Flightline Ltd v Secretário de Estado dos Transportes e Comunicações and Transportes Aéreos Portugueses SA (TAP) (C-181/00)

Contents

Judgment of the Court (Sixth Chamber)9 July 2002^noteIn Case C-181/00,REFERENCE to the Court under Article 234 EC by the Supremo Tribunal Administrativo (Portugal) for a preliminary ruling in the proceedings pending before that court betweenFlightline LtdandSecretário de Estado dos Transportes e Communicações,Transportes Aéreos Portugueses SA (TAP),THE COURT (Sixth Chamber),composed of: F. Macken (Rapporteur), President of the Chamber, C. Gulmann, R. Schintgen, V. Skouris and J.N. Cunha Rodríguez, Judges,Advocate General: S. Alber,Registrar: H.A. Rühi, Principal Administrator,after considering the written observations submitted on behalf of:— Flightline Ltd, by J.L. Mota de Campos, advogado,— Transportes Aéreos Portugueses SA (TAP), by J.N. Barata, advogado,— the Portuguese Government, by L. Fernandes and A. Pato, acting as Agents,— the Commission of the European Communities, by M. Afonso, M. Huttunen and D. Triantafyllou, acting as Agents,having regard to the Report for the Hearing,after hearing the oral observations of Flightline Ltd, Transportes Aéreos Portugueses SA (TAP), the Portuguese Government and the Commission at the hearing on 5 July 2001,after hearing the Opinion of the Advocate General at the sitting on 27 September 2001,gives the following

Judgment

1By a judgment of 13 April 2,000, filed at the Court on 15 May 2000, the Supremo Tribunal Administrativo referred three questions to the Court under Article 234 EC on the interpretation of Articles 3(2) and 4(1)(a) and (d) of Council Regulation (EEC) No 2408/92 of 23 July 1992 on access for Community air carriers to intra-Community air routes (OJ 1992 L 240, p. 8, hereinafter ‘the Regulation’) and Article 1(e) of Commission Decision 94/698/EC of 6 July 1994 concerning increase in capital, credit guarantees and tax exemption in favour of TAP (Transportes Aéreos Portugueses) (OJ 1994 L 279, p. 29).

2Those questions were raised in proceedings between Flightline Ltd (hereinafter ‘Flightline’), established in the United Kingdom, and the Secretário de Estado dos Transportes e Comunicações (the Secretary of State for Transport and Communications, hereinafter ‘the Transport Secretary’) and Transportes Aéreos Portugueses SA (hereinafter ‘TAP’), relating to the Transport Secretary's refusal of Flightline's application for the right to fly certain routes in Portugal.

Legal background and Decision 94/698

3The first recital in the preamble to the Regulation states that ‘it is important to establish an air transport policy for the internal market over a period expiring on 31 December 1992’.

4Article 1(4) of the Regulation provides as follows:‘Airports in the Greek islands and in the Atlantic islands comprising the autonomous region of the Azores shall be exempted from the application of this Regulation until 30 June 1993. Unless otherwise decided by the Council, on a proposal from the Commission, this exemption shall apply for a further period of five years and may be continued for five years thereafter.’

5Article 3(1) and (2) of the Regulation provide as follows:1. Subject to this Regulation, Community air carriers shall be permitted by the Member State(s) concerned to exercise traffic rights on routes within the Community.2. Notwithstanding paragraph 1, before 1 April 1997 a Member State shall not be required to authorise cabotage traffic rights within its territory by Community air carriers licensed by another Member State, unless:(i) the traffic rights are exercised on a service which constitutes and is scheduled as an extension of a service from, or as a preliminary of a service to, the State of registration of the carrier;(ii) the air carrier does not use, for the cabotage service, more than 50% of its seasonal capacity on the same service of which the cabotage service constitutes the extension or the preliminary.’

6Article 4(1)(a) and (d) of the Regulation provide as follows:(a) A Member State, following consultations with the other Member States concerned and after having informed the Commission and air carriers operating on the route, may impose a public service obligation in respect of scheduled air services to an airport serving a peripheral or development region in its territory or on a thin route to any regional airport in its territory, any such route being considered vital for the economic development of the region in which the airport is located, to the extent necessary to ensure on that route the adequate provision of scheduled air services satisfying fixed standards of continuity, regularity, capacity and pricing, which standard air carriers would not assume if they were solely considering their commercial interest. The Commission shall publish the existence of this public service obligation in the Official Journal of the European Communities....(d) If no air carrier has commenced or is about to commence scheduled air services on a route in accordance with the public service obligation which has been imposed on that route, then the Member State may limit access to that route to only one air carrier for a period of up to three,years, after which the situation shall be reviewed. The right to operate such services shall be offered by public tender either singly or for a group of such routes to any Community air carrier entitled to operate such air services. The invitation to tender shall be published in the Official Journal of the European Communities and the deadline for submission of tenders may not be earlier than one month after the day of publication. The submissions made by air carriers shall forthwith be communicated to the other Member States concerned and to the Commission.’

7By letter of 26 January 1994, the Republic of Portugal notified the Commission under Article 93(3) of the EC Treaty (now Article 88(3) EC) of a proposed grant of aid to TAP in the context of a restructuring programme affecting that company.

8By Decision 94/698, that aid was declared compatible with the common market provided that a number of conditions were met. Article 1(e) of that decision states one of those conditions to be that ‘the Portuguese Government [fulfil] its commitment to apply Article 4 of Council Regulation (EEC) No 2408/92 to the Atlantic islands of Madeira and the Azores as of 1 January 1996 at the latest, publishing public service obligations for the individual routes in question (see Chapter VIII, point 3)’.

9The sixth paragraph of point 3 of Chapter VIII of the grounds of Decision 94/698 states more particularly as follows: ‘The Portuguese Government has:— confirmed that the liberalisation of the nonscheduled transport between all Community airports and the Archipelago of the Azores, refers to all the services, as expressed in Regulation (EEC) No 2408/92, including the “seat-only charter” and “one-way charter”. This means that these types of air services will be authorised notwithstanding that the Azores are temporarily excluded from the application of Regulation (EEC) No 2408/92,— reaffirmed its determination and willingness to follow in 1995 a public tender procedure for the connections between the Portuguese mainland and the islands of Madeira and the Azores in accordance with Article 4 of Regulation (EEC) No 2408/92. Moreover, it is the intention of Portugal to inform the Commission during the first half of 1995 about the contents of the obligations of these public services, in order that they may be published in the Official Journal of the European Communities. In that respect the Commission recalls that Article 4 of that Regulation means that the contents of the public service obligations are to be separately published in the Official Journal of the European Communities. Following publication, should no European carrier declare its readiness to fulfil these public service obligations, the right to operate such services shall be offered by public tender either singly or for a group of such routes to any European air carrier entitled to operate such air services.’

10On the date of adoption of Decision 94/698, 6 July 1994, the Commission also adopted Commission Decision 94/666/EC concerning compensation in respect of the deficit incurred by TAP on the routes to the autonomous regions of the Azores and Madeira (OJ 1994 L 260, p. 27). Article 1 of that decision declared the aid regime, which is intended to compensate for the deficit incurred by TAP in fulfilling public service requirements imposed on it on the routes to the autonomous regions of the Azores and Madeira, to be compatible with the common market until 1 January 1996, provided the aid granted did not exceed the deficit incurred on those routes.

11Pursuant to Decision 94/698, the Portuguese Government decided to impose public service obligations, as from 1 January 1996, on nine routes between the Portuguese mainland and the autonomous regions of the Azores and Madeira, and on routes between those regions; the terms of those obligations were published (OJ 1995 C 200, p. 3).

12An invitation to tender for scheduled air services on the nine routes subject to public service obligations was published (OJ 1995 C 223, p. 16, hereinafter ‘the invitation to tender’) in accordance with the provisions of Article 4(1)(d) of the Regulation.

13Paragraph 8 of the invitation to tender provides: ‘The contract shall start on 1.1.1996. It shall end on 31.12.1998’.

14Paragraph 3 of the invitation to tender provides: ‘All air carriers holding a valid operating licence issued by a Member State pursuant to Council Regulation (EC) No [2408/92], as well as an adequate air-operator certificate, are eligible to tender’. Paragraph 3 goes on to state: ‘However, as Portugal is applying the provision of Article 3(2) of Regulation No 2408/92, carriers licensed by a Member State other than Portugal may not, until 1.4.1997, use for the cabotage service within Portugal more than 50% of their seasonal capacity on the same service of which the cabotage service must be the extension or the preliminary’.

15Paragraph 11 of the invitation to tender stated first of all that pursuant to Article 4(1)(d) of the Regulation, the validity of the invitation was subject to the condition that no Community carrier who might be authorised to operate the routes applied before 1 November 1995 for authorisation to operate one or more of those routes with effect from 1 January 1996 in accordance with the public service obligations without receiving financial compensation and, secondly, that the invitation to tender would remain valid just for those routes for which no carrier had tendered by 1 November 1995 under those conditions.

The main proceedings and the questions referred

16On 30 October 1995, Flightline applied in accordance with the conditions laid down in paragraph 11 of the invitation to tender for authorisation to operate, without financial compensation, eight of the nine routes referred to in the invitation to tender, together with one further route. The tender was for routes located wholly in Portugal.

17That application was refused on 22 December 1995 by the Transport Secretary. He took the view that Flightline was not licensed by the Portuguese Republic so that, by virtue of Article 3(2) of the Regulation, it could, until 1 April 1997, only operate internal flights constituting the extension or the preliminary of main services between the Member State that licensed it and Portugal. Flightline appealed against that decision to the Second Section of the First Chamber of the Supremo Tribunal Administrativo, which dismissed the appeal.

18That is the background against which Flightline brought an appeal before the First Chamber, sitting in plenary session, of the Supremo Tribunal Administrativo, which decided to stay proceedings and refer the following three questions to the Court:(1) Does the exercise by a Member State of the rights and powers provided for by Article 4 of Council Regulation (EEC) No 2408/92 of 23 July 1992 presuppose or mean that the power provided for in Article 3(2) of that Regulation of that Member State to be able to restrict, until 1 April 1997, competition in cabotage services within its territory is necessarily waived?(2) May a Member State in a public tender procedure organised in 1995 for the provision of scheduled air services on a route subject to public service obligations imposed on such a route under Article 4 of the Regulation require air carriers licensed by another Member State which submit bids to meet the conditions laid down in Article 3(2) of that same Regulation?(3) Must Article 1(e) of Commission Decision 94/698/EC be interpreted as meaning that, by making approval of the aid for which it provides subject to the condition that Portugal honour the undertaking to apply Article 4 of Regulation (EEC) No 2408/92 to the Autonomous Regions, with effect from 1 January 1996, by publishing the public service obligations for the individual routes in question (“pursuant to Chapter VIII, point 3”), Portugal is precluded from exercising the power granted to Member States by Article 3(2) of the Regulation?’

Admissibility

19Although TAP does not formally argue that the questions referred are inadmissible, it takes the view first of all that Article 234 EC does not confer on the Court of Justice jurisdiction to apply the law to specific situations, because that is a matter for the national courts. Secondly, it questions the need for this reference for a preliminary ruling in the light of the clear wording of the relevant Community legislation.

20In that regard it must first of all be observed that whilst the Court does not have jurisdiction under Article 234 EC to apply the rules of Community law to a particular case or to judge the compatibility of provisions of national law with those rules, it may provide a national court with all the elements relating to the interpretation of Community law which may be useful to it in assessing the effects of the provisions of that law (see the judgment in Case 128/88 Di Felice [1989] ECR 923, paragraph 7).

21Secondly, in the context of the system of cooperation between the Court of Justice and the national courts provided for by Article 234 EC, it is solely for the national court before which the dispute has been brought, and which must assume responsibility for the subsequent judicial decision, to determine in the light of the particular circumstances of the case both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the questions which it submits to the Court. Consequently, where the questions submitted by the national court concern the interpretation of Community law, the Court of Justice is, in principle, bound to give a ruling (see, inter alia, Case C-415/93 Bosman [1995] ECR I-4921, paragraph 59).

22It is therefore appropriate to reply to the questions referred by the national court.

The first question

23By its first question the national court is asking whether the exercise by a Member State of its rights and powers under Article 4 of the Regulation presupposes or means that that Member State must waive its right under Article 3(2) of the Regulation to restrict, until 1 April 1997, competition in cabotage services within its territory.

24Flightline argues that, in consideration of the aid awarded to TAP, which was authorised by the Commission, the Commission laid down certain conditions, including a requirement to issue an invitation to tender in accordance with Article 4 of the Regulation and to publish the terms of the public service requirements. Accordingly, although under Article 3 of the Regulation the Portuguese Republic was entitled, until 1 April 1997, to refuse to authorise Community air carriers licensed by another Member State to exercise cabotage rights, the Commission required that obstacles protecting TAP from competition, including the limitation of cabotage rights, be removed as consideration for the award of aid.

25TAP, the Portuguese Government and the Commission, in contrast, essentially consider that application of Article 4 of the Regulation does not imply any waiver of the provisions of Article 3(2).

26It must first of all be pointed out that it does not follow from the wording of Article 4 of the Regulation that application of that article implies a waiver of the provisions of Article 3. On the contrary, by stating at Article 4(d), that ‘[t]he right to operate such services shall be offered... to any Community air carrier entitled to operate such services’, Article 4 had the effect, until 1 April 1997, of limiting operation of those services to carriers who satisfy the conditions laid down in the Regulation, and in particular those laid down in Article 3(2).

27Secondly, as regards the context in which the Regulation was adopted, it must be recalled first of all that, with a view to the gradual establishment of the internal market for air transport, the Community legislature adopted three sets of measures, in 1987, 1990 and 1992, which were known as ‘packages’ on account of the fact that they consisted of several documents.

28Secondly, until the Regulation was adopted, an air carrier's right to transport passengers within a Member State other than the Member State where it is licensed was subject to more stringent conditions than those laid down by Article 3(2) of the Regulation.

29Finally, the objective of the Regulation, according to the 10th recital in the preamble, is to ‘phase in cabotage rights in order to stimulate the development of the Community air transport sector’, first by relaxing, for a temporary period ending on 1 April 1997, the conditions on which an airline licensed in one Member State may fly in another Member State and, second, by removing all conditions at the end of that period.

30In accordance with that objective, Article 3(2) of the Regulation seeks to authorise the Member States, during the transitional period, to adapt to the process of liberalisation so as to bring about a situation where any airline licensed by any Member State may be authorised to operate cabotage services in a Member State other than that where it is licensed.

31Article 4 of the Regulation, on the other hand, relates to a different situation. It authorises any Member State, even after the transitional period referred to in Article 3(2) of the Regulation has expired, to guarantee a sufficient level of air services on certain thin routes or to airports serving peripheral or underdeveloped regions, subject to conditions relating, inter alia, to frequency, timetabling, capacity and price.

32However, as the Commission was right to point out, for the period from 1 January 1993, the date on which the Regulation entered into force, to 1 April 1997 inclusive, a Member State could effectively apply the provisions of Article 4(1)(d) of the Regulation, even if it was exercising its power under Article 3(2) of the Regulation. Issuing an invitation to tender pursuant to Article 4(1)(d) enabled the various air carriers licensed by the Member State concerned to compete immediately for allocation of the right to operate routes subject to public service obligations. That partial liberalisation was therefore intended to pave the way for complete liberalisation at the end of the transitional period referred to in Article 3(2) of the Regulation.

33The reply to the first question must therefore be that the exercise by a Member State of the rights and powers laid down in Article 4 of the Regulation does not presuppose or mean that that Member State must waive its right under Article 3(2) of the Regulation to restrict competition until 1 April 1997 in cabotage services within its territory.

The second question

34By its second question the national court is asking whether, in a public tender procedure organised in 1995 for the provision of scheduled air services on a route subject to public service obligations imposed on that route under Article 4 of the Regulation, a Member State may require air carriers licensed by another Member State which submit bids to meet the conditions laid down in Article 3(2) of that Regulation.

35Having regard to the reply to the first question, in so far as an invitation to tender issued under Article 4( 1 ) of the Regulation does not imply any waiver of the right to limit the allocation of cabotage rights in accordance with Article 3(2) of the Regulation, it is not incompatible with Community law for the Member State to require air carriers, in the context of such an invitation to tender, to submit their offers in accordance with the conditions laid down in Article 3(2).

36However, the effects of Article 3(2) of the Regulation cannot, under the wording of that provision itself, extend beyond 1 April 1997.

37The reply to the second question must therefore be that, in a public tender procedure organised in 1995 for the provision of scheduled air services on a route subject to public service obligations imposed on that route under Article 4 of the Regulation, a Member State was entitled to require air carriers licensed by another Member State which submitted bids to meet the conditions laid down in Article 3(2) of the Regulation, provided that the invitation to tender did not continue to have effect beyond 1 April 1997.

The third question

38By its third question, the national court is asking whether Article 1(e) of Decision 94/698, which makes approval of the aid for which it provides subject to the condition that the Portuguese Republic honour its undertaking to apply Article 4 of the Regulation to the autonomous regions of Madeira and the Azores with effect from 1 January 1996 at the latest, and publish the public service obligations for the routes in question, must be interpreted as meaning that the Portuguese Republic is precluded from exercising its right under Article 3(2) of the Regulation.

39It must first of all be observed that while the Regulation applies to the autonomous region of Madeira from the time of its entry into force, 1 January 1993, the autonomous region of the Azores was excluded from the scope of the Regulation until 30 June 1993, by virtue of Article 1(4) thereof, and then, following an extension, until 30 June 1998.

40None the less, the Portuguese Republic's undertaking in Article 1(e) of Decision 94/698 means that Article 4 of the Regulation also applies to the Azores from 1 January 1996.

41In that regard, it must be observed that Article 1(e) of Decision 94/698 does not provide that, having regard to the application of Article 4 of the Regulation, the Portuguese Republic must waive the right under Article 3(2) of the Regulation to limit access to the relevant routes solely to carriers holding a licence that meets the conditions laid down by that latter provision.

42On the contrary, it is clear from the sixth paragraph of point 3 of Chapter VIII of that decision that the Portuguese Republic undertook to follow a public tender procedure for the connections between the Portuguese mainland and the islands of Madeira and the Azores in 1995 and that the right to operate those services was to be offered by public tender ‘to any European air carrier entitled to operate such air services’.

43The words ‘entitled to operate such air services’ also appear in Article 4(1)(d) of the Regulation and cannot have a different meaning in Decision 94/698. Therefore, as stated in paragraph 26 of this judgment, the Portuguese Republic was entitled to limit the right to operate those routes to carriers that satisfied the conditions laid down in Article 3(2) of the Regulation.

44None the less, since the Regulation has applied to the autonomous region of Madeira since 1 January 1993, all European air carriers licensed by a Member State have, since 1 April 1997, been entitled to fly to or from that region on intra-Community routes. As regards the autonomous region of the Azores, such carriers have been entitled to engage in cabotage since 1 July 1998.

45The reply to the third question must therefore be that Article 1(e) of Decision 94/698, which makes approval of the aid for which it provides subject to the condition that the Portuguese Republic honour its undertaking to apply Article 4 of the Regulation to the autonomous regions of Madeira and the Azores with effect from 1 January 1996 at the latest and publish the public service obligations for the routes in question, does not preclude that Member State from exercising its right under Article 3(2) of the Regulation.

Costs

46The costs incurred by the Portuguese Government and by the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court.

Operative part

On those grounds,THE COURT (Sixth Chamber),in answer to the questions referred to it by the Supremo Tribunal Administrativo by judgment of 13 April 2000, hereby rules:

1.The exercise by a Member State of the rights and powers laid down in Article 4 of Council Regulation (EEC) No 2408/92 of 23 July 1992 on access for Community air carriers to intra-Community air routes does not presuppose or mean that that Member State must waive its right under Article 3(2) of that regulation to restrict competition until 1 April 1997 in cabotage services within its territory.

2.In a public tender procedure organised in 1995 for the provision of scheduled air services on a route subject to public service obligations imposed on that route under Article 4 of Regulation No 2408/92, a Member State was entitled to require air carriers licensed by another Member State which submitted bids to meet the conditions laid down in Article 3(2) of that regulation, provided that the invitation to tender did not continue to have effect beyond 1 April 1997.

3.Article 1(e) of Commission Decision 94/698/EC of 6 July 1994 concerning increase in capital, credit guarantees and tax exemption in favour of TAP, which makes approval of the aid for which it provides subject to the condition that the Portuguese Republic honour its undertaking to apply Article 4 of Regulation No 2408/92 to the autonomous regions of Madeira and the Azores with effect from 1 January 1996 at the latest and publish the public service obligations for the routes in question, does not preclude that Member State from exercising its right under Article 3(2) of that regulation.

Delivered in open court in Luxembourg on 9 July 2002.