Page 16 - Lawtext Utility Law Review Journal Sample

16[2006/2007]4 ULR LEVY FUNDING, STATE INFLUENCE & APPLICATION OF COMMUNITY LAW – DOWNIE 163

Levy Funding, State Influence and the

Application of Community Law

Gordon Downie
Partner, Shepherd and Wedderburn LLP*

Introduction
The relevant concept is defined as follows:
3
The framers of the EC Treaty were well aware of the risks
posed to competition by state intervention in markets. ‘Body governed by public law’ means any body:
Community law outlaws a range of state measures which have
as their object or effect the distortion of free competition – established for the specific purpose of meeting needs in
between domestic firms and their foreign rivals. the general interest, not having an industrial or commercial
In many instances, the state’s presence in a given market character, and
will be evident and unequivocal. The imposition of a tax or – having legal personality, and
duty on a particular activity, or the purchasing decisions of a – financed, for the most part, by the State, or regional or
central or local government agency are reasonably unambiguous local authorities, or other bodies governed by public law;
interventions. The provision of financial support by the state or subject to management supervision by those bodies;
can often also be clearly identified, for example as in the case or having an administrative, managerial or supervisory
of grants or subsidies paid to particular economic actors. board, more than half of whose members are appointed
However, it is not always so easy to characterise the state origins by the State, regional or local authorities or by other bodies
of financial support. One such difficulty lies in the area of governed by public law.
levy funding, that is, financial support which is supplied not by
the state itself (for instance, out of general taxation) but by Background
industry or customers under some form of state mandate.
Two recent cases before the European Court provide Although Germany’s public broadcasters are institutions
important guidance on the extent to which levy funding should governed by public law, with a public interest remit, they are
be characterised as financial support by the state. The first, independent of the state authorities, self-managed and
Bayerische Rundfunk, examines the application of the EC public organised in such a way as to exclude any influence by the
1
procurement rules to purchasing decisions of levy funded public authorities. 4
bodies in the broadcasting sector. The second, Essent Noord, 2 The financing of the public broadcasters is governed by a
considers whether levy funding arrangements in the energy series of treaties entered into between the federal government
market can amount to state aid. Both cases (although in the and the various German states (‘Länder’). In terms of these
second we do not yet have the court’s judgment) appear to treaties, more than half of the needs of the public broadcasters
signal a willingness to bring levy funded bodies within the is to be financed by fees paid by citizens, with the balance
notion of the state for Community law purposes. coming from advertising and other revenues. Individual liability
to pay the relevant ‘broadcasting fee’ is triggered by possession
of a broadcasting receiver, whether it is used or not. Entitlement
Bayerische Rundfunk to the fee is vested (by virtue of the treaties) in each of the
This case concerned the scope of the EU rules on the award relevant public broadcasters.
of public contracts and, in particular, their application to The amount of the broadcasting fee, which is calculated
Germany’s public broadcasters (the ‘Rundfunkanstalten’). by reference to the financial needs of the public broadcasters,
Specifically, the question posed by the referring court was
whether the public broadcasters were ‘bodies governed by
public law’ and, thus, subject to the mandatory tendering
requirements imposed by the EU rules. 3 This definition is currently set out in Article 1(9) of Directive 2004/
18/EC. In point of fact, the proceedings in this case were raised under
a predecessor provision, namely Article 1(b) of Directive 93/50/EEC,
which was expressed in essentially identical terms.
4 According to the court, Article 5(1) of Germany’s Basic Law has
been consistently interpreted as ‘imposing an absolute prohibition on
any interference or any intervention by the public authorities in the
management and operation of the public broadcasting bodies and an
* The author gratefully acknowledges the assistance received from the obligation of strict neutrality in relation to the programme material of
members of the firm’s competition, regulation and public law team in those bodies. That provision of the Basic Law is of cardinal importance
the preparation of this article. in the structure of the present German state and aims to ensure that
1 Case C-337/06, Bayerischer Rundfunk and Others v Gesellschaft für broadcasting does not become a political instrument. It represents a
Gebäudereinigung und Wartung mbH, Judgment of 13 December 2007. constitutional guarantee of the right to freedom of expression and the
2 Case C-206/06, Essent Netwerk Noord BV and Others v Aluminium Delfzijl right to receive information from a plurality of sources, and also of the
BV and Others, Opinion of Advocate General (Mengozzi) 24 January existence of public broadcasting bodies and of their financing and
2008. Not yet available in English. development’ (paragraph 13 of judgment).
UTILITIES LAW REVIEW PUBLISHED BY LAWTEXT PUBLISHING LIMITED
www.lawtext.com