Executive Summary:
- To determine whether an activity is economic in nature or, instead, connected with the exercise of public powers, it is necessary to examine its objective, how it is carried out and how it is financed.
- Compulsory tasks in the public interest [e.g. safety, security, environmental protection] exercised systematically, uniformly and in a non-discriminatory manner fall within the essential functions of the state.
- The exclusive right to carry out a task is not decisive in its classification as a non-economic activity.
- The charging of a fee determined by the state does not affect the link of a task to the exercise of public powers.
Table of Contents:
- Introduction
- Does the creation of a monopoly constitute state aid?
- Exercise of the prerogatives of the state
Introduction
A Romanian court requested a preliminary ruling from the Court of Justice of the EU [CJEU] on a dispute between port companies and the Romanian Ministry of Transport concerning compulsory pilotage services in ports and in particular the interpretation of the concept of state aid and Regulation 2017/352 establishing a framework for the provision of port services.
In 2017 the Romanian Ministry of Transport adopted a decree that pilotage services could be provided only by the pilots of the port authority “Administrația Fluvială a Dunării de Jos” [Lower Danube River Administration]. Only military vessels and pleasure craft were excluded from the law imposing compulsory pilotage.
Port companies, port associations and port pilots, initiated legal proceedings contesting that decree on the ground that it infringed Article 107(1) TFEU by granting the exclusive right to provide the pilotage service to the port authority. In December 2021, the adjudicating Romanian court dismissed that action as unfounded, inter alia, because, under Regulation 2017/352, pilotage services were exempt from competition rules for reasons of safety and environmental protection. Subsequently, the applicants brought an appeal before the referring court.
The referring court was uncertain as to whether the pilotage service was an economic activity or an activity falling within the exercise of public powers and, if it were an economic activity, whether the exclusive right was compatible with EU law. The CJEU delivered its ruling on 22 October 2026, in case C-117/25, Canal Sea Services and others.1
Does the creation of a monopoly constitute state aid?
The first question of the referring court was whether the granting of an exclusive right would constitute state aid.
The CJEU, first, recalled that Article 107(1) TFEU applies to undertakings that are entities engaged in economic activities, irrespective of their legal status and the way in which they are financed. Any activity consisting in offering goods or services on a given market is an economic activity. However, activities connected with the exercise of public powers are not of an economic nature. [paragraphs 30 & 31 of the judgment]
Then the CJEU explored the scope of non-economic activities. Activities which fall within the essential functions of the state and activities which are inextricably linked to those functions are both to be considered as public powers. In so far as a public entity carries on an economic activity which may be dissociated from the exercise of its powers as a public authority, that entity acts as an undertaking. If, however, that economic activity is inseparable from the exercise of its powers as a public authority, all the activities carried out by that entity remain activities connected with the exercise of public powers. [para 32]
The CJEU further explained that in order to determine whether a particular activity is connected with the exercise of public powers, it is necessary to examine its nature, its purpose and the rules to which it is subject. [para 33]
Then it applied the above principles to the case at hand.
First, it noted that Regulation 2017/352, which promoted the development of maritime transport, did not define pilotage as an activity exercised by public authorities, not did it exempt it from the application of the competition rules, in general, and Article 107 TFEU in particular. [para 35] However, the CJEU pointed out that Article 10 of Regulation 2017/352 provided, in Chapter II, that the regulation was not applicable to pilotage, unless the Member States decided otherwise. [para 36]
Chapter II of Regulation 2017/352 dealt specifically with market access and the organisation of the provision of port services. It laid down minimum requirements for the provision of port services. The main purpose of those provisions was to establish a framework for the organisation and conditions of access to the supply of port services and to reduce restrictions which may hinder their supply. [para 37]
Therefore, Article 10 of Regulation 2017/352 had to be understood as a provision delimiting the scope of Chapter II alone, and not as establishing any classification in principle as to the nature, economic or non-economic, of the pilotage activity. Accordingly, the CJEU ruled that Regulation 2017/352 did not determine the economic or non-economic nature, within the meaning of Article 107 TFEU, of the pilotage activity. [paras 38 & 39]
Since Regulation 2017/352 provided no guidance, the CJEU proceeded to determine whether in the case at hand the pilotage activity was of an economic nature or was connected with the exercise of public powers, on the basis of the national provisions applicable to pilotage, the specific arrangements under which that activity was carried out and the conditions under which it was financed. [para 40]
This reasoning of the CJEU is important because it shows that an activity can be economic or non-economic in a certain Member State regardless of its nature in other Member States.
Exercise of the prerogatives of the state
Under the provisions of the relevant Romanian law, the pilotage of vessels entering and leaving ports is qualified as a “security service”, provided under the supervision of the state. It was, moreover, provided to all vessels, on a permanent, non-discriminatory, uniform and continuous basis, under equal conditions concerning quality, duration and price. According to those provisions, the compulsory nature of the use of pilotage for certain ports, areas or categories of ships was determined by the Minister of Transport. [para 41]
Given that pilots were required to have highly specialised experience and knowledge of local conditions, access to the profession of pilot in Romania and the retention of pilots in activity were subject to a series of criteria linked, in particular, to a high level of vocational training, the need to have licences and their regular renewal. The mission and obligations of pilots, especially with respect to safe navigation, the observed condition of vessels and risks to the environment, were specified in a government decree. [paras 42 & 43]
The CJEU inferred that in order to ensure the exercise of the essential functions of the state, Romanian law made pilotage activity compulsory for certain ports, certain areas or certain categories of ships. The very purpose of the pilotage activity carried out by the port authority was to ensure the safety of maritime and port traffic, to prevent threats to the marine environment, and to protect the environment in a port. Those tasks in the public interest fell within the essential functions of the state. By boarding ships and by reporting any irregularities to the competent port authorities, pilots ensured that safety and environmental protection rules were respected by ships. The systematic nature of the intervention of pilots in the ports and areas concerned for all ships meant that the majority of the ships entering or leaving those ports were subject to pilotage. [paras 44-47]
The CJEU concluded that the pilotage activity carried out by the port authority was inseparable from those intended to control maritime and port traffic and to ensure its safety and the protection of the environment in the port concerned. Pilotage played a direct role in the objective of safety and environmental protection in ports pursued by control activities. [para 48]
Then the CJEU made another important statement. The connection of pilotage with the exercise of public powers was not based on the exclusive rights granted to the port authority to carry out the pilotage. It was, therefore, independent of those rights. It could not be considered that it was the mere fact that a Member State chose to exclude, for considerations of public interest, an activity from competition by creating a legal monopoly for the benefit of an entity entrusted with exclusive rights which was at the origin of the lack of economic character of that activity. [para 51]
The CLEU further clarified that the fact that a fee was chargd for pilotage services was also irrelevant, since the rules governing that fee were approved by the Romanian public authorities. It was settled case-law that the fact that a service provided by a public body and connected with the exercise by that body of public powers was provided in return for remuneration was not sufficient to classify the activity as an economic in nature and the entity carrying it out as an undertaking, where that remuneration was approved by public authorities. [para 50]
Lastly, the fact that, in different contexts, pilotage activity could be regarded as an economic activity did not preclude the possibility that the pilotage activity at issue could be linked to the exercise of public powers. It was possible that activities which were in principle of an economic nature lost that character when they were inseparably connected with the exercise of public powers. [para 51]
The CJEU concluded that in this case the pilotage activity had to be regarded as relating to the exercise of public powers and it could not be classified as an economic activity, which also precluded the granting state aid, regardless of the fact that it was exercised through exclusive rights. [para 52]
