A competitive selection process whereby only one bidder submits an offer does not conform with the fourth Altmark condition.
Introduction
Commission decision 2025/2453 that was published in the Official Journal of 30 December 2025 approved State aid totalling EUR 853.6 million in the form of public service compensation [PSC] for Corsica Linea and La Méridionale.[1] The PSC was granted by the Transport Board of Corsica [OTC] in the context of five public service contracts concerning maritime services between different ports of Corsica and the port of Marseille for the period 2023-2030. The State aid measure was notified to the Commission but was granted before approval by the Commission. Although it was unlawful, the Commission still found it to be compatible with the internal market. The Commission reached a positive decision on the compatibility of the aid after a formal investigation and also after it took into account a complaint by Corsica Ferries.
The decision is exceptionally long. It spans more than 170 pages over 1159 paragraphs. Therefore, this article is in two parts. This week, Part I reviews the assessment of the Commission with respect to the presence of State aid. The decision contains interesting analysis of why the aid measure did not satisfy the fourth Altmark condition. Next week, Part II will review the assessment with respect to the conformity of the aid with the SGEI Framework.
[1] The full text of the Commission decision can be accessed at:
https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L_202502453
Part I
Before imposing the public service obligations [PSO], the French authorities commissioned an expert report and carried out public consultations to determine the needs of residents of Corsica and the extent to which the market was not able to meet fully those needs. They also consulted stakeholders to determine the least distortionary support measure. The report and the consultations showed the need for regular maritime services and also that air transport services were not a substitute for freight and passengers travelling with cars and large loads.
The report and the consultations found that the services provided by the market [mostly by Corsica Ferries] were not sufficient to cover the needs of at least one port, the needs of medical passengers and the demand for freight transportation.
The next step for the French authorities was to determine the amount of the PSC. For this purpose, the French authorities took and into account the needs identified by the report and consultations and defined the scope of the PSO in terms of frequency of crossings, specific times of departure and arrival, and minimum capacity for passengers, cars, medical passengers and freight.
Ferry companies were chosen through a competitive process on a route basis. Technical criteria were given 60% of the total grade, the requested amount of compensation was given 30% while the remaining 10% was awarded according to criteria concerning corporate social responsibility.
Presence of State aid
The most interesting aspect of the Commission’s analysis of whether the public funding constituted State aid was its assessment of compliance with the Altmark conditions. Since the four Altmark conditions are cumulative, the Commission focused on the fourth condition.
Fourth condition: Least cost to the community
With respect to the first part of the fourth condition [that the tender procedure results in the selection of the provider at the least cost to the community], the Commission recalled that the “(685) communication on the application of EU State aid rules to compensation for services of general economic interest (‘SGEI communication’) sets out the criteria for assessing whether the fourth Altmark criterion has been met.”
“(686) Paragraph 66 of the SGEI communication states that, as regards the characteristics of the call for tenders, a competitive dialogue or a negotiated procedure with publication confers a wide discretion on the adjudicating authority and may restrict the participation of interested operators. Therefore, they can only be deemed sufficient to satisfy the fourth Altmark criterion in exceptional cases.”
“(687) The Commission notes in the present case that France awarded the measures in question by means of a negotiated procedure. Thus, such a procedure cannot in principle be deemed to guarantee the least cost to the community under the SGEI communication.”
“(689) The procedure falls under maritime services to Corsica, where there has never been a situation of free competition because of the limitations imposed by the PSO scheme and the historical existence of successive PSCs. Such a context is therefore likely to limit the commercial supply of and competition for maritime services to Corsica and is not likely to guarantee a service at the least cost to the community.”
The argument of the Commission in paragraph 689 appears weak. It is not obvious whey the absence of free competition on that route was relevant. The most relevant issue is whether potential competitors could submit bids. Even if not many maritime companies had experience on that route, it was not difficult to estimate demand and costs.
The Commission went on to note that “(690) the tender award criteria relating to financial compensation were weighted at only 20 %, while the criteria relating to the technical value of the bids were weighted at 60 %. The Commission observes that these technical criteria were not defined in such a way as to allow effective competition minimising the advantage enjoyed by the successful tenderers, since those criteria mainly measured the capacity and quality of the candidates in terms of meeting the public service obligations assigned (timetables, adaptation of the fleet to users’ needs, quality of services to professional and private users, etc.) rather than encouraging effective competition minimising the amount of compensation.”
This is also a puzzling statement. This is because the SGEI communication on Altmark does allow for qualitative standards to be included in the selection criteria. More specifically, the communication states that “(67) also the ‘most economically advantageous tender’ is deemed sufficient, provided that the award criteria, including environmental or social ones, are closely related to the subject-matter of the service provided and allow for the most economically advantageous offer to match the value of the market … The awarding authority is not prevented from setting qualitative standards to be met by all economic operators or from taking qualitative aspects related to the different proposals into account in its award decision”.
In this case, however, the Commission further explained that “(691) the procurement procedure for the PSCs did not lead to sufficient open and genuine competition, given the small number of candidates for each lot.”
Indeed, there were one or two bidders for each of five lots.
“(692) Finally, in the case of procedures where only one bid is submitted, the tender cannot be deemed sufficient to guarantee the lowest cost to the community. In the present case, all the PSCs, apart from those concerning the services to Propriano and Porto-Vecchio (which received only two applications), received only one application.”
“(693) It follows from these considerations that the tendering procedure for the PSCs provided no guarantee for the community that the services in question were contracted at the lowest cost.”
Fourth condition: Efficient provider
With respect to the second part of the fourth condition [that the compensation is determined on the basis of the costs incurred by a typical, well-run and adequately resourced undertaking], the Commission stated that “(695) the French authorities have not provided any evidence or information capable of demonstrating that the compensation paid under the PSCs was determined on the basis of the costs that a typical, well-run and adequately resourced undertaking would bear in order to fulfil the public service obligations assigned to it.”
It added that “(696) the PSCs make no reference to the costs that would be incurred by a typical, well-run undertaking with adequate means to fulfil the public service obligations assigned to it. On the contrary, it is apparent from the information in the file that the
compensation was determined only at the end of the PSC tendering procedure, following negotiations between the beneficiaries of the PSCs and the OTC, without any reference being made, during those negotiations, to the costs that would be borne by a typical, well-run undertaking with adequate means to fulfil the public service obligations assigned to it in order to determine that amount of compensation.”
The Commission concluded that the PSCs did not fulfil the fourth Altmark condition. Therefore, the PSC conferred an advantage to the chosen undertakings.
Since the PSC satisfied all of the criteria of Article 107(1) TFEU, it constituted State aid. Although the measure was notified to the Commission, it was implemented before the Commission could assess it. Therefore, the next step for the Commission was to determine whether the measure complied with the requirements of Decision 2012/21 which exempts PSC from the notification requirement. In this regard, the Commission noted that, according to the case law [see the landmark judgments on Dilly’s Wellnesshotel & Eesti Pagar], Decision 2012/21, like all other block exemption regulations, had to be “interpreted strictly”.
Non-compliance with Decision 2012/21
The Commission explained the reasons why the measure in question did not conform with the requirements of Decision 2012/21.
“(714) The scope of the SGEI Decision is defined in its Article 2. Article 2(d) provides that State aid in the form of public service compensation for maritime links to islands is not exempt from the notification requirement if the average annual traffic on those routes exceeded 300 000 passengers in the two financial years preceding that in which the SGEI was granted.”
“(715) Article 2(d) of the SGEI Decision refers only to maritime passenger transport and makes no reference to maritime freight transport. In view of the principle of strict interpretation which governs the application of a notification exemption decision, the Commission considers that, in the absence of any explicit reference to maritime freight transport, compensation paid for SGEIs relating to maritime freight transport, or to combined services (passengers/freight), cannot be covered by the SGEI Decision.”
“(716) Since the PSCs relate to combined services, the compensation granted to the beneficiaries of the PSCs does not fall within the scope of the SGEI Decision.”
Then the Commission rebutted counter-arguments that had been submitted during the course of the formal investigation by interested parties.
“(718) First of all, …, the exclusion of maritime freight transport from the scope of the SGEI Decision is not contrary either to the text of the SGEI Decision or to its purpose as interpreted by recital 24 of that Decision. Indeed, none of the articles in the SGEI Decision mention maritime freight transport. Recital 24 merely specifies the rules applicable to State aid granted for the financing of SGEIs in the air and maritime transport sectors, simply clarifying that the SGEI Decision determines the conditions under which such aid may be exempted from the notification requirement laid down in Article 108(3) TFEU in the absence of a sectoral rule on this point. However, Article 2(d), which defines the scope of the SGEI Decision, does not cover maritime freight transport. Moreover, [it is not explained] why the exclusion of maritime freight transport from the SGEI Decision would be contrary to the principle of equal treatment.”
“(719) Furthermore, the argument that the reference only to a passenger threshold is justified by the fact that passenger traffic is an overall indicator of the economic importance of a given route does not demonstrate that the SGEI Decision expressly covers maritime freight transport. On the contrary, the Commission notes that the main purpose of the PSCs is the transport of freight, passenger transport being limited to the transport of medical passengers and drivers (except for the Marseille-Propriano route), the volumes of which are limited.”
“(720) Finally, the observation that the Commission’s decision-making practice suggests that the SGEI Decision applies to combined services is irrelevant, since it is settled case-law that the Commission is not bound by its decision-making practice.”
“(721) The SGEI Decision is therefore not applicable in the present case. It follows that the measures were unlawfully implemented by the French authorities, in breach of Article 3 of Regulation (EU) 2015/1589 and Article 108(3) TFEU.”
Nonetheless, the Commission is obliged to assess the compatibility of State aid with the internal market even if the aid has been granted without prior authorisation or without being compliant with a block exemption regulation. Therefore, it proceeded to assess the conformity of the PSC with the SGEI Framework.
