Focus on Regulatory Law – March 2015

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REGULATORY AUTHORITIES

French Competition Authority – TDF fined for anti-competitive practices

In a 2009 opinion issued at the request of the French regulator for electronic and postal communications (ARCEP) the French Competition Authority ruled that the broadcasting company TDF had a dominant position in the market of terrestrial broadcasting. TDF was required to publish, by 15 September 2009, its technical standards and prices to give newcomers to the market an overview of TDF’s technical conditions and prices relating to accommodation on and access to its antennas to ensure fairness in the market (Autorité de Régulation des Communications Électroniques et des Postes, 11 June 2009, n° 2009-0484). TDF did not publish this information by the deadline.

In 2010, France Télévisions launched a tender process to award the contract to broadcast TNT in France’s territories overseas. At this point, TDF had still not published the required information.

On 5 February 2015, the French Competition Authority found that, by delaying publication without just cause, TDF abused its dominant position and distorted the market by creating asymmetry in the information available to participants.

Consequently, given the gravity of the facts and the damage caused to the economy, the Authority fined TDF the maximum penalty of €3.5 million. The Authority subsequently increased this fine by 20 per cent as a penalty for repeat infractions, TDF having already been found to be acting abusively in 2009.

Source: Autorité de la concurrence, 15-D-01 du 5 février 2015 relative à des pratiques mises en œuvre dans le secteur de la diffusion de la télévision par voie hertzienne terrestre en outre-mer.

Railway Regulator – French railway regulator’s method of evaluating the impact on the economic balance of the public service contract by railway cabotage found to be valid

Railway cabotage is the commercialisation of internal railway services in the context of international transportation. It is authorised in France under Article 2121-12 of the Transportation Code, as transposed from Directive 2007/58/CE of 23 October 23 2007, subject to the two following conditions :

• Part of the journey must be international, i.e., the passenger must pass through a country other than France.
• The commercial, privately held services must not compromise the economic balance of railway services by undermining the publicly held services through being cheaper.

According to the same provisions, the French railway regulator (l’Autorité de regulation des activités ferroviaires (ARAF)) has to verify that both conditions have been fulfilled.

Provence Alpes Cote d’Azur region filed a complaint contesting a decision by ARAF, which found that the railway link proposed by Thello between Marseille and Milan, which included the internal service of trains between Marseille and Menton, did not jeopardise the economic balance of the service contract between Provence Alpes Cote d’Azur and the French National Railway Company (SNCF).

In its 30 January 2015 decision, the French Supreme Administrative Court (the Conseil d’État) ruled that ARAF was correct in evaluating the substitutability of the regional transportation services used by SNCF with the services planned by Thello by taking into account the fares proposed by each. Given that the fares proposed by Thello were significantly higher than the full fares offered by SNCF, the Conseil d’État found that ARAF was correct in assuming that the fares proposed by Thello would not persuade travelers to switch to this new service, and therefore the conditions were met.

Source: CE, 30 January 2015, Région Provence-Alpes-Côte d’Azur, n° 374022, Tables Lebon.

Railway Regulator – Dispute between Stif and Gares & Connexions settled

On 22 July 2014, the Ile-de-France Transport Association (Stif) referred to ARAF its dispute with Gares & Connexions, which is a branch of SNCF in charge of maintaining passenger stations.

Stif first challenged the lack of transparency of Gares & Connexions’ accounts. ARAF therefore ordered Gares & Connexions to transfer, every year, a data file containing their accounts for each level of management of the stations in the Ile-de-France Region, and present Stif with the floor plans of all stations considered to be of national interest.

Stif next challenged the amount of the return on capital invested in the stations by SNCF Mobility. Under the Decree of 20 January 2012, the fees payable by railway companies to Gares & Connexions for goods and services provided in the passenger stations must cover the projected costs corresponding to the performance of these services, including the cost of invested capital.

Although it rejected Stif’s argument that Gares & Connexions unfairly took into account a risk premium as well as corporation taxes, ARAF considered that the risks borne by SNCF Mobility were overestimated and, consequently, directed SNCF Mobility to fix the rate of invested capital within a range of between 5.5 per cent and 6.9 per cent before taxes, as opposed to the 9.2 per cent currently applied.

Finally, Stif challenged Gares & Connexions’ equalisation policy in the use of its capacity as a self-financing entity, which benefitted the funding of stations in other regions. In relation to this challenge, ARAF stated that there is no legal obligation restraining Gares & Connexions from using the financing it generated in the Ile-de-France region to finance installations in other regions.

Source: ARAF, 3 février 2015, Stif c/ Gares & Connexions.

Audiovisual Council – The Audiovisual Council must not grant a significant proportion of available frequencies to very similar services

In a decision handed down on 12 December 2014, the Conseil d’État found that the Audiovisual Council (CSA) should take into account the number of terrestrial frequencies available when assessing the public interest in the context of granting authorisation to a radio service applicant.

The CSA had launched a call for applications for the use of category D radio services via terrestrial frequencies channels in the Reims region. At the end of this procedure, the CSA rejected an application from RML on the basis that its musical programming was exclusively composed of Latin music, which was likely to interest a smaller public than those targeted by the applicants normally retained in this category. The CSA instead accepted applications from Fun Radio, Virgin Radio, Radio Nova and Chérie FM. RML requested the annulment of these two decisions.

The Conseil d’État found that, in granting an significant portion of the available frequencies to very similar services when the number of frequencies available would allow for the approval of applicants offering more varied, albeit less popular, services, the CSA had disregarded the primary imperative of protecting and encouraging cultural diversity.

Source: CE, 12 décembre 2014, Société RML, n° 364775, Tables Lebon.

French Financial Market Authority – The AMF cannot stay the proceedings on a request for authorisation for the use of financial instruments

Bernheim Dreyfus and Co had sought from the Financial Market Authority (AMF) an extension of its authorisation for the use of financial instruments. At the same time, Bernheim Dreyfus was the subject of a control order relating to a failure to fulfil its professional obligations. As a result of this control order, the AMF Board filed a statement of objections against Bernheim Dreyfus and its executive officers, and elected to bring an action in front of its penalties commission, which is part of the AMF.

Taking into account the context and the doubts raised as to the reliability of Bernheim Dreyfus’ executive officers, the AMF decided to stay the proceedings on the request for authorisation.

In a 26 January 2015 decision, however, the Conseil d’État found that the AMF did not have the authority to stay these proceedings while waiting for the outcome of a control procedure.

Source: CE, 26 janvier 2015, Société Bernheim Dreyfus et Co, n° 368847, Tables Lebon.

ENERGY

Public Gas Service – Continuity of public service and the amount of shareholder capital held by the State in GDF-Suez

Under the first sentence of Section VI, Article 7 of the law of 29 March 2014, The State has fulfilled its obligation to hold a minimum of 50 per cent of shareholder capital in certain companies if the capital is either equity shares or voting rights. The second sentence of Section V1 allows that the State’s shareholding may temporarily fall below 50 per cent on the condition that it reaches the threshold within no less than two years.

The union representing the employees of GDF-Suez filed an appeal against a 25 June 2014 decision by the Order of the Minister of Finance and the Minister of Economic Order that fixed the price and the terms of the State’s shareholding in GDF-Suez. The union also filed a Priority Preliminary Ruling on Constitutionality relating to the provisions of the second sentence of Section VI of Article 7 of the law of 29 March 2014, arguing that the provisions violated the principle of continuity of public service, in that the State, deprived of its ability to form a blocking minority in extraordinary shareholders meetings, even during a limited period of time, could not oppose mergers or public takeover bids and divestitures of assets.

The Conseil d’État began by recalling that under Article L. 212-32 of the Energy Code, obligations of public service relative to the continuity of the supply of gas, the security of procurement, the security of persons and operations, the balanced development of the territory and the supply of natural gas at a special rate for low-income users, are imposed on GDF-Suez and all other operators in the gas industry. The Conseil therefore found that the union’s appeal was not of a serious nature.

The Conseil d’État next highlighted that, in applying the Decree from 20 December 2007, Under Article L.111-69 of the Energy Code, the State held a special share in the capital of GDF-Suez that permitted it to oppose decisions relating to divestitures, or a change in use of the company or its subsidiaries’ assets that would violate France’s essential interests in the energy sector relating to the continuity and the security of the energy supply.

In addition, the Conseil d’État noted that, in exceptional circumstances, the appropriate State authorities could always proceed in the name of their administrative police powers, or under the provisions of the Defence Code to requisition persons, goods or services.

The Conseil noted that these provisions guaranteed the continuity of public service, regardless of the amount of shareholder capital held by the State in GDF- Suez, and refused to refer the Priority Preliminary Ruling on Constitutionality to the Constitutional Court.

Source: CE 11 février 2015, Fédération CFE-CGC Energies, n° 384057.

Regulation of Energy Prices – CJEU asked for ruling on a preliminary question relating to the French mechanism for maintaining regulated gas prices

On 15 December 2014, the Conseil d’État referred a preliminary question to the Court of Justice of the European Union (CJEU) on the compatibility with European Union law of the French mechanism for regulated gas prices.

The National Association of energy supply companies (ANODE) asked the State to overturn the 16 May 2013 Decree relating to regulated natural gas prices. ANODE claimed that Articles L. 445-1 to 445-4 of the Energy Code misrepresented the objectives of Directive 2009/73/CE concerning the common rules for the internal market of natural gas.

The Conseil d’État asked the CJEU to determine whether or not State intervention by way of imposing regulated gas prices upon the traditional operator, while not prohibiting the traditional operator or alternate suppliers from offering competing gas at a lower price, must be seen as ultimately determining the supply price of natural gas for the end consumer, independent of free market forces. The Conseil asked if such intervention is, therefore, a barrier to the realisation of a competitive natural gas market as mentioned in Article 3, paragraph 1 of Directive 2009/73/CE.

If the answer to this question is yes, the Conseil d’État asked the CJEU to specify the criterion for compatibility of such State intervention with the Directive, and whether or not the Directive authorises EU Member States to pursue objectives other than the maintenance of a reasonable supply price, such as supply security and territorial cohesion.

Source: CE, 15 décembre 2014, Association nationale des opérateurs détaillants en énergie, n° 370321.

Fixing Regulated as prices – Refusal to suspend the decision that fixed the regulated prices for the sale of electricity

In a decision from 28 October 2014, the Ministry of Energy and the Ministry of the Economy introduced a new calculation method for the sale of electricity, called “stacking.” The Ministries fixed the new regulated prices for the sale of electricity as either “blue” (for residential clients and for small businesses), “yellow” (for mid-sized businesses) or “green” (for a small number of businesses that heavily consume high voltage electricity).

ANODE claimed that these prices were fixed at a level that did not cover EDF’s entire costs, and brought an action before the interim judge of the Conseil d’État on the basis of Article L. 521-1 of the Administrative Justice Code (CJA), requesting that the 28 October decision be suspended. The Conseil d’État held that, under the 12 August 2009 Decree, regulated prices do not necessarily need to take into consideration the total costs of the supply of electricity by EDF. Consequently, although the prices fixed by the contested decision did not take into account EDF’s entire costs, this did not, by its nature, cast doubt on the legality of the decision.

The Conseil d’État nonetheless held that the fixing of regulated prices should allow for the recovery of differences between the prices and EDF’s costs over the previous tariff period. On this basis, the Conseil found that this obligation had not been fulfilled as regards the “green” prices.

Nonetheless, because of the lack of an emergency, which is the required condition for suspending decisions under Article L. 521-1 CJA, the Conseil d’État rejected the request for the 30 October decision to be annulled.

Source: CE, Ord., 7 janvier 2015, Association nationale des opérateurs détaillants en énergie, n° 386076.

Network Operators – Network distribution operators required to clearly differentiate their brands from those of their parent companies

In a decision handed down on 17 December 2013, the French Competition Authority imposed a €13.5 million fine on EDF for having abusively supported its subsidiary active in the photovoltaic (PV) solar energy market (EDF ENR). The abusive activity consisted of utilising the brand “Bleu ciel d’EDF” and playing upon the similarities of the logos and brands.

Reaching a similar conclusion in its 2013-2014 report, the Energy Regulation Commission (CRE) estimated that the significant similarities between the two social identities, the logos and acronyms of the electricity and the natural gas distribution network operators (ERDF and GRDF) and their parent companies, created a risk of confusion in the minds of consumers that was detrimental to effective competition in the sector.

The CRE held that these similarities between the two companies were contrary to the provisions of Article L. 111-64 of the Energy Code, under which the administrator of a distribution network and the supply company must abstain from creating any confusion between their identities, communication practices and brand strategies.

The CRE requested that, before 1 June 2015, ERDF and GRDF change the elements constituting their brand, i.e., their visual identity, abbreviations and/or pronunciation, in order to end the confusion.

Source: CRE – Respect des codes de bonne conduite et indépendance des gestionnaires de réseaux d’électricité et de gaz naturel – Rapport 2013-2014.

Exploratory Oil Drilling – An assessment of its impact on the environment is not automatically necessary

The Directive of 23 April 2009 provides that the extraction of oil and natural gasses must be subject to an assessment of its environmental impact when the extraction is done for commercial purposes. In order to establish whether or not an assessment is necessary, the characteristics of the project must be analysed in comparison with the cumulative effects of other projects.

In a decision from 11 February 2015, issued following a preliminary question referred by an Austrian court, the CJEU held that exploratory oil drilling could still require an environmental impact assessment based partly on whether or not it amounts to “deep drilling.”

Specifically, the CJEU stated that, even if the exploratory drilling may have a commercial aim, it would not fall within the scope of the Directive of 23 April 2009 as long as it does not, a priori, constitute a long-term project involving the continual extraction of large quantities of hydrocarbons.

By contrast, the CJEU noted that, with respect to “deep drilling”, pursuant to explicit provisions of the Directive of 23 April 2009, national authorities must determine, on a case-by-case basis, if an environmental impact assessment is necessary.

Exploratory drilling, when qualifying as deep drilling, may therefore fall within the scope of the Directive and require an environmental impact assessment.

In order to establish whether or not an environmental impact assessment is necessary, the national authorities must examine the impact on the environment that the project may have alongside the impact of other projects. In the absence of any specificity in the Directive, the CJEU found that this obligation is not limited to projects undertaken in the same geographical zone.

Source: CJEU, 11 février 2015, Kornhuber e.a, C-531/13.

STATE AID

Existence Of State Aid – Permission given to London taxis to drive in bus lanes, while excluding private hire vehicles, does not constitute State aid

In a decision from 14 January 2015, the CJEU ruled that permission given to London’s taxis (black cabs) to drive in bus lanes, a privilege that has been withheld from private-hire vehicles (PHV), does not constitute State aid.

The CJEU reasoned that black cabs and PHVs are both factually and legally different and, as such, are not governed by the same policies in relation to bus lanes. Black cabs therefore do not benefit from an economic advantage. In addition, the fact that black cabs do not have to pay fines when they use bus lanes does not involve any additional costs for public authorities and, consequently, no commitment of State resources.

A Member State does not, therefore, automatically award an economic advantage when granting a preferential right of access to certain users of public infrastructure that is not used by the public authorities to generate income, when pursuing an objective provided for by national regulation.

Source: CJEU, 14 janvier 2015, The Queen c. Parking Adjudicator, C- 518/13.

See our commentary on the decision of the Conseil d’État dated 17 December 2014 in the Public Economic Law Section below.

Existence Of State Aid – Conditions under which the advance payment of the net book value of public works may not qualify as State aid

The community of Epinal entered into a public work concession with Numéricâble NC, entrusting Numéricâble with the financing, design, construction and operation of an electronic communication network for a period of 15 years.

At the end of the concession, the network was to become the full property of Epinal, in return for which Numéricâble had the right to operate the network throughout the duration of the contract and was to be compensated for the net book value of the network remaining at the end of the contract. This compensation was to be paid by Epinal at the beginning of the concession rather than at the end.

The administrative court of Nancy rejected a petition for the annulment of the contract, brought by an ousted competitor. The Nancy administrative court of appeal did, however, annul the contract on the basis that the anticipated payment of the compensation owed for the remaining book value of the network at the end of the contract qualified as State aid. According to the administrative court of appeal, the anticipated payment allowed the concession holder to benefit from a substantially higher profitability than a comparable operation.

On appeal, the Conseil d’État annulled the administrative court of appeal’s decision on the grounds that, before qualifying the anticipated payment as State aid, it should have verified whether or not the amount effectively paid was higher than the residual book value remaining at the end of the contract.

Source: CE, 13 février 2015, Communauté d’agglomération d’Epinal et Société Numéricâble NC, nos 373645 et 373648.

Incompatible State Aid – Opening an insolvency proceeding prohibits the recovery of State aid

The subsidies granted by the Corsican Government of Corsica to SNCM for ferry services were found to be State aids in 2013. (Com. Euro., 2 May 2013, SA. 22843 2012/C).

SNCM requested the interim judge of the Administrative Court of Bastia to annul, on the basis of Article L.521-1 of the Code of Administrative Justice, two enforceable recovery decisions, issued on 7 and 19 November 2014, by the Transportation Office of Corsica to recover the State aid.

By two orders issued on 14 January 2015, the interim judge of the Administrative Court found that the opening on 28 November 2014 of insolvency proceedings in the name of SNCM prohibited the payment of these debts under the principle of suspension of proceedings as provided for by Article L. 621-7 of the Commercial Code.

Source: TA Bastia ord. 14 janvier 2015, SNCM, n° 1401073 et 1401074.

Recovery – EU General Court upholds finding of Irish Airline Tax as State Aid but annuls recovery decision

In parallel judgments T-473/12 and T-500/12 handed down on 5 February 2015, the EU General Court upheld the European Commission’s finding that the Irish airline tax constituted State aid. The Court confirmed that the lower rate of excise duties for airline flights of up to 300 km from Ireland granted an advantage when compared with the higher rate of excise duties for flights travelling further, and therefore constituted State aid to the benefit of the short haul flight passengers and the corresponding carriers. The General Court did, however, annul the Commission’s decision relating to the recovery of the aid, on the grounds of inadequate assessment of the advantage to be recovered.

In the last few years, the Commission has increasingly focused its State aid investigations on fiscal or parafiscal charges. According to the decisions handed down by the Commission, and paragraph 185 of its 2014 Draft Communication on the Notion of Aid, a reduced excise duty can be ruled as granting a selective advantage for the undertakings that benefit from it. In line with these precedents, the Commission had found the Irish airline excise duty system, with its two different rates for airline tickets depending on the distance travelled, to be State aid. This decision was appealed by Ryanair and Aer Lingus to the General Court.

The Commission had found that the taxable event, i.e., the departure from an Irish airport, was the same for both long and short haul flights, and the reference rate at the time of the decision was the higher excise duty rate. The lower rate was therefore an exception from that reference and accordingly formed a selective benefit for the short haul carriers (SA.29064, paragraph 45).

The General Court stated that the higher rate for long haul flights was in itself lawful under Article 56 of the Treaty on the Functioning of the European Union (T-500/12, paragraph 83; T-473/12, paragraph 58). It therefore found that the Commission was right to take the higher rate as a reference rate for the finding of a benefit in the application of a second, lower excise duty to certain short haul flights departing from Ireland (T-500/12, paragraph 90; T-473/12, paragraph 64). The Court agreed that the lower excise duty was a selective benefit for short haul carriers in Ireland and therefore constituted State aid.

The Commission had ordered the recovery of the difference between the lower excise duty and the higher excise duty per passenger. The General Court noted that, under existing case law, the Commission is not obliged to determine the exact amount that needs to be recovered. It is only obliged to include information that enables the Member State to work out for itself, without too much difficulty, the amount that needs to be recovered (T-500/12, paragraph 113; T-473/12, paragraph 84; inter alia: C-415/03, Commission/Hellenic Republic 2005, I-03875, paragraph 39).

According to the Court, the Commission should have

“Merely ordered the recovery of the amounts actually corresponding to that advantage or, if it proved impossible to determine those amounts accurately in the decision, to confer that task to the national authorities and provide the necessary information in that respect, in accordance with the case law cited in paragraph […] above”. (T-500/12, paragraph 136; T-473/12, paragraph 105).

The Court found that, in defining the amount to be recovered as the difference between the high excise duty and the low excise duty, the Commission had actually determined the amount to be recovered. In doing so, the Commission was then obliged to assess, as accurately as the circumstances of the case would allow, the actual value of the benefit received from the aid by the beneficiary (T-500/12, paragraph 114; T-473/12, paragraph 85).

The Court highlighted that the recovery of aid must be limited to the financial advantages to the beneficiary that actually arose, and be proportionate to those advantages (T-500/12, paragraph 135; T-473/12, paragraph 104; T‑308/00 RENV, Salzgitter/Commission, 2013, ECLI:EU:T:2013:30, paragraph 138). The Court found that the Commission had not taken into account the pass-on of the advantage to passengers and therefore the recovery order exceeded the actual advantage to the carriers. It is interesting to compare this with the situation in antitrust damages litigation, where the defendant has the burden of proof for the pass-on of any advantage to customers.

Parallel judgments T-473/12 and T-500/12 show the willingness of the General Court to support the ever-closer scrutiny of Member States’ tax rules under EU State aid rules. Not only individual tax measures, but whole tax laws and tax systems may be found to constitute State aid.

They also confirm on one hand that the Commission does not have to itself determine the exact amount of the benefit to be retrieved. On the other hand, the General Court has made it clear that it expects the Commission to come up with a more sophisticated calculation of the amount it wants recovered, paying close regard to the actual benefit incurred by the parties, if it decides to determine the amount to be recovered.

Source: TUE, 25 novembre 2014, Aer lingus Ltd / Commission T-473/12 et Ryanair Ltd / Commission T-500-12.

PUBLIC ECONOMIC LAW

Mobile Telephony – Annulment of 22 March 2013 Decree modifying the royalty fees payable by mobile telephone operators

Based on a claim brought by Bouygues Telecom, the Conseil d’État has overturned the 22 March 2013 Decree relating to the increase in royalty fees payable by mobile telephony operators for the use of 4G licenses on radio frequencies.

In its decision of 29 December 2014, the Conseil d’État noted that the managing authority of the radio frequencies, which are public property, may modify the financial conditions attached to the occupation of this public property, but it can only exercise this prerogative for reasons that were brought to its attention after the authorisation was granted, or reasons related to a change in circumstances.

The Conseil d’État found that the possibility, which became available in 2011, for license holders of the 1 800 MHz band to ask for the lifting of technical restrictions on the use of the frequencies, which would allow them to operate on the frequencies with technical standards other than GSM, namely 4G, constituted a new circumstance. This therefore permitted the appropriate authority to modify the financial conditions for the use of these frequencies, even though its previous authorisation had not yet expired.

In relation to Bouygues Telecom’s claim the Conseil d’État noted that the method used by the State to evaluate the economic benefit gained by the licensing of these frequencies constituted a double error of law. The Conseil reasoned that the amount of the royalty fee should have been calculated not by taking into account the total amount of time granted for an authorisation (15 years), but the amount of time that was left on the authorisation to which the new royalty fee would be applied.

In relation to the value of the unrestricted frequencies, the French Government based its estimate solely on the exclusive use of 4G networks. In practice, however, these frequencies use not only the4G standard, but also the less efficient standards. The Conseil d’État therefore found that the estimate of the value of the band frequency was structurally greater than the economic benefit that a telecommunications operator could reap from it.

Source: CE, 29 décembre 2014, Société Bouygues Télécom, n° 368773, Recueil Lebon.

VTC Decree – The 27 December 2013 Decree imposing restrictions on pre-booked private hire vehicles is definitively overturned

In a decision handed down on 27 December 2014, the Conseil d’État definitively overturned the 27 December 2013 Decree that imposes on private hire vehicles (known in France as VTCs) a delay of 15 minutes from the reservation of the vehicle to the collection of the client (Article. R. 231-1-1 of the Tourism Code).

After being reminded that the legislator was attempting to distinguish the activity of parking and driving on public roads in search of clients looking for transportation (taxis) from the activity of transporting individuals following conditions fixed in advance between the parties (VTCs), the Conseil d’État noted that, under Article L. 231-3 of the Tourism Code, VTCs may neither park on public property if they have not already been booked, nor may they be booked on sight.

These provisions do not, however, authorise the regulator to create new conditions that restrict the activities of VTCs by delaying the collection of their passengers for 15 minutes simply because the service was pre-booked.

According to the Conseil d’État therefore, by imposing a minimum delay of 15 minutes between the reservation of the vehicle and the collection of the client, the regulator violated Article L. 231-1 of the Tourism Code.

Source: CE, 17 décembre 2014, SAS Allocab et autres, n° 374525.

Airline Companies – Airlines required to immediately specify the final price to be paid by the passenger

The CJEU was asked to examine a preliminary question relating to the interpretation of Article 23, paragraph 1, second sentence, of Regulation (CE) n° 1008/2008 of 24 September 2008, which establishes the common rules for the operation of airlines services within the European Union.

In its decision handed down on 15 January 2015, the CJEU considered that airline companies using an electronic reservation system for flights leaving from an airport in the European Union, must specify the final price to be paid by the passenger at every stage of the booking, including the first stage, when passengers are comparing and selecting flights.

The CJEU specified that this extended beyond the airline services chosen by the passenger (such as on-board meals) to all the airline services for which the price was displayed. The total price shown must therefore include not only the ticket price, but also the taxes and any possible surcharges.

This interpretation supports the purpose and objectives of the Regulation, which is intended to enable passengers to be able to effectively compare the prices of different airline companies.

Source: CJEU, 15 janvier 2015, Air Berlin plc & Co. Luftverkehrs KG, C-573/13.

CONTRACTS

Private Contracts – Conseil d’État rules that the annulment of an administrative act preliminary to a contract does not necessarily prompt the automatic termination of the contract

In two separate decisions, the municipal council of Uchaux authorised its mayor to enter into a purchase agreement for a building and a loan agreement to finance the acquisition. The council then signed a commercial lease for the restaurant situated on the main floor of the building. The loan agreement was governed by administrative law, the other agreement and the lease were governed by ordinary law.

These two decisions were annulled by the administrative Tribunal of Nîmes, which found that the council did not demonstrate the existence of a local public interest to justify taking on the restaurant business. The Court of Appeal of Marseille upheld the lower court’s decision and enjoined the parties to either proceed to a mutual termination of the contracts or have the judge of ordinary law declare them terminated.

On appeal, the Conseil d’État examined the power of the administrative judge to rule on a contract governed by ordinary law. In this case, the two decisions taken by the municipal council of Uchaux were considered preliminary acts, governed by administrative law and necessary for the council to be able to enter into these contracts. The question before the Conseil was whether or not the administrative judge had jurisdiction to rule on the termination of the contracts once the preliminary acts of the municipality had been annulled, as the contracts were governed by ordinary law.

In a decision from 29 December 2014, transposing its Ophrys decision (CE 21 February 2011, n° 337349) to contracts governed by ordinary law, the Conseil d’État stated that the administrative judge was to treat contracts governed by ordinary law in the same manner as contracts governed by administrative law, and specified that the annulment of an administrative act preliminary to a contract does not necessarily prompt the automatic termination of the contract. The administrative judge should, therefore have examined whether or not the error that followed from the contract can be rectified and, if so, the parties should rectify it. If the error cannot be rectified, then the administrative judge must assess, taking into account the nature of the irregularity and the existence of any reason of general interest that might prevent the termination of the contract, whether or not it becomes necessary to enjoin the parties to go before the judge of ordinary law and have the contract terminated.

The Conseil d’État considered that, based on the reason for the annulment of the preliminary acts—the failure to demonstrate the existence of a public interest in the restaurant business—and the fact that none of the contracts in question had as their objective the council taking on the restaurant, the annulment of the decisions did not involve the termination of the contracts, nor a referral to the judge who had jurisdiction over the contract.

Source: CE, 29 décembre 2014, Commune d’Uchaux, n° 372477, Recueil Lebon.

Public Contracts – The national agreement between private medical transporters and State health insurers is a public contract

In a decision from 8 December 2014, the Tribunal of Conflicts overruled its previous decision in Descarrega (TC 4 May 2009, Descarrega c/ CPAM de la Marne, n°3686), under which the Tribunal considered that a national agreement entered into between professional organisations that represent private medical transporters and State health insurance offices, constituted private contracts governed by ordinary law.

In December 2014, however, the Tribunal of Conflicts found that, since the purpose of the agreement at issue was for the public entity to control the exercise of the contract (for health insurance purposes) the contract was governed by administrative law.

Source: TC, 8 décembre 2014, Chambre nationale des services d’ambulance c/ Union nationale des caisses d’assurance maladie et autres, n° 3980, Recueil Lebon.

Publics Contracts Interim Relief Procedure – The contractual relationship is established from the signing of the contract, even if it not enforceable

After having signed an operating agreement for communal procurement contracts, the Mayor of the municipality of Ouistreham informed the co-contracting company of his intention to terminate the contract. The company requested that the interim judge find that the Mayor was obligated to honour the contract, in line with the case law established by Beziers II.

The question considered by the court was whether or not the contractual relationship had already been established, as the contract was not yet enforceable because it had not yet been delivered (the final stage in formalising a contract) to the co-contracting company.

In a judgment handed down on 26 December 2014, the interim judge found that, if both parties signed the contract, then the contract was entered into and a contractual relationship established between the two parties, despite the fact that the contract had never been delivered to the company by the Mayor.

Source: TA Caen, Ord., 26 décembre 2014, Société Géraud et associés, n° 1402337.

Pre-Contract Interim Relief Procedure – Pre-contract interim judge does not have jurisdiction over lease agreements relating to public property

Tisséo, a public industrial and commercial business, wished to enter into a contract for the sale of advertising space on buses and metro trains in Toulouse. Because it thought the contract qualified as public procurement, Tisséo launched a negotiated procedure as required by the French Public Procurement Code.

A rejected candidate brought an action before the pre-contract interim judge to annul the tender proceedings.

The Conseil d’État decided that, given the purpose of the contract was to issue exclusively to the co-contracting party the rights to advertise on public property in exchange for a fee, the contract was to be regarded as a simple lease agreement on public property.

Next, the Conseil noted that lease agreements on public property were not subject to Article L. 551-2 of the Administrative Code, which authorises referrals to the pre-contract interim judge. Only the ordinary interim judge has jurisdiction over cases relating to procedural deficiencies and, once the contract is signed, to the contract. On that basis, the Conseil ruled that the pre-contract interim judge did not have jurisdiction over this case, annulled the decision of the pre-contract interim judge and rejected the candidate’s application.

Source: CE, 3 décembre 2014, Etablissement public Tisséo, n° 384170, Tables Lebon.

Pre-Contract Interim Relief Procedure – When it fails to reject a company’s application as inadmissible, the public entity cannot base its defence on the incomplete nature of the application

In a case brought by a rejected applicant, the interim judge of Nantes cancelled the bidding procedure organised by the Department of Loire-Atlantique for the award of a public contract relating to the construction of a middle school. The judge reasoned that the Department did not sufficiently define the minimum requirements of the applicants.

On appeal, the Department claimed that the claimant company, when bidding for the contract, did not submit the application form properly. It had neglected to include the signature of the person responsible for the company and, therefore, its application was inadmissible. On that basis, the Department argued that the claim brought before the interim judge was also inadmissible since, in any event, the contract could not awarded to the claimant company.

The Conseil d’État rejected the Department’s argument, noting that the Department could have rejected the application of the claimant company or requested the rectification of the irregularity of its application. The Department therefore could not rely upon the incomplete nature of the company’s application to support its arguments before the judge. As a result, the Conseil d’État cancelled the interim judgment and upheld the bidding procedure.

Source: CE, 3 décembre 2014, Département de la Loire-Atlantique, n° 384180, Tables Lebon.

Pre-Contract Interim Relief Procedure – The pre-contract interim judge may also be the ordinary interim relief judge of the same contract

In a decision handed down on 19 January 2015, the Conseil d’État found that the pre-contract interim judge who ordered the proceedings to be resumed and the contract be examined could, without contravening the principle of impartiality, rule on a later petition for the suspension of the contract.

The Conseil also clarified that the principle of impartiality does not prevent a pre-contract interim judge who has already annulled a tender procedure to rule on the request for suspension of the contract awarded after the resumption of the tender procedure, in conformity with the first decision.

Source: CE, 19 janvier 2015, Société Ribière, n° 385634.

Delegation Of Public Service – Conditions under which the delegating authority must itself undertake the commitments it had delegated

The council of the municipality of Propriano entered into a public service delegation agreement (DSP) with Yacht Club International du Valinco relating to the construction and operation of Propriano harbour. Owing to a fault committed by Yacht Club, however, the council terminated the agreement.

In its decision dated 19 January2015, the Conseil d’État specified the conditions under which a delegating authority is required to undertake the commitments it delegated. If the contract relates to the operation of a public service, the public entity charged with guaranteeing the continuity and proper functioning of that service must take over. This obligation is, however, limited by the reasonableness of the contract’s object, conditions of execution and length, and does not oblige the delegating authority to take on debts, or benefit from credits, generated under the contract.

Source: CE, 19 décembre 2014, Commune de Propriano, n° 368294, Recueil Lebon.

Public-Private Partnerships (PPP) – PPP deemed illegal for a municipal project in Bordeaux

On 22 December 2011, the Mayor of Bordeaux entered into a PPP agreement with Project Ubercité to construct an energy efficient office building. The Major justified the use of a PPP by invoking the urban, technical and financial complexities of the project. The national business union contested this justification, claiming that the conditions under which a public authority may enter into a PPP had not in fact been met.

The Administrative Tribunal of Bordeaux found against the Mayor, on the basis that i) urban complexity was inherent in any project undertaken in a city of the size of Bordeaux, ii) more than 100 energy-efficient buildings had been successfully constructed since 2011 and iii) the Mayor had not established any financial complexity.

Source : TA Bordeaux, 11 février 2015, Syndicat national des entreprises du second œuvre, n° 1200574.

Public-Private Partnerships – As of 1 January 2015, only the State can enter into certain PPPs

The law of 29 December 2014, which relates to the public financing program for the period 2015 to 2019, was published in the Official Journal on 30 December 2014.

Article 34 of the law provides that, as of 1 January 2015, only the State may enter into PPPs on behalf of the central governments, public entities public health establishments and certain health organisations, if the object of these contracts is to build, modify or renovate public buildings or works, equipment or intangible assets responding to a specific need of the public authority, and which is intended to be used or owned by that public authority.

The agreement of such contracts must be preceded by a preliminary project assessment conducted by the relevant Ministry, and the project must be sustainable in relation to the consequences on the public finances and the authority’s financial situation.

As of 1 January 2016, before entering into a PPP, local authorities must undertake a preliminary evaluation to be submitted to either the competent State authorities or the Minister of the Economy’s PPP support committee for analysis of the project’s financial impact on the region.

Source: Loi n° 2014-1653 du 29 décembre 2014 de programmation des finances publiques pour les années 2015 à 2019.

Public Procurement – Conseil d’État specifies the conditions under which a local authority may apply for a public procurement

In 2006, the Department of Vendée organised a tender procedure for a public contract relating to the dredging of the Lay estuary. The Department of Charente-Maritime applied for and was awarded the contract. This was contested by Armour SNC.

Although no law or principle prohibits a public entity from applying for a public procurement contract because of its nature as a public entity, Conseil d’État case law has decided certain conditions: the takeover of the economic activity must be done in the name of public interest and must not run contrary to the freedom of competition. (CE, Avis contentious, 8 November 2000, Société Jean-Louis Bernard Consultants, n° 222208 ; CE, 31 mai 2006, Ordre des avocats au barreau de Paris, Leb. p. 272)

In Département de l’Aisne 10 July 10 2009 (n° 324156), the Conseil ruled that simply submitting an application for a procurement contract did not constitute a takeover of an economic activity that necessitated justification in the name of public interest.

In relation to Charente-Maritime, the Conseil d’État specified the circumstances under which a local authority may apply for a procurement contract, subject to the conditions above. In particular, the local authority must act in accordance with the “public interest”, which the Conseil defined as the authority’s public service mandate, and resource and finance the project without compromising those public interests.

The Conseil d’État also noted that the applicant must not distort the conditions of competition, specifically the calculation of the price, by using any advantages which the local authority may benefit from through extra resources or means allotted to it under its mandate to serve the public.

Source : CE, Ass., 30 décembre 2014, Société Entreprises Morillon Corvol Courbot, n°355563, Recueil Lebon.

Public Procurement – Practical guidance on the method to evaluate the loss of potential earnings for an applicant irregularly ousted

In a decision from 19 January 2015, the Conseil d’État specified the method for calculating damages owed to an applicant who had a serious chance of being awarded a procurement contract but was instead irregularly ousted. The Conseil reaffirmed that damages must equal the loss of potential earnings.

The damages must be therefore calculated on the basis of the net profit the contract would have brought to the company. As the intention of this sum is to replace a loss of commercial revenue, it is therefore also subject to taxation.

Source: CE, 19 janvier 2015, Société Spie Est, n° 384653, Tables Lebon.

PUBLIC HEALTH

Embryonic Stem Cell Research – Biomedicine Agency obliged to state the reasons for giving authorisation for embryonic stem cell research

Article L. 2151-5 of the Code of Public Health establishes the prohibition of research on human embryonic stem cells, but also provided for an exception to this rule if the research is likely to bring about major therapeutic advances and there are no comparable alternative methods available.

On 20 June 2008, on the basis of this exception, the Biomedicine Agency authorised the implementation by the National Institute for Health and Medical Research of a research protocol using human embryonic stem cells.

In its decision from 23 December 2014, the Conseil d’État recalled that, under Article 2 of the law of 11 July 1979, individual decisions derogating the general rule fixed by law or regulation must be supported. Stating that this provision applied to the authorisation of research involving embryonic stem cells, it ruled that the Biomedical Agency must provide the reasoning behind its decision to authorise research on human embryos.

The Conseil d’État clarified the conditions under which the derogation provided for in Article L. 2151-5 could be granted.

First, the Conseil d’État ruled that, when assessing if the research for which the authorisation is requested could not be undertaken by an alternative method of comparable efficiency, the Biomedicine Agency has to take into consideration all the scientific research that exists up until the date of its decision.

Second, the Conseil d’État explained that the burden of proof lied on whoever solicits the authorisation, and the applicant must provide all the information necessary to demonstrate that the proposed research could not be undertaken using an alternative method of comparable efficiency.

Source: CE, 23 décembre 2014, Agence de Biomédecine, n° 360958, Tables Lebon.

French Sunshine Act – Conseil d’État specifies requirements for health care companies under the Sunshine Act

Law no. 2011-2012 of 29 December 2011, also known as the French Sunshine Act, introduced into French law certain disclosure obligations imposed on health care companies (HCC).

The French Medical Board and a nonprofit organisation challenged the law’s implementing Decree of 21 May 2013 and its explanatory circular of 29 May 2013. On 24 February 2015, the Conseil d’État annulled some of the challenged provisions and provided useful clarifications on the scope of the disclosure obligations.

Under the 21 May 2013 Decree and the explanatory 29 May 2013 circular, there were three exceptions to the obligation to disclose (i) benefits in kind or cash exceeding €10 and (ii) written agreements:

• Payments made as reasonable compensation for services rendered and for salaries did not have to be disclosed.
• Companies that manufacture or commercialise cosmetic and tattoo products did not have to disclose agreements other than those relating to the conduct of health and safety work assessments and biomedical or observation research on these products.
• Companies that manufacture or commercialise health products did not have to disclose commercial sales agreements relating to goods and services.

Under the Conseil d’État decision of 24 February 2015, the two first exceptions no longer apply and the scope of the third exception has been clarified. The other main changes coming out of this decision are as follows.

All payments made from 1 January 2012 by HCCs to health care professionals (HCPs) that do not constitute salaries must now be disclosed.

The Conseil d’État specified the limits of the concept of “benefit in cash or in kind” that must be disclosed. The 2013 circular had given a narrow definition of this concept, stating that it excluded payment made as reasonable compensation for services rendered and for salaries. According to the Conseil d’État, however, the provisions of Law no 2011-2012 exclude only salaries received by HCPs working exclusively as employees of HCCs. The General Advocate, speaking before the Conseil d’État, confirmed that the exclusion relates to an “HCP who works exclusively as an employee in an HCC.”

Consequently, the Conseil d’État annulled the provisions of the explanatory circular, which disregarded both Law no. 2011-2012 and the 21 May 2013 Decree by excluding from the scope of the disclosure obligations payments made as reasonable compensation for services rendered.

Companies manufacturing or distributing non-corrective contact lenses, cosmetic or tattoo products must now disclose all agreements concluded with French HCPs, regardless of the object of the agreement.

With regard to companies that manufacture or distribute non-corrective contact lenses, cosmetic or tattoo products, the Decree limited the scope of the disclosure obligations to agreements concluded with HCPs relating to the conduct of health and safety work assessments and biomedical or observation research on the products. The Conseil d’État stated that, by limiting the scope of the disclosure obligations, the Decree disregarded the provisions of Law no. 2011-2012, and therefore annulled the relevant regulatory provisions. For this reason, only commercial sales agreements of goods and services in which the HCP is the buyer are now excluded from the disclosure obligations.

The Conseil d’État clarified the content of Article R. 1453-2 of the French Code of Public Health, which excluded from the disclosure obligations commercial sales agreements of goods and services. Even though this Article was explained in the circular, it remained unclear which agreements it really targeted. According to the judges, this exemption only relates to commercial sales agreements of goods and services in which the HCP is the buyer. Furthermore, despite the rather unclear wording of the Conseil’s decision, it must be noted that, in light of the words of the General Advocate, the decision clarified that this exemption does not apply to purchase by HCCs of advertising space in medical journals.

Since the Conseil d’État did not time-differentiate the effects of its decision, its 24 February 2015 interpretation of the Sunshine Act is deemed to apply to all conventions concluded and benefits paid from 1 January 2012. HCCs should therefore now disclose the following:

• All payments made from 1 January 2012 by HCCs to HCPs for services rendered that do not constitute salaries.
• All agreements concluded from 1 January 2012 between companies manufacturing or distributing non-corrective contact lenses, cosmetic or tattoo products, and French HCPs.
• Commercial sales agreements of goods and services in which the HCP is not the buyer.

In accordance with the principle of legal certainty, HCCs will be given reasonable and sufficient time to adapt to the regulation as interpreted by the Conseil d’État, during which period of time they will not be sanctioned.

Source: CE, 24 février 2015, CNOM, n° 369074, Tables Lebon.

COMPARATIVE LAW

Italian Anti-Corruption Authority –Italian Anticorruption Authority guidelines on public procurement of postal services and draft guidelines on project financing

On 9 December 2014, the Italian Anticorruption Authority published its guidelines on the public procurement of postal services (the Postal Services Guidelines), which aim to clarify the awarding procedures of public contracts in the postal sector, following the liberalisation of the postal market.

The Postal Services Guidelines set out the operational rules for awarding contracts to authorities and economic operators on issues such as, inter alia, the nature of the awarding procedure and the scope of the contract (which should be unbundled from the other upstream/downstream related services), the information to be supplied in the invitation to tender, the determination of the starting tender price and the amount of the penalties.

The Guidelines point out that Poste Italiane S.p.A. (the former incumbent) is currently the only operator that can cover the entire national territory, while the private operators can only guarantee a regional coverage. In order to attain the full liberalisation of the market, therefore, awarding authorities should consider dividing the invitations to tender into several lots, e.g., on the basis of the delivery areas, identified by postal code numbers, so the operators can bid for the areas that they are able to serve. The services that the operator cannot perform directly or indirectly itself should be carved out from the procurement agreement and entrusted to Poste Italiane, which should not, however, manage more than 20 per cent of each lot.

The Italian Anticorruption Authority also published, on 12 January 2015, its draft guidelines on project financing (the Draft Project Financing Guidelines), which were under consultation up until 2 March 2015. The Draft Project Financing Guidelines, which are intended to also apply to PPPs and strategic infrastructures, update and consolidate the current 2009 Guidelines on Project Financing and the 2010 Resolution on public works concessions of the former Public Contracts Supervising Authority (now the Anticorruption Authority).

The Draft Project Financing Guidelines deal with the procedures for project financing and the awarding of public works and services concessions, from the establishment of the procedural calendar of the awarding authorities to the requirements of the concession agreement. They do not amend the existing legal framework, but are intended to provide operating tools to comply with the duties set out in the 12 April 2006 Legislative Decree No 163 on public contracts, implementing Directive 2004/17/EC coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors, and Directive 2004/18/EC on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts.

Italian Communications Authority – The Italian Communications Authority sector inquiry into the audiovisual production market

On 13 January 2015, the Italian communications Authority (AGCOM) opened a sector inquiry into the audiovisual (AV) production market—focusing on European independent productions—and published a consultation document and questionnaire for stakeholders.

The aim of the sector inquiry is to carry out a review of the structural conditions of the AV sector which, according to the consultation document, is undergoing significant changes, owing to the growth of digital technology and the broadening of the televisual offering.

Because of the increased availability of transmission capacity, which is as a result of the expansion of digital and satellite television, national broadcasters have developed a more diverse and specialised offer, encompassing generalist, semi-generalist and dedicated channels, e.g., children, information, culture, sport, music and TV sales channels. This has led to an increase in the demand for specialised AV products, with a consequent impact on compliance with the quotas reserved to European and independent AV productions by the Audiovisual Media Services Directive 2010/13/EU, implemented in Italy by Legislative Decree No 177 of 31 July 2005.

The outcome of the sector inquiry will allow AGCOM to review the competition dynamics in the sector and ascertain whether or not there is an effective promotion of European audiovisual works created by producers who are independent from broadcasters.

AGCOM expects to complete the sector inquiry by 6 May 2015.

The consultation document and the questionnaire for stakeholders are available at here.