Stockholm District Court (Stockholms tingsrätt), sitting as the Patent and Market Court (Patent- och marknadsdomstolen) has made a new reference for a preliminary ruling under Article 267 TFEU to the Court of Justice of the European Union (CJEU) concerning state aid and the general prohibition thereof, whether compensation provided to a company owned by municipality in Sweden constitutes new or existing aid, whether it matters that aid was communicated to the Commission at the time of Sweden’s accession to the EU in 1995 as per Article 144 of the Act of Accession of Sweden to the EU, inter alia. The case will be known as Case C-401/24, Stockholms Hamn.
The case can be summarised as concerning whether compensation paid by the Swedish Maritime Administration (Sjöfartsverket) (the State) to Ports of Stockholm (Stockholms Hamn) (a wholly owned municipal company), pursuant to an agreement from 1979, in order to compensate Stockholm Harbour for its loss of revenue resulting from the abolition of lockage fees, constitutes prohibited state aid which must be repaid to the state, or not.
Factually, the Swedish Maritime Administration is a state authority which is responsible for passage through the Södertälje Canal. Ports of Stockholm is a municipal company, wholly owned by Stockholm Municipality (Stockholms stad), which operates Hammarby lock (Hammarbyslussen). Prior to 1979, the Swedish Maritime Administration charged lockage fees on the Södertälje Canal and Stockholm Municipality charged lockage fees for Hammarby lock. Fees were coordinated between the Södertälje Canal and Hammarby lock so that fees would not affect the distribution of traffic in the two connections between Lake Malar and the Baltic Sea.
The state then decides from 1979 on the abolition of special passage fees for traffic in Lake Vänern and Lake Malar that canal fees on the Södertälje Canal should be abolished and that the special fees for passage through Hammarby lock should therefore be discontinued by means of a similar procedure. It was considered necessary by the state for Stockholm Municipality to be compensated for the loss of revenue entailed by the abolition of passage fees.
The compensation that Stockholm Municipality received was to be based in the form of annual compensation based on traffic volume and the level of charges at the time, and linked every ytear to the consumer price index. The agreement would be extended for five years at a time unless notice of termination was given at least six months before the end of the term of the agreement. In the 1990s, Ports of Stockholm took over the arrangement from Stockholm Municipality. The Swedish Maritime administration gave notice of early termination of the agreement at the end of 2021. Ports of Stockholm claim that the Swedish Maritime Administration should repay a sum of 38 million SEK plus interest.
The arguments of the parties are as follows:
- The Swedish Maritime Administration claim that that by the 1979 agreement on compensation, Stockholm Municipality and Ports of Stockholm was granted an advantage through state resources which favoured them, and distorted or threatened to distort competition and was, as such, to affect trade between Member States. The aid at issue was not communicated to the Commission at the time of Sweden’s accession to the EU in 1995, and therefore, the conditions laid down in Article 144 of the Act of Accession are not met. Moreover, the Swedish Maritime Administration claim this is not ‘existing aid’, because each new agreement period was preceded by informed deliberations, and before each new five-year agreement period, the parties negotiated the compensation to be paid, which means it is new aid. This compensation, the Swedish Maritime Administration argue, is therefore unlawful state aid, and must be repaid to the state.
- Ports of Stockholm argues that the compensation does not satisfy the cumulative criteria for being state aid. It claims that Hammarby lock is not economic activity falling within the scope of state aid, and that it constitutes a service of general economic interest it has been required to provide. Ports of Stockholm further argues that it was not favoured economically in comparison with competing undertakings because the criteria on the basis of which the compensation from the Swedish Maritime Administration was calculated were determined in advance in an objective and transparent manner. The compensation covered only the loss of revenue, and was less than the costs of operation and maintenance. It also argues that the alleged aid not being communicated to the Commission at the time of accession is irrelevant.
Stockholm District Court therefore sends the following questions to the CJEU to assist in answering the underlying dispute between the parties:
- Question 1: Should the criterion of favouring in Article 107(1) of the Treaty on the Functioning of the European Union be understood as meaning that annual compensation which is paid by a State authority to a municipal joint stock company from State resources under an agreement as compensation for the company’s undertaking to provide free of charge a certain service, in this case lock operations, for which fees were charged until the conclusion of the agreement,
- is to be regarded in its entirety as constituting aid which distorts or threatens to distort competition by favouring the recipient?
- is to be regarded as constituting aid which distorts or threatens to distort competition by favouring the recipient to the extent that the compensation exceeds the recipient’s previous annual revenue from fees for the service, taking into account changes in, for example, the consumer price index and traffic volume in lock operations?
- is to be regarded as constituting aid which distorts or threatens to distort competition by favouring the recipient to the extent that the compensation exceeds the recipient’s annual costs for providing the service?
- is to be regarded as constituting aid which distorts or threatens to distort competition by favouring the recipient based on some other calculation model?
- is not to be regarded to any extent as constituting aid which distorts or threatens to distort competition by favouring the recipient?
- Question 2: Should an agreement on annual compensation paid by a State authority to a municipal joint stock company from State resources as compensation for the company’s undertaking to provide free of charge a service outside the agriculture sector, in this case lock operations, where the agreement was concluded before Sweden’s accession to the European Union and was not notified to the Commission, be considered to constitute existing aid which, in accordance with Article 1(b)(i) of Council Regulation (EU) 2015/1589 of 13 July 2015 laying down detailed rules for the application of Article 108 of the Treaty on the Functioning of the European Union, is to be regarded as lawful provided the Commission has not found the aid to be incompatible with the internal market?
- Question 3: If question 2 is answered in the affirmative, should such annual compensation nevertheless be considered to constitute new aid if, on several occasions after Sweden’s accession to the European Union, the agreement was extended by five years at a time, in accordance with the original terms, in the absence of notice of termination and the annual compensation for each new five-year period was changed, partly in the light of the consumer price index and partly in the light of the extent of the service which was provided free of charge during the preceding agreement period, in this case traffic volume in lock operations?
More on the case before the CJEU, Case C-401/24, Stockholms Hamn, can be found here.