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Compensation for providing a service of public interest does not lead to state aid problems

Compensation for providing a service of public interest does not lead to state aid problems

A subsidy scheme launched by the minister for Health, Welfare and Sport for carrying out non-invasive prenatal tests (NIPTs) came into effect on 1 April 2017. Under this subsidy scheme, most of the expenses incurred for NIPTs for pregnant women will be compensated, provided these tests are taken at a university medical centre. The court in preliminary relief proceedings at the District Court in The Hague found in a ruling of 26 January 2016 that the subsidy scheme amounts to state aid, but that despite this it is not forbidden. The subsidy scheme benefits from the exception to the state aid prohibition that is defined in the Services of Public Interest Exemption Decision.

The dispute

Gendia, a Belgian supplier of NIPTs, brought the preliminary relief proceedings. Gendia is offering NIPTs (in Belgium) for € 590. Under the subsidy scheme, university medical centres can offer NIPTs to pregnant women in the Netherlands for € 175. Because it is not a university medical centre, Gendia is not eligible for subsidy and it is at a competitive disadvantage in the Netherlands vis-à-vis university medical centres.

That the subsidy scheme amounts to state aid is not disputed. Gendia has taken the position that the subsidy scheme is not allowed to benefit from the exception to the state aid prohibition ensuing from the Service of Public Interest Exemption Decision. In Gendia’s opinion a service can only be classified as service of public interest if there is market failure, i.e. market participants do not offer the service. This is not the case here because Gendia offers NIPTs at market conditions (in Belgium). So Gendia is arguing that the minister of Health, Welfare and Sport has wrongly relied on the Service of Public Interest Exemption Decision.

The opinion of the court in interlocutory proceedings

The court in interlocutory proceedings rejected Gendia’s argument. According to legal precedent and the Services of Public Interest Exemption Decision, the Netherlands as a Member State has ample freedom of discretion about whether or not to qualify a service, such as offering NIPTs, as a service of public interest. According to the court in interlocutory proceedings, the fact that private parties already provide a service does not always constitute an obstacle to the Member State (nevertheless) designating that service as a service of public interest. Referring to the European Commission’s Notice on Services of Public Interest, the court in interlocutory ruled that this could also be the case if the market is not offering the service in a satisfactory way, for instance, because the price is too high. In this case, the minister of Health, Welfare and Sport substantiated his claim by arguing that the subsidy is necessary to create (i) equal access to the NIPT for women from various income groups; and (ii) freedom of choice between the various tests that are available (combination test/NIPT). According to the court in interlocutory proceedings, the other conditions in the Services of Public Interest Exemption Decision had also been met, namely:

  • the university medical centres are the ones tasked with actually providing a service of public interest;
  • the compensation mechanism is described in the subsidy scheme;
  • the parameters for calculating, monitoring and revising the compensation have been stated; and
  • the subsidy includes an arrangement to prevent overcompensation.

The court in interlocutory proceedings dismissed Gedia’s demand to cease all activities under the subsidy scheme.

Conclusion and recommendations

For central and decentralised authorities, the court in interlocutory proceedings ruling confirms that they have ample discretion to designate services of public interest; a lack of market solutions is not a precondition for the applicability of the Services of Public Interest Exemption Decision. This (more or less) gives the authorities the option to invoke the Services of Public Interest Exemption Decision as they see fit.

The state aid amounts that can (lawfully) be granted under the Services of Public Interest Exemption Decision are substantial. For instance, in principle a maximum amount of 15 million euro per annum applies to companies who are tasked with providing a service of public interest (provided they operate in the transport sector). Many decentralised authorities will not have access to these kinds of budgets. For businesses operating in the healthcare sector who are tasked with providing a service of public interest, no limit at all has been set for the extent of the compensation.

Having said that, caution is advisable. The fact is that the Services of Public Interest Exemption Decision (irrespective of the extent of the compensation) is only applicable if all the (substantive and procedural) requirements have been met before the support measure becomes effective. If they are not met, then there is a risk that the compensation granted to the service of public interest will have to be recovered from the beneficiary. In other words, it is crucial to prepare state aid under the Services of Public Interest Exemption Decision carefully.

By Sjaak van der Heul

 

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