The cultural derogation
In 1992, the Maastrict Treaty introduced a cultural article into EU law. What was then Article 128(4) of the Treaty establishing the European Community noted that '[t]he Community shall take cultural aspects into account in its action under other provisions of this Treaty, in particular in order to respect and to promote the diversity of its cultures'. As a consequence of the introduction of this provision, a specific cultural protection clause was inserted in state aid law as well. Article 107(3)(d) TFEU currently asserts that state aid can be considered to be compatible with the provisions of the TFEU if it promotes 'culture and heritage conservation where such aid does not affect trading conditions and competition in the Union to an extent that is contrary to the common interest'.
Services of general economic interest
Besides the cultural state aid derogation, the TFEU also foresees a special status for SGEI. While these services remain undefined in the TFEU, they are generally assumed to be important for and open to all consumers (Gromnicka, 2005: 492; Nicolaides et al., 2005: 48). According to the Commission's Communication on SGEI (2007d: 3),
these services are essential for the daily life of citizens and enterprises, and reflect Europe's model of society. They play a major role in ensuring social, economic and territorial cohesion throughout the Union and are vital for the sustainable development of the EU in terms of higher levels of employment, social inclusion, economic growth and environmental quality.
The discretion of the Commission to define what SGEI are is limited. It is essentially up to the member states to decide on this. The definition prerogative was firmly put with the member states in BUPA.1 The Commission can thus only check for manifest errors; that is, services that would clearly and unmistakingly not be SGEI.
PSM are considered to be a service of general economic interest. They can hence benefit from the special status Article 106(2) TFEU grants these services. Article 106(2) TFEU provides:
Undertakings entrusted with the operation of services of general economic interest or having the character of a revenue-producing monopoly shall be subject to the rules contained in the Treaties, in particular to the rules on competition, in so far as the application of such rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them. The development of trade must not be affected to such an extent as would be contrary to the interests of the Union.
Basically this means that, while competition rules apply to SGEI, their application cannot obstruct the continued delivery of these services. State aid is thus allowed provided that three conditions are cumulatively met. First, there must be a provision of SGEI. The mission of these services must be defined by the member states and companies must be officially entrusted with their delivery. Second, state aid must be necessary in order to ensure the achievement of the goals related to the delivery of SGEI. Third, the state aid measure must be proportional. It must not exceed what is necessary to deliver the services in question (Grespan, 2008: 1128; Ritten and Braun, 2004: 956). With these criteria, the TFEU attempts to overcome the 'uneasy space' (Szyszczak, 2004: 185) that SGEI occupy within the European internal market. It safeguards 'the provision of effective and high-quality services of general economic interest' as 'a key component of the European welfare state' (Anestis and Drakakis, 2006: 60), at the same time ensuring oversight by the Commission and the EU courts. The opposition between public interest and internal market objectives is thus not solved by Article 106(2) TFEU. Rather, the 'regular seismic movement' or 'the main point of contact between two tectonic plates moving in opposite direction' has a place within the [Union]'s legal order (Buendia Sierra, 2006: 543).
For several decades, scholars, lawyers and the EU courts have discussed whether aid to SGEI should be considered as state aid within the meaning of Article 107(1) TFEU. Indeed, if one merely compensates for the cost of the production and delivery of services that achieve certain public interest objectives, should such compensation then be validly considered a selective advantage? While some have argued that a wide application of state aid rules is paramount to protecting the internal market (e.g. Nicolaides, 2003: 561; Rizza, 2003: 67-68), others have supported a more lenient approach (e.g. Dony, 2005). EU case law has provided clarity in this regard. While the Court of Justice of the European Union (CJEU, ex-European Court of Justice, ECJ) adhered to the 'compensatory' approach in Ferring in 2001;2 this was in part overruled in Altmark in 2003.3 The ECJ essentially ruled that a compensatory approach applies in so far as four conditions are complied with: SGEI must be clearly defined; they must be evaluated on the basis of established parameters; their funding must be proportional; and entrust- ment must be preceded by an independent and objective tendering procedure. As it is impossible for state aid to public broadcasters to comply with the fourth condition, in particular, the Altmark ruling holds little relevance for state aid procedures concerning PSM (see Donders, 2012a: 64-65).