Seite - 3 - in Austrian Law Journal, Band 1/2019

ALJ 2019 Article 106 (2) TFEU in Case Law 3 This paper explores how this multi-level balancing of interests is conducted in the context of Article 106 (2) TFEU – a provision that represents the original (legislative) compromise between the more welfare-oriented interests of some Member States and the market-focused interests of other Member States and the EU, and one which has been crucial to the balancing of conflicting interests ever since. On the one hand, this work takes a broad perspective and looks beyond the derogation stipulated by Article 106 (2) TFEU by inquiring into the latter’s scope of application. Arguably, how the relevant interests are balanced is also affected by the range of activities that are subject to EU competition law in general and are in principle eligible for a derogation. On the other hand, this article focuses on how Article 106 (2) TFEU is applied and construed by the CJEU and the Commission as main actors. The balancing of the aforementioned interests, as it is reflected in primary law or sectoral secondary legislation or horizontal soft law in general falls outside the scope of this work (except if such legislation is interpreted in the context of Article 106 (2) TFEU). In a nutshell, this paper argues that the EU managed to internalize the aforementioned struggle of interests in the context of Article 106 (2) TFEU in two ways. On the one hand, the EU, represented by the CJEU and the Commission, has become a key player in public services law which firmly controls this area of law and ‘calls the shots’. The autonomy and margin of discretion which the Member States enjoy regarding the provision, commission and organization of public services is increasingly restricted. Technically, the CJEU and the Commission are not trespassing the boundaries of EU law by venturing into areas that are (still) subject to Member State law. However, they make sure that EU law (as opposed to national law) covers, shapes and regulates public services as far as possible, so that the EU institutions have the final say. This is particularly visible regarding the scope of application of competition law in general and Article 106 (2) TFEU in particular. A broad understanding of an ‘economic activity’ and extensive transparency requirements regarding the entrustment of public service obligations ensure that a large number of public services are subject to the EU law on SGEI and under scrutiny of the Commission and CJEU (see part II infra). On the other hand, as regards the substantive balancing of welfare and market interests, this paper identifies a ‘balancing test’ pursuant to Article 106 (2) TFEU which tolerates only a ‘customized derogation’ from competition rules that replaced both, the strict approach in favour of competition before Corbeau and the rather lenient approach after this landmark decision. Services that are generally subject to the market rules due to the economic activity involved (‘general compatibility test’) may not be exempted from these rules in a generalized and undifferentiated way, but only in so far as it is absolutely necessary and proportionate stricto sensu to allow functioning SGEI in a functioning market. A ‘customized derogation’ thus complements the ‘general compatibility test’, which identifies economic activities (SGEI) in the first place, and reconciles market and welfare interests by supporting a market-based approach for the provision of SGEI that recognizes the intrinsic value and particularities of such services by granting customized and limited derogations only (see part III infra).