Page - 9 - in Austrian Law Journal, Volume 1/2019

ALJ 2019 Article 106 (2) TFEU in Case Law 9 In sum, despite the allegedly wide discretion of the Member States to identify, provide, commission and organize such services, it is the EU and its institutions that ultimately determine what constitutes an SGEI and what does not, also outside harmonized sectors. The EU determines which of the activities that are generally subject to competition may qualify for a derogation based on Article 106 (2) TFEU. This is not alarming in itself, but it illustrates a shift in the balancing of interests and control of SGEI in favour of the EU that should not be overlooked. III. A Customized and Limited Derogation for SGEI While SGEI as economic activities enter the scope of application of EU competition law through the front door, Article 106 (2) TFEU provides a back door out. To be specific, Article 106 (2) TFEU allows a derogation from competition rules (and other provisions of EU primary and secondary41 law) for entities entrusted with the operation of SGEI, if the application of these rules would ‘obstruct the performance […] of the particular tasks assigned to them’ and the development of trade is not ‘affected to such an extent as would be contrary to the interests of the Union’.42 In the following sections, this derogation is examined more closely. After explaining the understanding of this rule as a ‘balancing test’ (see III.A infra), its application in the presence and absence of secondary and soft law is contrasted (see III.B infra). It is argued that Article 106 (2) TFEU only allows a customized and limited derogation that is increasingly shaped by secondary and soft law and complements the general ‘compatibility test’ performed to identify an economic activity (see II.A.3 supra). A. From a Narrowly Conceived Exception to a Balancing of Interests Formerly neglected, Article 106 (2) TFEU gained much importance as a derogation provision in the context of the liberalization and privatization of public undertakings in the utility markets in the 1980s and 1990s. Today it is the only primary law provision on SGEI that is directly relied on by the CJEU on a regular basis. Prior to 1993, the CJEU used this provision to strengthen competition and applied Article 106 (2) TFEU in a very restrictive manner, in so far as it required the fulfilment of the particular public service task to be incompatible with competition rules.43 In the case Corbeau however, it abandoned this approach. It no longer gives priority to undistorted competition over SGEI by limiting the chances of a derogation as much as possible,44 but stipulates that a derogation Similarly, as regards an existing ‘market failure’ as a precondition for an SGEI: WOLF SAUTER, PUBLIC SERVICES IN EU LAW 153 (2014). 41 The General Court appears to approve of such an interpretation in Case T-128/98 Aéroports de Paris v Commission, ECLI:EU:T:2000:290, para 228. Likewise, Alexis Komorowski, Der allgemeine Daseinsvorsorgevorbehalt des Art. 106 Abs. 2 AEUV, EuR 310, 324 (2015). 42 Many details regarding the impact of various financing models for SGEI on competition are provided by a recent study (2016) prepared by Ecorys for the Commission, available at http://ec.europa.eu/competition/publications/reports/kd021641enn.pdf (last visited Feb. 15, 2019). 43 See for example Case C-41/90 Höfner, ECLI:EU:C:1991:161, para 24; Case 155/73 Sacchi, ECLI:EU:C:1974:40, para 15; Case C-260/89 ERT, ECLI:EU:C:1991:254, para 33; Case 41/83 Italy v Commission, ECLI:EU:C:1985:120, para 33 (emphasis added). For further case law, see BUENDIA SIERRA, supra note 35, at 305 – 316. 44 Equally Tony Prosser, Competition Law and Public Services: From Single Market to Citizenship Rights?, 11 EPL 543, 551 (2005).