Sad Trasporto Locale SpA v Provincia autonoma di Bolzano (C-186/22)

Contents

Judgment of the Court (Fifth Chamber)19 October 2023^note(Reference for a preliminary ruling — Transport — Regulation (EC) No 1370/2007 — Public passenger transport services by rail and by road — Scope — Article 1(2) — Cableway installations — Direct award of a transport public service contract by a competent local authority to an internal operator — Transfer of the operating risk — Public service compensation)In Case C‑186/22,REQUEST for a preliminary ruling under Article 267 TFEU from the Consiglio di Stato (Council of State, Italy), made by decision of 7 March 2022, received at the Court on 9 March 2022, in the proceedingsSad Trasporto Locale SpAvProvincia autonoma di Bolzano,other party:Strutture Trasporto Alto Adige SpA A. G.,THE COURT (Fifth Chamber),composed of E. Regan (Rapporteur), President of the Chamber, Z. Csehi, M. Ilešič, I. Jarukaitis and D. Gratsias, Judges,Advocate General: M. Campos Sánchez-Bordona,Registrar: C. Di Bella, Administrator,having regard to the written procedure and further to the hearing on 30 March 2023,after considering the observations submitted on behalf of:– Sad Trasporto Locale SpA, by G. Greco and A. Sandulli, avvocati,– the Provincia autonoma di Bolzano, by L. Fadanelli, P. Mantini, P. Pignatta, L. Plancker and A. Roilo, avvocati,– Strutture Trasporto Alto Adige SpA A. G., by P. Mantini, avvocato,– the European Commission, by G. Gattinara, P. Messina and F. Tomat, acting as Agents,having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,gives the following

Judgment

1This request for a preliminary ruling concerns the interpretation of Article 1(2) of Regulation (EC) No 1370/2007 of the European Parliament and of the Council of 23 October 2007 on public passenger transport services by rail and by road and repealing Council Regulations (EEC) Nos 1191/69 and 1107/70 (OJ 2007 L 315, p. 1), as amended by Regulation (EU) 2016/2338 of the European Parliament and of the Council of 14 December 2016 (OJ 2016 L 354, p. 22) (‘Regulation No 1370/2007), and of Article 107(1) TFEU.

2The request has been made in proceedings between Sad Trasporto Locale SpA and the Provincia autonoma di Bolzano (Autonomous Province of Bolzano, Italy) regarding the direct award, to an internal operator, by means of a concession, of a public passenger transport service on certain rail and cableway networks to Strutture Trasporto Alto Adige SpA A. G. (‘STA’).

Legal context

European Union law

Regulation No 1370/2007

3Recitals 33 and 36 of Regulation No 1370/2007 are worded as follows:(33) In paragraphs 87 to 95 of [the judgment of 24 July 2003, Altmark Trans and Regierungspräsidium Magdeburg (C‑280/00, EU:C:2003:415)], the Court of Justice of the European Communities ruled that compensation for public service does not constitute an advantage within the meaning of Article [107 TFEU], provided that four cumulative conditions are satisfied. Where those conditions are not satisfied and the general conditions for the application of Article [107(1) TFEU] are met, public service compensation constitutes State aid and is subject to Articles [93, 106, 107 and 108 TFEU].…(36) … Any compensation granted in relation to the provision of public passenger transport services other than those covered by this Regulation which risks involving State aid within the meaning of Article [107(1) TFEU] should comply with the provisions of Articles [93, 106, 107 and 108 TFEU], including any relevant interpretation by the [Court of Justice of the European Union] and especially [the judgment of 24 July 2003, Altmark Trans and Regierungspräsidium Magdeburg (C‑280/00, EU:C:2003:415)]. When examining such cases, the [European] Commission should therefore apply principles similar to those laid down in this Regulation or, where appropriate, other legislation in the field of services of general economic interest.’

4Article 1 of that regulation, headed ‘Purpose and scope’, provides in paragraphs 1 and 2 that:(1) The purpose of this Regulation is to define how, in accordance with the rules of Community law, competent authorities may act in the field of public passenger transport to guarantee the provision of services of general interest which are among other things more numerous, safer, of a higher quality or provided at lower cost than those that market forces alone would have allowed.To this end, this Regulation lays down the conditions under which competent authorities, when imposing or contracting for public service obligations, compensate public service operators for costs incurred and/or grant exclusive rights in return for the discharge of public service obligations.(2) This Regulation shall apply to the national and international operation of public passenger transport services by rail and other track-based modes and by road, except for services which are operated mainly for their historical interest or their tourist value. Member States may apply this Regulation to public passenger transport by inland waterways and, without prejudice to Council Regulation (EEC) No 3577/92 of 7 December 1992 applying the principle of freedom to provide services to maritime transport within Member States (maritime cabotage) [(OJ 1992 L 364, p. 7)], national sea waters.’

5Article 2 of that regulation headed ‘Definitions’ states, in points (a), (e), (h), (i), (j) and (aa):‘For the purpose of this Regulation:(a) “public passenger transport” means passenger transport services of general economic interest provided to the public on a non-discriminatory and continuous basis;…(e) “public service obligation” means a requirement defined or determined by a competent authority in order to ensure public passenger transport services in the general interest that an operator, if it were considering its own commercial interests, would not assume or would not assume to the same extent or under the same conditions without reward;…(h) “direct award” means the award of a public service contract to a given public service operator without any prior competitive tendering procedure;(i) “public service contract” means one or more legally binding acts confirming the agreement between a competent authority and a public service operator to entrust to that public service operator the management and operation of public passenger transport services subject to public service obligations; depending on the law of the Member State, the contract may also consist of a decision adopted by the competent authority:– taking the form of an individual legislative or regulatory act, or– containing conditions under which the competent authority itself provides the services or entrusts the provision of such services to an internal operator;(j) “internal operator” means a legally distinct entity over which a competent local authority, or in the case of a group of authorities at least one competent local authority, exercises control similar to that exercised over its own departments;…(aa) “public passenger transport services by rail” means public passenger transport by rail, excluding passenger transport by other track-based modes, such as metros or tramways.’

6Article 5 of that regulation, headed ‘Award of public service contracts’, states, in paragraph 2:‘Unless prohibited by national law, any competent local authority, whether or not it is an individual authority or a group of authorities providing integrated public passenger transport services, may decide to provide public passenger transport services itself or to award public service contracts directly to a legally distinct entity over which the competent local authority, or in the case of a group of authorities at least one competent local authority, exercises control similar to that exercised over its own departments. ……’

Regulation (EU) 2016/424

7Article 3 of Regulation (EU) 2016/424 of the European Parliament and of the Council of 9 March 2016 on cableway installations and repealing Directive 2000/9/EC (OJ 2016 L 81, p. 1), headed ‘Definitions’, states, in paragraphs 1, 7 and 9:‘For the purposes of this Regulation the following definitions apply:(1) “cableway installation” means a whole on-site system, consisting of infrastructure and subsystems, which is designed, constructed, assembled and put into service with the objective of transporting persons, where the traction is provided by cables positioned along the line of travel;…(7) “cable car” means a cableway installation where the carriers are suspended from and propelled by one or more cables;…(9) “funicular railway” means a cableway installation in which the carriers are hauled by one or more ropes along a track that may lie on the ground or be supported by fixed structures.’

Italian law

8The decreto legislativo n. 50 – Codice dei contratti pubblici (Legislative Decree No 50 on the Public Procurement Code), of 18 April 2016 (GURI No 91 of 19 April 2016 – Ordinary Supplement No 10), in the version which applies to the case in the main proceedings, provides, in Article 192(2):‘For the purposes of the internal award of a contract relating to services which are available on the market in a competitive environment, the contracting authorities shall carry out a prior assessment of the financial merits of the offerings of the internal entities, in the light of the subject matter and the value of the services and set out in the statement of reasons for the award decision of the reasons for not having put the contract out to tender, as well as the benefits for society at large of the form of management chosen, by reference to, inter alia, the objectives of universality and social solidarity, efficiency, economy and quality of services and optimal use of public resources.’

9Article 34(20) of decreto-legge n. 179/2012 – Ulteriori misure urgenti per la crescita del Paese (Decree-Law No 179 laying down further urgent measures for the growth of the country), of 18 October 2012 (GURI No 245 of 19 October 2012 – Ordinary Supplement No 194), converted into law, with amendments, by legge n. 221 (Law No 221), of 17 December 2012 (GURI No 294 of 18 December 2012 – Ordinary Supplement No 208), provides:‘For local public services of economic interest, in order to ensure compliance with EU law, equality between operators and economy of management and in order to guarantee that appropriate information is provided to the entities concerned, contracts for services shall be awarded on the basis of a report drawn up for that purpose and published on the website of the entity making the award; that report shall set out the grounds for the award and state that the conditions laid down by EU law for the form of award chosen are fulfilled and shall specify the precise content of the public service and universal service obligations, stating the financial compensation where applicable.’

The dispute in the main proceedings and the questions referred for a preliminary ruling

10By decisions of 30 December 1991 and 15 June 2001, the effects of which were extended several times including, most recently, until 19 March 2021, the respondent in the main proceedings, the Autonomous Province of Bolzano (‘the respondent’), assigned to the appellant in the main proceedings, Sad Trasporto Locale SpA (‘the appellant’), the management of local public transport services in that province, comprising funicular railway, cableway and tramway fixed installations.

11By Decision No 243 of 16 March 2021, the respondent awarded the contract internally for the abovementioned public transport services, pursuant to Article 5(2) of Regulation No 1370/2007, to STA, a company the entire share capital of which is owned by the respondent and which is therefore legally distinct from it, but principally carries out its activities with the respondent and which operates exclusively on the territory of the Autonomous Province of Bolzano, for the period from 19 May 2021 to 30 April 2030.

12Funicular railway and tramway transport constitute the majority of the transport services in respect of which management was awarded in this way, with cableway transport representing 47% of the total service directly awarded to STA.

13By Decision No 243, the respondent approved a public service contract which provides for the payment of a contractual fee by the respondent to STA, and the business plan concerning its relationship with STA, from which it follows that fare revenue is allocated to the respondent, whilst any potential income from other business activities linked to the supply of the service in question are allocated to STA.

14By Decision No 244, adopted on the same day as Decision No 243, the respondent required the appellant to continue to provide transport services until STA became responsible for them.

15The appellant brought an action for annulment before the Tribunale Regionale di Giustizia Amministrativa del Trentino Alto Adige, Sezione autonoma di Bolzano (Regional Administrative Court of Trentino Alto Adige, Autonomous Section of Bolzano, Italy) of Decisions No 243 and No 244 and related measures, including the report relating to the internal award, the service contract in question and the corresponding business plan.

16In that regard, the appellant claimed that those decisions were unlawful in that Article 5(2) to (6) of Regulation No 1370/2007 does not apply to the public service contracts at issue in the main proceedings, but only applies to concessions for public passenger transport services by rail or by other means of track or road. The dispute in the main proceedings concerns a service contract that, first, does not take the form of a concession and, second, relates to a cableway service. Consequently, that dispute must be decided in accordance with the Public Procurement Code, in particular Article 192(2) thereof, which makes the internal award of a contract contingent on the fulfilment of certain conditions, in particular, stating in the grounds for the decision the reasons for not having recourse to the market and setting out the benefits for the community of the form of award chosen, which are not satisfied in this case.

17During the proceedings, the appellant, recalling recital 33 of Regulation No 1370/2007, raised the issue of the compatibility of the compensation granted in the context of the public service contract at issue in the main proceedings, with the provisions of the FEU Treaty relating to State aid, claiming, inter alia, that the level of compensation granted to STA had not been determined on the basis of an analysis of the costs that a typical undertaking, well run and adequately provided with means of transport, would have incurred to discharge the service obligations for which it was responsible.

18The Tribunale Regionale di Giustizia Amministrativa del Trentino Alto Adige, Sezione autonoma di Bolzano (Regional Administrative Court of Trentino Alto Adige, Autonomous Section of Bolzano) dismissed the action brought by the appellant, which then brought an action seeking a reversal of that decision before the Consiglio di Stato (Council of State, Italy), the referring court. That court has doubts regarding the interpretation of the provisions of Regulation No 1370/2007 and the FEU Treaty relating to State aid.

19In particular, the referring court asks, first, whether cableway transport falls within the scope of that regulation, as defined in Article 1(2), and, second, for the purposes of determining whether the compensation provided for in the public service contract for the transport of passengers at issue in the main proceedings constitutes State aid within the meaning of Article 107(1) TFEU, subject to the obligation of advance notification under Article 108(3) TFEU, whether the methodology used to calculate that compensation satisfied the fourth condition laid down by the case-law arising from the judgment of 24 July 2003, Altmark Trans and Regierungspräsidium Magdeburg (C‑280/00, EU:C:2003:415).

20In those circumstances, the Consiglio di Stato (Council of State) decided to stay the proceedings and refer the following questions to the Court of Justice for a preliminary ruling:(1) Must Article 1(2) of [Regulation No 1370/2007] be interpreted as precluding the application of that regulation to the operation of national and international multimodal public passenger transport services, where, first, the public transport service is of a uniform nature for the purposes of the award and is performed by tramway, funicular railway and cableway, and second, track-based modes of transport account for more than 50% of the service awarded in its entirety to the operator?(2) If the first question is answered in the negative[:] … must Article 5(1) and (2) of Regulation No 1370/2007 be interpreted as requiring, particularly in relation to the direct award to an internal operator of a public service contract that includes the transport of passengers by tramway, verification of the legal form of the measure awarding the service, with the effect of excluding from the scope of Article 5(2) of that regulation measures that do not take the form of services concession contracts?(3) If the second question is answered in the affirmative[:] must Article 5(1)(b) and the second subparagraph of Article 5(1) of Directive 2014/23/EU [of the European Parliament and of the Council of 26 February 2014 on the award of concession contracts (OJ 2014 L 94, p. 1)] be interpreted as meaning that the operating risk in exploiting those services must not be transferred to the contractor if the contract awarded: (a) is based on gross cost, with the contracting entity receiving the revenue; (b) only envisages as operating revenue for the operator a fee paid by the [contracting] entity, commensurate with the volume of services provided (and therefore excluding demand risk); (c) leaves the contracting entity with demand-side operating risk (reduction in fees due to a decline in service volumes below a predefined threshold), regulatory risk (resulting from legislative or regulatory changes and delay in the granting of authorisation and/or certification by the competent bodies), financial risk (non-payment or late payment of fees and failure to adjust fees), and the risk of force majeure (resulting from an unforeseeable change in the service performance conditions); (d) transfers to the contractor supply side operating risk (changes in the costs of factors such as energy, raw materials and supplies that are beyond the operator’s control), industrial relations risk (resulting from changes in staff costs under a collective agreement), management risk (resulting from an increase in operating costs due to incorrect estimates), and socio-environmental risk (resulting from operating incidents involving assets needed to provide the service)?(4) [Lastly, the Court is asked:] must [Article] 107(1) TFEU and [Article] 108(3) TFEU be interpreted as meaning that, in the [context] of a direct award of a public service contract for the transport of passengers by a competent local authority to an internal operator, public service compensation calculated on the basis of management costs that, although related to the anticipated service requirements, are[: (a)] estimated taking into account the historical costs of the service provided by the [outgoing] operator … awarded a services concession which was extended for more than 10 years[; and (b)] are based on costs or fees that relate to the previous award[,] or at least involve standard market parameters applicable to all operators in the sector, constitutes State aid subject to prior control under Article 108(3) TFEU?’

Consideration of the questions referred

The first question

21By its first question, the referring court asks, in essence, whether Article 1(2) of Regulation No 1370/2007 must be interpreted as precluding the application of that regulation to a mixed service contract for multimodal public passenger transport services, comprising transport by tramway, funicular railway and cableway, even in a context where track-based transport accounts for the majority of the transport services in respect of which management has been awarded.

22At the outset, it is important to note that, first, according to settled case-law, an interpretation of a provision of EU law cannot have the result of depriving the clear and precise wording of that provision of all effectiveness. Thus, where the meaning of a provision of EU law is absolutely plain from its very wording, the Court cannot depart from that wording (see, to that effect, judgment of 20 September 2022, VD and SR, C‑339/20 and C‑397/20, EU:C:2022:703, paragraph 71 and the case-law cited).

23Second, Article 9 of Regulation No 1370/2007 states that compensation paid in accordance with that regulation is to be exempt from the prior notification requirement laid down in Article 108(3) TFEU. Therefore, as a qualification of the general rule that there is the obligation to notify, the provisions of that regulation and the conditions laid down by it must be interpreted strictly (see, to that effect, judgments of 21 July 2016, Dilly’s Wellnesshotel, C‑493/14, EU:C:2016:577, paragraph 37, and of 5 March 2019, Eesti Pagar, C‑349/17, EU:C:2019:172, paragraph 60).

24The wording of Article 1(2) of Regulation No 1370/2007, which defines its scope, provides that the regulation applies to the national and international operation of public passenger transport services by rail and other track-based modes and by road, except for services which are operated mainly for their historical interest or their tourist value. It further provides that Member States may apply that regulation to public passenger transport by inland waterways.

25First, it must be noted that Regulation No 1370/2007 does not define the terms ‘transport services by rail and other track-based modes’. However, taking into account their usual meaning in everyday language, the legislature’s choice to use those terms implies that it intended to target modes of transport characterised by the movement of vehicles on a single track or several parallel tracks.

26Consequently, those terms do not apply to a mode of transport such as cable car. Article 3(7) of Regulation 2016/424 defines ‘cable car’ as a cableway installation where the carriers are suspended from and propelled by one or more cables.

27Second, for the same reason, that form of transport does not fall within the scope of transport by road or by inland waterway, which are also included in Article 1(2) of Regulation No 1370/2007.

28Third, Regulation No 1370/2007 does not include any provision that applies to mixed contracts including forms of transport other than those provided for in Article 1(2) of that regulation, including where track-based transport accounts for more than 50% of the contract in question.

29Fourth, it should be noted that Article 1(2) of Regulation No 1370/2007 provides the possibility for Member States to apply that regulation to public passenger transport by inland waterway. Thus, as Article 1(2) expressly provides for the possibility to extend the scope of the regulation without mentioning cable car transport, it must be considered that that form of transport is not subject to such a possibility.

30For the reasons set out in paragraph 23 of the present judgment, Article 1(2) of that regulation determines its scope and must be interpreted strictly.

31Consequently, the answer to the first question is that Article 1(2) of Regulation No 1370/2007 must be interpreted as meaning that that regulation does not apply to a mixed public service contract for multimodal public passenger transport services, comprising transport by tramway, funicular railway and cableway, even in a context where track-based modes of transport account for the majority of the transport in respect of which management has been awarded.

The second and third questions

32In view of the answer given to the first question, there is no need to answer the second and third questions.

The fourth question

33By its fourth question, the referring court asks, in essence, whether Article 107(1) TFEU must be interpreted as meaning that ‘State aid’, within the meaning of that provision, includes public service compensation paid to an internal operator in the context of a direct award of a public service contract for the transport of passengers by a competent local authority that has been calculated on the basis of operating costs, which are (a) estimated taking into account the historical costs of the service provided by the outgoing operator; and (b) linked to costs or fees also relating to the previous award or, in any event, to the standard market parameters applicable to all operators in the sector concerned.

34This question arises, as is apparent from the referring court’s explanations, in a context in which the system of compensation to be paid to the new operator would have been determined, in particular, on the basis of uniform sectoral reference parameters and a comparison with the costs resulting from a business plan relating to a simulated call for tenders, itself based on the outgoing operator’s accounts relating to certain previous years.

35It should be noted at the outset that, as is apparent from recital 36 of Regulation No 1370/2007, where compensation for the provision of a public passenger transport service does not fall within that regulation, it is necessary to consider whether that compensation constitutes State aid within the meaning of Article 107(1) TFEU, in which case the compensation would be subject to the notification obligation provided for in Article 108(3) TFEU.

36It follows from settled case-law of the Court that measures which, whatever their form, are likely to directly or indirectly benefit undertakings, or are to be regarded as conferring an economic advantage which the recipient undertaking would not have obtained under normal market conditions, that is to say, without State intervention, are regarded as State aid (see, to that effect, judgment of 27 January 2022, Sātiņi-S, C‑238/20, EU:C:2022:57, paragraph 41 and the case-law cited).

37However, according to the judgment of 24 July 2003, Altmark Trans and Regierungspräsidium Magdeburg (C‑280/00, EU:C:2003:415), compensation for a public service is not considered State aid where four cumulative conditions are satisfied. First, the undertaking receiving compensation for services provided in order to discharge public service obligations must actually have public service obligations to discharge and those obligations must be clearly defined. Second, the parameters on the basis of which the compensation is calculated must be established in advance in an objective and transparent manner. Third, the compensation cannot exceed what is necessary to cover all or part of the costs incurred in the discharge of public service obligations, taking into account the relevant receipts and a reasonable profit for discharging those obligations. As a consequence, fourth, where the undertaking which is to discharge public service obligations is not chosen pursuant to a public procurement procedure, the compensation must be determined on the basis of an analysis of the costs which a typical undertaking, well run and adequately provided with the requisite means so as to be able to meet the necessary public service requirements, would have incurred in discharging those obligations, taking into account the relevant receipts and a reasonable profit for discharging those obligations (see, to that effect, judgment of 24 July 2003, Altmark Trans and Regierungspräsidium Magdeburg, C‑280/00, EU:C:2003:415, paragraphs 89, 90, 92 and 93).

38In particular, by its fourth question, the referring court asks whether the compensation calculation granted in the context of a public service contract for passenger transport satisfies the fourth condition, as set out in the above paragraph of the present judgment, when that calculation is made taking into account the costs and fees of the outgoing operator, as well as the standard market parameters applicable to all operators in the sector. The referring court doubts that those criteria constitute an adequate basis for calculating the costs of a typical undertaking, well run and adequately provided with the requisite means so as to be able to meet the necessary public service requirements.

39In that respect, with regard, first, to the ‘standard market parameters’, it should be noted that one of the approaches which may be used to assess whether the fourth condition is satisfied is to calculate the compensation to be granted to an undertaking awarded a public service contract on the basis of an average of the costs incurred by undertakings which have provided, for several years, in a free market, a comparable service to the public service at issue in the main proceedings, the relevant revenue received by those undertakings to discharge their public service obligations and, where appropriate, the profits made by them in respect of that service. It can be assumed that such a calculation leads to the determination of the costs that a typical undertaking, well run and adequately provided with the requisite means so as to be able to meet the necessary public service requirements, would have incurred in discharging those obligations, taking into account the relevant revenue and a reasonable profit that it could expect from the exercise of such an activity.

40However, in order for such an approach to be relevant, it is necessary to ensure that, first, the number of undertakings operating on the market and taken into account are sufficiently significant so that, since the particular situation of a given undertaking should not be subject to a disproportionate weighting, such an average can be considered to be statistically robust and, therefore, representative of the standard provided for by the fourth condition set out in the judgment of 24 July 2003, Altmark Trans and Regierungspräsidium Magdeburg (C‑280/00, EU:C:2003:415).

41Next, only undertakings that are able immediately to discharge their public service obligations and can therefore be considered as being adequately provided with the requisite means to be able to meet the public service requirements can be taken into account for the purposes of such a calculation.

42Finally, while the service offered by those undertakings must be comparable to the public service in question, in the context of the award of a multimodal public passenger transport service, such a requirement does not preclude, initially, the cost incurred by a typical undertaking, well run and adequately provided with the requisite means for each of the aspects of that multimodal transport service, from being calculated separately and, next, those costs from being added together, provided that, where appropriate, any clearly identifiable synergy effects arising from the integrated management of those elements are duly taken into account.

43It will therefore be for the referring court to determine, in the light of those factors, whether the standard market parameters implemented in the present case correspond to that methodology.

44Second, as regards whether the costs of the service provided by the outgoing operator can be taken into account, it should be noted that the criteria of the ‘typical undertaking, well run and adequately provided with the requisite means’ does not preclude, per se, a calculation based on the historic costs of the service provided by the outgoing operator or relating to the previous award, provided, however, that the outgoing operator can be considered, in the light of the methods of accounting and financial analysis normally used to that end, as being a typical and well-run undertaking.

45As such, the answer to the fourth question is that Article 107(1) TFEU must be interpreted in the sense that ‘State aid’, within the meaning of that provision, does not include public service compensation paid to an internal operator in the context of a direct award of a public service contract for the transport of passengers by a competent local authority that has been calculated on the basis of operating costs, which are (a) estimated taking into account the historical costs of the service provided by the outgoing operator; and (b) linked to costs or fees also relating to the previous award or, in any event, to the standard market parameters applicable to all operators in the sector concerned, provided that the use of such factors leads to the determination of costs which reflect those that a typical undertaking, well run and adequately provided with the requisite means so as to be able to meet the necessary public service requirements, would have incurred in discharging those obligations.

Costs

46Since 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. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

Operative part

On those grounds, the Court (Fifth Chamber) hereby rules:

1.Article 1(2) of Regulation (EC) No 1370/2007 of the European Parliament and of the Council of 23 October 2007 on public passenger transport services by rail and by road and repealing Council Regulations (EEC) Nos 1191/69 and 1107/70, as amended by Regulation (EU) 2016/2338 of the European Parliament and of the Council of 14 December 2016,must be interpreted as meaning that that regulation does not apply to a mixed public service contract for multimodal public passenger transport services, comprising transport by tramway, funicular railway and cableway, even in a context where track-based modes of transport account for the majority of the transport in respect of which management has been awarded.

2.Article 107(1) TFEUmust be interpreted as meaning that ‘State aid’, within the meaning of that provision, does not include public service compensation paid to an internal operator in the context of a direct award of a public service contract for the transport of passengers by a competent local authority that has been calculated on the basis of operating costs, which are (a) estimated taking into account the historical costs of the service provided by the outgoing operator; and (b) linked to costs or fees also relating to the previous award or, in any event, to the standard market parameters applicable to all operators in the sector concerned, provided that the use of such factors leads to the determination of costs which reflect those that a typical undertaking, well run and adequately provided with the requisite means so as to be able to meet the necessary public service requirements, would have incurred in discharging those obligations.