the obligation of prior notification and, second, to the liability of the recipient of
         illegal aid, it must be held that the uncertainties of the Tribunale di Genova are not concerned with those issues, which
         it seems to have resolved, at least in part. The Tribunale di Genova does not, moreover, disclose the matters of law or of
         fact necessary to examine such issues.
      
      27      In the light of all the foregoing, the question referred must be construed as asking whether under European Union law subsidies
         paid in circumstances such as those in the main proceedings, pursuant to national legislation providing for payments on account
         prior to the approval of an agreement, may constitute State aid.
      
      28      The Italian Government submits that that question is irrelevant and must therefore be declared inadmissible. It contends that
         the question of the classification of the subsidies at issue in the main proceedings as State aid is not raised, since they
         relate to the period from 1976 to 1980, that is, a period during which the cabotage market had not yet been liberalised.
      
      29      It is to be observed in that regard that the presumption that questions referred by national courts for a preliminary ruling
         are relevant may be rebutted only in exceptional cases, where it is quite obvious that the interpretation which is sought
         of the provisions of European Union law bears no relation to the actual facts of the main action or where the problem is hypothetical
         (see, inter alia, Case C-429/05 Rampion and Godard [2007] ECR I-8017, paragraphs 23 and 24, and Case C‑387/07 MI.VER and Antonelli [2008] ECR I-9597, paragraph 15 and case-law cited).
      
      30      It is clear that the question of the classification of the subsidies at issue in the main proceedings does bear a relation
         to the subject-matter of the dispute between TDM and the Italian State and does not raise a hypothetical problem, since, in
         order to resolve that dispute, it is necessary for the Tribunale di Genova to ascertain whether Tirrenia benefited from State
         aid. Therefore, the question referred, as reformulated, is admissible.
      
       The question referred
      31      It should be recalled that, in accordance with settled case-law, classification as aid requires all the following conditions
         to be fulfilled. First, there must be intervention by the State or through State resources. Second, the intervention must
         be liable to affect trade between Member States. Third, it must confer an advantage on the recipient. Fourth, it must distort
         or threaten to distort competition (see, to that effect, in particular, Case C-142/87 Belgium v Commission [1990] ECR I-959 (‘Tubemeuse’), paragraph 25; Altmark Trans and Regierungspräsidium Magdeburg, paragraphs 74 and 75; Enirisorse, paragraphs 38 and 39; Servizi Ausiliari Dottori Commercialisti, paragraphs 55 and 56; Joined Cases C-341/06 P and C-342/06 P Chronopost and La Poste v UFEX and Others [2008] ECR I‑4777, paragraphs 121 and 122; Essent Netwerk Noord and Others, paragraphs 63 and 64; and UTECA, paragraph 42).
      
      32      In this case, the first of those conditions is not the subject of the question referred and is not in dispute, since the subsidies
         at issue in the main proceedings were paid under Law No 684 and, as is clear in particular from Articles 18 and 19 thereof,
         borne by the State budget. 
      
      33      In the light of the grounds of the order for reference, as set out at paragraphs 16 to 18 above, the third condition must
         be examined, first, then the second and fourth conditions together.
      
       The advantage conferred on the recipient undertaking
      34      Measures which, whatever their form, are likely directly or indirectly to favour certain undertakings or are to be regarded
         as an economic advantage which the recipient undertaking would not have obtained under normal market conditions are regarded
         as aid (SFEI and Others, paragraph 60; Altmark Trans and Regierungspräsidium Magdeburg, paragraph 84; Servizi Ausiliari Dottori Commercialisti, paragraph 59; and Essent Network Noord and Others, paragraph 79). 
      
      35      By contrast, where a State measure must be regarded as compensation for the services provided by the recipient undertakings
         in order to discharge public service obligations, so that those undertakings do not enjoy a real financial advantage and the
         measure thus does not have the effect of putting them in a more favourable competitive position than the undertakings competing
         with them, such a measure does not constitute State aid under European Union law (see the judgments in Ferring, paragraphs 23 and 25, and Altmark Trans and Regierungspräsidium Magdeburg, paragraph 87, in response to questions referred for a preliminary ruling prior to the judgment of the Corte suprema di cassazione
         of 19 April 2000, at issue in the main proceedings; and Servizi Ausiliari Dottori Commercialisti, paragraph 60, and Essent Netwerk Noordand Others, paragraph 80).
      
      36      However, for such compensation to escape classification as State aid in a particular case, a number of conditions must be
         satisfied (Altmark Trans and Regierungspräsidium Magdeburg, paragraph 88; Servizi Ausiliari Dottori Commercialisti, paragraph 61; and Essent Netwerk Noord and Others, paragraph 81).
      
      37      First, the undertaking receiving such compensation must actually have public service obligations to discharge, and the obligations
         must be clearly defined (Altmark Trans and Regierungspräsidium Magdeburg, paragraph 89; Servizi Ausiliari Dottori Commercialisti, paragraph 62; and Essent Netwerk Noord and Others, paragraph 82).
      
      38      Second, the parameters on the basis of which the compensation is calculated must be established in advance in an objective
         and transparent manner, to avoid it conferring an economic advantage which may favour the recipient undertaking over competing
         undertakings (Altmark Trans and Regierungspräsidium Magdeburg, paragraph 90; Servizi Ausiliari Dottori Commercialisti, paragraph 64; and Essent Netwerk Noord and Others, paragraph 83).
      
      39      Third, the compensation cannot exceed what is necessary to cover all or part of the costs incurred in the discharge of public
         service obligations, taking into account the relevant receipts and a reasonable profit for discharging those obligations (Altmark Trans and Regierungspräsidium Magdeburg, paragraph 92; Servizi Ausiliari Dottori Commercialisti, paragraph 66; and Essent Netwerk Noordand Others, paragraph 84).
      
      40      Fourth, the compensation must be determined on the basis of an analysis of the costs which a typical undertaking, well run
         and adequately provided with the requisite means 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 (Altmark Trans and Regierungspräsidium Magdeburg, paragraph 93; Servizi Ausiliari Dottori Commercialisti, paragraph 67; and Essent Netwerk Noord and Others, paragraph 85).
      
      41      In the present case, it is apparent from Articles 8 and 9 of Law No 684 that the subsidies at issue in the main proceedings
         were intended for the provision of services linking the larger and smaller Italian islands, which had to satisfy requirements
         relating to the economic and social development of the regions concerned, particularly the Mezzogiorno. The agreements signed
         with the undertakings receiving those subsidies had to lay down obligations concerning the routes to be served, the frequency
         of those services, and the types of vessels allocated to each route. It follows that the recipient undertakings were required
         to discharge public service obligations.
      
      42      Article 7 of Law No 684 states, moreover, that the subsidies must provide for operation of the services under conditions of
         economic equilibrium, and that the subsidies are to be determined on a prospective basis by reference to net income, the amortisation
         of investments, operating costs, organisational costs and financial burdens.
      
      43      However, the Tribunale di Genova points out, in its decision, that it was only as a result of Presidential Decree No 501 of
         1 June 1979 that the economic components of the operation to be taken into account in the agreements to be entered into under
         Law No 684 were laid down, and only in July 1991 that the Italian State concluded the agreements of 20 years’ duration with
         each of the Tirrenia group undertakings, to run from 1 January 1989. For the entire period in question in the main proceedings,
         that is to say from 1976 to 1980, and until the agreements were approved, the subsidies at issue in the main proceedings were
         paid on account under Article 19 of Law No 684.
      
      44      It follows that, in the absence of those agreements, the subsidies at issue in the main proceedings were paid during the entire
         period referred to above without the public service obligations imposed on the recipient undertakings being clearly defined,
         without the parameters on the basis of which the compensation for those obligations is calculated being established in advance
         in an objective and transparent manner, and without ensuring that that compensation did not exceed what was necessary to cover
         the costs arising from the discharge of those obligations. Since the fourth condition referred to at paragraph 40 above is
         not satisfied either, those subsidies do not therefore fulfil any of the conditions for the compensation of public service
         obligations to escape classification as State aid under European Union law on the basis of no advantage being conferred on
         the undertaking concerned.
      
      45      The fact that the subsidies were paid on account, pending approval of the agreements which, moreover, were concluded and took
         effect only many years later, is of no consequence. Such a fact does not eliminate the advantage conferred on the recipient
         undertaking or the effects which an advantage of that kind may have on competition since all the conditions referred to have
         not been fulfilled.
      
      46      Similarly, the fact that tariffs were imposed on the undertaking receiving the subsidies at issue in the main proceedings
         by the administrative authority is of no consequence. While, in the light of the conditions referred to, the existence of
         such tariffs is of importance in assessing the costs incurred in the discharge of public service obligations, taking into
         account the relevant receipts, it has no bearing by contrast on the advantage conferred on the recipient undertaking, since
         all the conditions have not been fulfilled.
      
       The effect on trade between Member States and the risk of distorting competition
      47      As was stated at paragraphs 16 and 18 above, the Tribunale di Genova is of the opinion that the question of the effect on
         trade between Member States and of the distortion of competition does arise in the main proceedings. 
      
      48      The Italian Government takes the opposite view, maintaining that at the relevant time the cabotage market was not liberalised,
         since that market was liberalised only as a result of Council Regulation (EEC) No 3577/92 of 7 December 1992 applying the
         principle of freedom to provide services to maritime transport within Member States (maritime cabotage) (OJ 1992 L 364, p. 7),
         and, more specifically, as regards island cabotage in the Mediterranean, from 1 January 1999. At the hearing, it stated that
         no operator from another Member State operated on the domestic routes where Tirrenia was present during the years 1976 to
         1980, whereas TDM referred to the presence on those routes of an undertaking formed by the merger of an Italian and a Spanish
         undertaking.
      
      49      In that connection, the fact that the restrictions on the freedom to provide maritime transport services within Member States
         were abolished after the relevant period in the main proceedings does not necessarily exclude the possibility that the subsidies
         at issue in the main proceedings were liable to affect trade between Member States or that they distorted or threatened to
         distort competition. 
      
      50      First, it cannot be excluded that Tirrenia was, as TDM contends, in competition with undertakings from other Member States
         on the domestic routes concerned, which it is for the national court to determine. Second, it cannot be excluded either that
         it was in competition with such undertakings on international routes and that, in the absence of any separate accounting for
         its various activities, there was a risk of cross‑subsidisation, that is to say, in the present case, a risk that the revenue
         from its cabotage activity which received the subsidies at issue in the main proceedings was used for the benefit of activities
         carried on by it on its international routes, which it is also for the national court to determine. 
      
      51      It is in any event for the national court to assess, having regard to the above and in the light of the facts in the main
         proceedings, whether the subsidies at issue in those proceedings were liable to affect trade between Member States and whether
         they distorted or threatened to distort competition.
      
      52      Having regard to all those considerations, the answer to the question referred is that under European Union law subsidies
         paid in circumstances such as those in the main proceedings, pursuant to national legislation providing for payments on account
         prior to the approval of an agreement, constitute State aid if those subsidies are liable to affect trade between Member States
         and distort or threaten to distort competition, which it is for the national court to determine.
      
       Costs
      53      Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court,
         the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs
         of those parties, are not recoverable.
      
      On those grounds, the Court (Fourth Chamber) hereby rules:
      Under European Union law subsidies paid in circumstances such as those in the main proceedings, pursuant to national legislation
            providing for payments on account prior to the approval of an agreement, constitute State aid if those subsidies are liable
            to affect trade between Member States and distort or threaten to distort competition, which it is for the national court to
            determine.
      [Signatures]
      * Language of the case: Italian.