The General Court dismissed JCDecaux’s action against a Commission decision finding that JCDecaux’s exemption from payment of rent and taxes on advertising displays is State aid incompatible with the internal market (Case T-642/19).
The City of Brussels and JCDecaux (the applicant) entered into a first public contract in 1984, whereby the applicant made available to the City of Brussels and operated advertising bus shelters and street furniture of which it remained the owner. Moreover, JCDecaux was required to provide the City of Brussels with a number of benefits in kind. In return for its services, the applicant did not pay any rent or occupancy fees for the street furniture. In 1995, the City of Brussels terminated the 1984 contract.
In 1998, the City of Brussels issued a call for tenders for, among other things, the manufacture, supply and installation of street furniture, passenger shelters and display stands. In order to comply with its contractual obligations under the 1984 contract, the City of Brussels included an annex to the special tender specifications, listing a number of bus shelters and items of street furniture covered by the 1984 contract where the applicant's right to operate had not yet expired under the terms of said contract.
JCDecaux won the tender procedure and, as a result, a second public contract was entered into between JCDecaux and the City of Brussels in 1999, for a 15-year period. The City of Brussels became the owner of the street furniture in return for payment of a net fixed price for each device. In exchange, the applicant had to pay a monthly rent for the use of the street furniture covered by the contract for advertising purposes. During the implementation of the 1999 contract, some of the devices listed in the aforementioned annex to the special tender specifications were removed before their specified expiry date, while others were maintained beyond those dates. For the latter devices, the applicant paid neither rent nor taxes to the City of Brussels.
In 2011, Clear Channel Belgium (JCDecaux’s main competitor in Belgium) lodged a complaint with the European Commission denouncing the illegality and incompatibility of the State aid received by JCDecaux from the City of Brussels. On 24 June 2019, after the formal investigation procedure had closed, the Commission adopted the contested decision establishing that, by continuing to operate certain devices listed in the annex beyond their scheduled expiry date (‘the phantom billboards’) without paying any rent or tax to the City of Brussels, JCDecaux had benefited from State aid which was incompatible with the internal market.
JCDecaux’s main argument was that, as some of the devices listed in the annex to the 1999 tender procedure were removed in advance, it was allowed to “compensate for” the loss resulting therefrom by maintaining and operating the devices listed in that annex beyond their expiry date. Consequently, because of this alleged compensation mechanism, the benefits derived from this late operation of phantom billboards did not qualify as State aid.
Firstly, regarding the 1984 contract compensation mechanism (based on the obligation of the City of Brussels to preserve the economic balance of the 1984 contract), the General Court pointed out that State aid is an objective legal concept defined directly by Article 107(1) TFEU, which does not distinguish between the causes or objectives of State interventions, but rather considers them in terms of their effects. Consequently, the fact that the objective of the State measure was to preserve the economic balance of the 1984 contract or that this objective was in accordance with the principles of national law does not ab initio preclude such a measure qualifying as State aid.
Therefore, continuing to operate some of the devices listed in the annex beyond their expiry date enabled the applicant to avoid installing and operating new devices under the 1999 contract. Consequently, the applicant avoided paying rent and taxes to the City of Brussels that it would have had to pay under the latter contract and that would have been detrimental to its budget.
Furthermore, the General Court pointed out that, in order to determine whether a State measure constitutes aid, it is necessary to assess whether, in similar circumstances, a market economy operator of a size comparable to that of public sector bodies could have taken a similar decision, namely, in this case, to compensate in a similar way for damage allegedly caused to a co-contractor in the performance of its contractual obligations. The General Court concluded that, in the case in hand, the City of Brussels was not acting as a market operator.
The General Court also held that the City of Brussels was not exempted from carrying out an analysis of the existence and extent of any loss which JCDecaux might have suffered as a result of the early removal of certain devices provided for in the annex and for which an alleged compensation mechanism was intended to preserve the economic balance of the 1984 contract, before putting that mechanism in place. Indeed, such an analysis was necessary in order to verify whether the measure complied with the requirements of European Union law, in particular those arising from Article 107(1) TFEU.
Moreover, the General Court confirmed the Commission’s assessment that the 1984 contract was a purely commercial contract. Indeed, the Belgian authorities did not define the installation and operation of street furniture as a service of general economic interest, and no act of public authority mandated JCDecaux to carry out the removal of certain street furniture devices in performance of a public service obligation. Hence the first Altmark condition was not met.
In light of the abovementioned reasoning, the Court found that the Commission did not commit an error of assessment in considering that the maintenance and operation of certain devices listed in the annex beyond their expiry date provided for in that annex constituted an advantage through State resources within the meaning of Article 107(1) TFEU.
This judgment illustrates once again that the concept of aid not only includes positive benefits, such as transfers of State resources, but also measures whereby public authorities grant an exemption from economic charges that place the beneficiaries in a more favourable financial situation than other taxpayers and that, without being subsidies in the strict sense of the term, are of the same nature and have the same effects. This is all the more important in a case such as this one, where the economic advantage was to some extent ‘hidden’ by entering into a subsequent contract.
Please contact Pierre de Bandt, Jeroen Dewispelaere or Raluca Gherghinaru for further information about this case and/or for general legal advice relating to State aid.