Commission Decision (EU) 2021/2182 of 6 March 2020 SA.41727 (2016/C) (ex 2016/NN) (ex 2015/CP) on the measures in favour of Empresa de Manutenção de Equipamento Ferroviário, S.A. (EMEF) (notified under document C(2020) 1254)Text with EEA relevance.

(b) Establish agreements deemed necessary or convenient with other companies or entities to better satisfy public needs and service requirement, which are its responsibility; (…)

(c) Undertake all actions deemed necessary or convenient to achieve its objective.

(67) Article 26(1) of the Articles of Association of CP reads: It is the exclusive responsibility of CP E.P.E to collect revenue from its activity which is provided for in accordance with these Articles of Association and the law, as well as to carry out all the expenditure required to meet its objective.

(68) The Portuguese authorities emphasised that the Portuguese Government has not interfered directly or indirectly with the management of EMEF, not even by means of the sole shareholder’s position of CP.

(69) Portugal submitted that CP’s decisions to invest in EMEF were, following the initiative of EMEF, adopted by CP’s Management Board and formally endorsed at EMEF’s annual general meeting (in its capacity of sole shareholder), and not by government acts. The shareholder position in EMEF is carried out by CP, and not by the Portuguese governmental authorities, under which terms CP has the same powers of any other private controlling shareholder provided for by private company law.

(70) Similarly, CP’s decisions concerning its subsidiaries involve no direct or indirect intervention by the State: they are taken by CP’s Management Board without direct or indirect intervention by the government, which does not interfere in CP’s management decisions.

(71) There are no specific reporting requirements of CP to the Portuguese Government as regards specifically EMEF and the actions undertaken with regard to EMEF. The Portuguese authorities noted that the specific investments made by CP in EMEF were not included in the PAOs. In fact, until 2011 references to EMEF in those documents are indirect, and were made in relation to the cost of maintenance of rolling stock.

(72) Portugal stated that CP’s decisions to invest in EMEF were not communicated to, decided or approved by the Portuguese government. The decisions to invest in EMEF were made by CP within the scope of its autonomy and independence in corporate management in particular as regards its relationship with its subsidiary companies. These decisions were taken by CP in line with the undertaking’s self-sustainability and through self-financing.

5.1.6.

Concerning the role of the Inspectorate-General of Finance

(73) The Portuguese authorities submitted that financial control over CP exercised by the Inspectorate-General of Finance (IGF), did not involve decisions on the Measures taken by CP in respect of EMEF. IGF receives on an annual basis the annual reporting of CP (i.e. the reports and annual accounts for each year), so that IGF can issue an opinion and then submit those documents for review to the government ministers responsible for finance and transport. Those documents provide no information on CP’s considerations of investments in EMEF.

5.1.7.

Concerning the financing of CP at the time of the granting of the Measures

(74) The Portuguese authorities also informed the Commission that in the period when the Measures were granted the State made no capital increases nor granted any direct loans to CP.

(75) It was also explained that the financial resources invested in EMEF in the period when the Measures were granted essentially came from loans obtained by CP from Portuguese commercial banks.

5.1.8.

Concerning EMEF’s decision making bodies

(76) The Portuguese authorities explained the structure of EMEF’s decision making bodies, which are the General Shareholders Meeting and the Board of Directors. Between 2005 and 2010, EMEF also had an Executive Committee consisting exclusively of persons who did not belong to CP’s management.

(77) The General Shareholders’ Meeting consists of EMEF’s shareholder, i.e. CP. As of March 2013, the Board of Directors consists of two members, who are selected out of the five

Until February 2013, the Board of Directors of CP consisted of five members, from February 2013 out of four members.

members of the CP’s Management Board. The members of the Board of Directors are elected at the EMEF’s General Shareholders’ Meeting. For the period prior to 2013, the Board of Directors of EMEF comprised three to five members, who were not necessarily representatives of its sole shareholder CP.

(78) The Portuguese authorities stressed that, unlike the Management Board members of CP (who are appointed by the government), the members of the Board of Directors of EMEF are elected at EMEF’s General Shareholders’ Meeting and are not appointed by the State.

5.2.

Portugal’s position concerning MEOP compliance of the Measures

(79) After the opening decision, Portugal submitted two due diligence reports by SaeR – Sociedade de Avaliação de Empresas e Risco

SaeR – Sociedade de Avaliação de Empresas e Risco is a Portuguese consulting company, which adviced EMEF and CP on restructuring EMEF.

(SaeR)

Due diligence report, dated 25 June 2004, and Plan EMEF/SaeR. Three-year period 2006-2008, dated December 2005, including a review dated August 2006.

,minutes of the meeting and three ex-post studies prepared by Deloitte & Associados SROC, S.A. assessing Measures 1, 2 and 3 separately.

(80) Portugal argued that CP’s capital contributions were made and decisions were taken as a private market economy operator would have done. Portugal claimed that CP took all of its decisions concerning EMEF based on a strategic ex-ante and in-depth analysis of EMEF’s activities, with the aim of supporting EMEF, taking into account its market needs and future perspectives leading to profitability.

(81) Portugal emphasized that the following specific circumstances should be taken into account for the assessment of CP’s conduct with the MEOP:

(1) EMEF operated in a loss-making sector, which was characterised by an incipient national railway repair market with limited opportunities and extremely dependent on State client for a long time;

(2) There has been an absence of competing operators with installed capacity and alternative know-how comparable to those of EMEF;

(3) CP’s overriding need to maintain its fleet in order to comply with the public service obligation to provide passenger rail services;

(4) EMEF was not set up ex novo but it inherited unsuitable personnel and costs structure which partly compromised its performance and immediate sustainability;

(5) The majority of EMEF’s work was performed in favour of CP;

(6) EMEF’s relationship with CP, which had to comply with public service obligations, had a significant impact on EMEF’s maintenance and repair services, mainly up to 2006, as it was difficult and time-consuming for EMEF to achieve the desired autonomy with respect to setting prices, defining its activity and enjoying organisational freedom.

5.3.

Portugal’s position concerning qualifying EMEF as a firm in difficulty

(82) Portugal argued that if the Commission wished to analyse the Measures with respect to the 2004 R&R Guidelines, it would be necessary to assess whether EMEF would have the capacity – taking into consideration its own resources and those which CP would be willing to provide – to bear the losses it was suffering, and to restore viability of its business model without the intervention of the government in the form of State aid.

1. ASSESSMENT OF THE MEASURES

6.1.

Introduction

(83) According to Article 107(1) TFEU, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the Internal market. The criteria laid down in Article 107(1) TFEU are cumulative. In order to determine whether a measure constitutes State aid, the following conditions have to be fulfilled:

the measure is granted by the State and through State resources,

the measure confers an advantage to an undertaking,

the advantage is selective, and

the measure distorts or threatens to distort competition and is liable to affect trade between the Member States.

(84) The first condition to be considered is whether CP’s financial support to EMEF was granted by the State or through State resources. According to the case-law of the Court of Justice in the Stardust Marine case

Judgment of 16 May 2002, France v Commission, C-482/99, EU:C:2002:294.

, this criterion is fulfilled if, on the one hand, it concerns State resources, and if, on the other hand, their granting is imputable to the State, that is to say Portugal.

6.2.

Aid granted through State resources

(85) State resources within the meaning of Article 107(1) TFEU are the resources of a Member State and of its public authorities as well as the resources of public undertakings on which the public authorities can exercise, directly or indirectly, a controlling influence.

(86) As pointed out by the Court of Justice, since the resources of public undertakings are subject to the control of the State and are therefore at its disposal, those resources fall within the scope of the concept of State resources, within the meaning of Article 107(1) TFEU

Case C-656/15 P, Commission/TV2 Denmark, point 47.

.

(87) CP is 100 % owned by the State. The Commission therefore concludes that CP’s financial support to EMEF implied the use of State resources even if in the period when the measures were granted CP financed itself not by direct grants from the State but through credits obtained on the commercial market.

6.3.

Imputability to the State

(88) As regards imputability, in Stardust Marine the Court stated that Even if the State is in a position to control a public undertaking and to exercise a dominant influence over its operations, actual exercise of that control in a particular case cannot be automatically presumed. A public undertaking may act with more or less independence, according to the degree of autonomy left to it by the State. […] Therefore, the mere fact that a public undertaking is under State control is not sufficient for measures taken by that undertaking, such as the financial support measures in question here, to be imputed to the State. It is also necessary to examine whether the public authorities must be regarded as having been involved, in one way or another, in the adoption of those measures

Case C-482/99, paragraph 52.

.

(89) It is therefore clear from the case-law of the Court of Justice that the criterion of imputability to the State must be examined by the Commission on a case-by-case basis. Imputability cannot be inferred exclusively from factors of an organic nature, which link the public undertaking to the State.

(90) The Court of Justice indicated that the imputability to the State of an aid measure taken by a public undertaking may be inferred from a set of indicators arising from the circumstances of the case and the context in which that measure was taken

Case C-482/99, paragraph 55.

.In its case-law, the Court referred to indicators, such as the fact that the public undertaking which granted the aid could not take that decision without taking account of the requirements of the public authorities, the fact that the undertaking was linked to the State not only by factors of an organic nature, but it had to take account of directives issued by an inter-ministerial committee, the integration of the public undertaking into the structures of the public administration, the nature of its activities and the exercise of the latter on the market in normal conditions of competition with private operators, the legal status of the undertaking (in the sense of its being subject to public law or ordinary company law), the intensity of the supervision exercised by the public authorities over the management of the undertaking, or any other indicator showing, in the particular case, an involvement by the public authorities in the adoption of a measure or the unlikelihood of their not being involved, having regard also to the compass of the measure, its content or the conditions which it contains

Case C-482/99, paragraphs 55 and 56; see also case T-305/13, SACE, paragraph 46 and case C-472/15 P, SACE, paragraph 36.

.

(91) In the opening decision (recital 29), since Portugal had not claimed that CP’s financing of EMEF was not imputable to the State, the Commission provisionally concluded that the Measures taken by CP were imputable to the State.

(92) Based on the submissions and further clarifications provided by Portugal following the opening decision, the Commission investigated the circumstances of the granting of the Measures and the various indicators of possible involvement of the Portuguese authorities in the granting decisions.

(93) The Commission will therefore assesses if the involvement of the Portuguese authorities in the decision to grant the Measures at issue was based on a set of indicators that, considered as a whole, demonstrate the exercise of the actual influence or control by the State.

6.3.1.

The legal status of CP

(94) Although CP is 100 % directly owned by the State and is therefore a public undertaking falling under the regime of State-owned enterprises in Portugal, it is governed by private law according to Articles 3 and 7 of Decree-Law 558/99 and, as from December 2013, by Decree Law 133/2013. CP has a high level of autonomy in its operations.

(95) Regarding the degree of autonomy from the government, CP is an undertaking over which the government has the power of supervision, which means that CP has the freedom and independence to manage its business without direct or indirect involvement of the Portuguese authorities.

(96) The Portuguese authorities clarified that, according to Portuguese administrative law, while the power of oversight consists of defining and guiding the conduct of an entity, the power of supervision is the mere power to audit the regularity or adequacy of the functioning of a certain entity.

(97) Therefore, CP, the grantor of the Measures, which belongs to the group of enterprises that is least integrated into the public sector, enjoys the highest degree of autonomy and has the least level of control exercised by the government, as only the power of supervision applies to it.

(98) The Commission notes that, as pointed out in recital (88), the mere fact that CP is under State control is not sufficient to conclude that the Measures are imputable to the State.

6.3.2.

Intensity of the supervision exercised

(99) Pursuant to the Articles of Association of CP, which are in accordance with the provisions of Decree Laws 558/99 and 133/2013, the economic and financial supervision of CP is exercised by the ministry of finance and the ministry of transport. This supervision implies:

(a) The approval of the activity and investment plans, budgets and accounts as well as capital investments, subsidiaries and compensatory payments; and

(b) The approval of the tariffs to be set by the company for the public service of passenger transport.

(100) However, according to the information provided by the Portuguese authorities, in the period during which the Measures under investigation were granted (2006-2014)

See recitals from (28) to (30) of the present decision.

, the supervisory control actually exercised by the State in respect of CP was limited. It consisted, mainly, of outlining the strategic guidelines for the rail transport sector and receiving the annual activity plans and budgets, the so-called PAOs. Only from 2016 onwards did the relevant ministry approve the PAOs of CP

As indicated in recital (29) of the present decision, the last measure under assessment was granted in January 2014.

.As described in recital (56), Portugal stated that the last time CP has asked for approval concerning investments in EMEF was in 2001, i.e. before the period under investigation in the present case, and even then it did not get any reply from the Portuguese authorities.

(101) CP’s governance also includes a supervisory body. From 2006 to 2013, the supervisory body was the Comissão de Fiscalização, with no member active in the public administration, except the president that acted from 2005 to 2007 as an external consultant to the Court of Auditors. In November 2013 the Comissão de Fiscalização was replaced by the Conselho Fiscal, with four members appointed by the Ministries for Finance and Economy, active at the same time in the public administration (the IGF and the Directorate-General of the Treasury and Finance). Based on information submitted by Portugal, those bodies acted in a similar way as an audit body of a private company and, as such, did not and could not intervene in the decision-making process, which led to the adoption of the Measures at issue, as they had to be independent.

(102) Portugal submitted that the investments planned by CP and reported to the relevant ministries did not contain specific references to the Measures, nor did CP request authorization or any decision on the matter. This indicates that the Portuguese authorities had no knowledge about the specific Measures granted by CP to EMEF.

(103) According to Portugal, in practice, until December 2013 when Decree Law 133/2013 entered into force, the annual accounts and reports sent to the IGF and to the Directorate-General of the Treasury and Finance were never followed by any approval. Since December 2013 according to Decree Law 133/2013, the reports and accounts must be approved. However, as Portugal submitted, these annual accounts and reports did not include information about the investment of CP in EMEF.

(104) The Commission observes that the only sub-measure granted after December 2013 is the EUR 3 million loan granted in January 2014 by CP to EMEF. Based on the information submitted by Portugal, even this sub-measure, which is part of Measure 2, was not approved by the State, as only 1 month had elapsed since the entry into force of the new provisions established by Decree Law 133/2013. The Commission considers that this is plausible. Moreover, even after the entry into force of Decree Law n. 133/2013, the information included in the annual accounts and reports sent to the IGF did not allow extrapolating the amounts of the loans and of the financial guarantees granted to EMEF, and not even of the conversions of loans into equity.

(105) Based on the above, the Commission considers that the supervisory framework in place in the period under investigation and the way it was concretely applied did not prevent CP from exercising its management functions in full autonomy and did not limit its corporate independence. The level of involvement of the responsible ministers in CP’s governance was, in practice, well below what was provided by the applicable legislation and the Articles of Association of CP. The limited role of the State in the present case, with specific reference to the Measures under investigation, was not such as to lead to a situation where the State could be considered involved in the adoption of a specific measure.

6.3.3.

Public authority not involved in the granting of the Measures

(106) According to Portugal, CP’s decision to invest in EMEF were not communicated to, decided or approved by the Portuguese Government. The decisions about the Measures were taken by CP within the scope of its autonomy and independence.

(107) According to Article 2(4) and article 26(1) of the Articles of Association of CP as described in paragraph (65), CP was entitled to set up a subsidiary and decide how to allocate the resources required to meet its objective, i.e. the provision of passenger rail transport in Portugal.

(108) Based on the information received, the investment measures provided to EMEF were not included in the PAOs. Until 2011 the reference to EMEF in those documents were made in connection with the maintenance costs of the rolling stock paid by CP to EMEF, as the maintenance was provided by EMEF and did not include information about funding measures provided to EMEF. After 2011, CP mentioned in the annual reports that action was needed to reduce the losses of CP’s affiliated companies and mentioned the prospects of EMEF becoming a competitive company.

(109) According to the minutes of CP’s Management Board meetings provided by Portugal, the decisions taken during CP’s Management Board meetings were preceded by information, requests and memos prepared and sent by EMEF. No references were made to a possible State intervention. Therefore, the Commission considers that the initiative for the adoption of the Measures under assessment came from EMEF.

(110) This stance is also supported by the fact that EMEF’s financial size is relatively limited compared to the CP group: EMEF’s turnover (EUR 55 million in 2014) and total assets (EUR 45 million in 2014) were very limited compared to the CP group (EUR 320 million of turnover and EUR 975 million of total assets for the consolidated CP group in 2014

Source: Orbis/Bureau van Dijk.

).

(111) CP’s investment decisions were taken by CP’s Management Board.

(112) Consequently, the Commission concludes that, based on the information submitted by the Portuguese authorities, in light of the specific and particular features of the present case, the Measures were not decided or approved by the Portuguese authorities and there is no indication that the government or any other public authority was involved in any way in the decision of CP to grant the Measures to EMEF.

6.3.4.

Appointment of the Management Board members of CP and EMEF’s Board of Directors

(113) In the period when the Measures were granted the Management Board of CP was appointed by administrative decisions (resolução) of the Portuguese Council of Ministers, as provided by CP’s Articles of Association.

(114) Based on the information provided in recitals (61) to (67), despite being appointed by the State, the Management Board members were managers who were not allowed to accumulate different stewardship roles during their term of office. This means that members of the Government or of any other public authority could not sit in CP’s Management Board while exercising public functions at the same time, nor could they sit in EMEF’s Board of Directors.

(115) Since 2011, the appointment of public managers, such as CP’s, and other senior civil servants in Portugal has been subject to the non-binding approval of their CVs by an independent evaluation body, namely the Public Administration Recruitment and Selection Committee.

(116) Portugal has provided the list of all Management Board members of CP, and their CVs for the period under investigation. The Commission observes that according to those CVs, only two Management Board members had extensive past experience within the Portuguese central administration (either at political level or as senior officials within ministries). The Commission considers therefore that the majority of the Management Board members were not appointed based on political or administrative merits linked to those members having past experience within the Portuguese public administration.

(117) EMEF’s Board of Directors members are elected at EMEF’s General Shareholdings Meeting, and are entrusted with the powers of administration of the undertaking.

(118) On the basis of the information submitted, it results that neither members of the Government nor any delegate from any public authority were appointed in CP’s or EMEF’s decision making bodies. The selection and the appointment of the Management Board of CP did not impact CP’s ability to exercise its financial and operational autonomy. Therefore, in the absence of any evidence of specific links between CP and the public authorities, the Commission concludes that there are no indications of the involvement of the public authorities in the adoption of the Measures under assessment.

6.3.5.

The circumstances underlying the adoption of the Measures

(119) CP relied on its subsidiary EMEF to fulfil its public service obligation, in a context where EMEF’s almost only customers were CP, its parent, and its (then) subsidiary CP Carga

See footnote 5.

. The fact that CP could pay to EMEF remunerations below market prices for the services provided as described in recital (27) is another reason explaining CP’s interest to keep EMEF in business. The decisions by CP to grant the Measures to EMEF were driven by business rational. As already indicated above, those Measure were taken at the level of CP, without any specific involvement of the State.

Conclusion on imputability

(120) Having regards to the circumstances and the context of the present case, on the basis of the direct and indirect indicators examined as a whole, the Commission considers that there is no evidence of any specific involvement of the Portuguese authorities in the granting of the Measures. The State did not initiate, did not approve and was not informed about the specific Measures and their details. The evidence provided indicates that the State’s supervision over the activity of CP was focused on ensuring that CP fulfilled its public service obligations and met its reporting obligations, and it did not cover the Measures granted by CP to EMEF. In light of the above, in the absence of sufficient indicators of the exercise of actual influence or control by the State, the Commission therefore concludes that the Measures are not imputable to the Portuguese State.

1. CONCLUSION

(121) The Commission finds that the Measures are not imputable to the Portuguese State. Since the criteria laid down in Article 107(1) TFEU in order to determine whether a measure constitutes aid are cumulative, the Commission does not need to assess whether the other conditions are met.

(122) Therefore, the Commission concludes that the Measures do not constitute State aid,

HAS ADOPTED THIS DECISION:

Article 1

Measure 1 (capital increases in EMEF), Measure 2 (loans granted to EMEF) and Measure 3 (financial guarantees granted to EMEF) do not constitute State aid within the meaning of Article 107(1) of the Treaty on the Functioning of the European Union.

Article 2

This Decision is addressed to the Portuguese Republic.

Done at Brussels, 6 March 2020.

For the Commission

Margrethe Vestager

Member of the Commission