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The EU and Italian Concessions for the Exploitation of Publicly Owned Maritime Assets

In Italy, the economic interests related to the commercial exploitation of publicly owned maritime (and lakeside) assets are considerable. The Italian coastline is, in fact, longer than 7,000 km and there are more than 30,000 bathing businesses. The majority are family-run businesses and employ over 100,000 people.

These assets fall under the rules laid out by the Legislative Decree No. 327/1942 (the so-called Shipping Code). In particular, Article 36 provides that their commercial exploitation may be subject to a concession. It also establishes that, in case of various requests over the same maritime asset, the Administration will choose the applicant who guarantees the best utilisation of the property in accordance with the public interest and intends to set up removable equipment.  However, in practice, the existing concessions are generally automatically renewed upon expiry without carrying out any transparent and impartial procedure for selecting candidates.

To tackle this issue, it is necessary to retrace the legal framework at the base of the concessions for the exercise of tourist and leisure-oriented business activities on State-owned maritime and lakeside property.

The aforementioned preferential right (the so-called “diritto di insistenza”), granted to the existing concessionaires was provided by Article 37 (2) of the Shipping Code. The conflicting points between this provision and the European legislation were clearly visible. As a result, in 2008 the European Commission opened an infringement procedure against Italy (procedure No. 2008/4908), claiming a breach of Article 43 of the EEC Treaty (now Article 49 TFEU) and Article 12(2) of the Directive 2006/123/EC on services in the internal market (called “Bolkestein Directive”, deriving from the name of the European Commissioner for the Internal Market, Frits Bolkestein).

In order to avoid a possible sanction by the European Union, the preferential right was abolished by Article 1(18) of the Decree Law No. 194/2009. However, when the Decree Law was converted into Law No. 25/2010, the legislature referred to Article 1(2) of the Decree Law No. 400/1993 (converted into Law No. 494/1993), which provided for an automatic renewal of the existing concessions every six years. The so called “diritto di insistenza” was consequently reintroduced.

In the context of the same infringement procedure, the European Commission considered that the reference to Article 1(2) of the Decree Law No. 400/1993 continued to violate the European rules. Therefore, the Italian Parliament was obliged to amend it (see Article 11(1) of Law No. 217/2011) and delegated the Government to reorganise the legislation referring to the concessions for the commercial exploitation of publicly-owned maritime assets. This reorganisation should have respected the “principles of competition, freedom of establishment, development and improvement of the business activities and investment protection” (Article 11 (2) of Law No. 217/2011).

As a consequence of these legislative modifications, on the 27th February 2012, the European Commission terminated the infringement proceedings. However, shortly after, the Italian legislature modified Article 1(18) of the Decree Law No. 194/2009, establishing that the existing concessions will be automatically extended until the 31st December 2020 (see Article 34-duodecies of the Decree Law No. 179/2012).

A temporary solution to the complicated matter of the bathing business seemed to be finally found. However, two Regional Administrative Courts have called the Italian legislative framework into question. In both cases referred to the Courts, the applicants run tourist and leisure-oriented businesses and declared an infringement of Article 1(18) of Decree Law No. 194/2009 because the Municipality denied the automatic renewal of their existing concessions and awarded them by public tendering procedure.

Faced with a potential conflict between the national and the European regulations, the Regional Administrative Courts decided to stay the proceedings and refer a question to the Court of Justice for a preliminary ruling (Regional Administrative Court, Lombardia – Milano, section IV, 26 September 2014, judgment No. 2401; Regional Administrative Court, Sardegna, section I, 28 January 2015, ordinance No. 224). They asked the Court whether the Italian legislation (under which the validity of Italian concessions is to be repeatedly extended) complies with the European regulation.

The two cases (nos. C-458/14 and C-67/15) were joined before the European Court of Justice and, on 25th February 2016, the Advocate General Maciej Szpunar delivered its opinion.

After having clarified the legal nature of the bathing concessions, he stated that the authorisations for the commercial exploitation of publicly-owned maritime and lakeside assets would fall under the provisions of Directive 2006/123/EC that guarantee “the exercise of the freedom of establishment for service providers and the free movement of services” (Article 1). According to the 1st paragraph of the aforementioned article “Where the number of authorisations available for a given activity is limited because of the scarcity of available natural resources or technical capacity, Member States shall apply a selection procedure to potential candidates…”. Therefore, Article 12(2) provides that the authorisation granted must be “for an appropriate limited period and may not be open to automatic renewal nor confer any other advantage on the provider whose authorisation has just expired or on any person having any particular links with that provider”.

As a result, according to the Advocate General, extending the period of validity of existing authorisations constitutes a breach of Article 12 of Directive 2006/123/EC. It violates the freedom of establishment and it indirectly discriminates the economic operators of the other Member States.

In addition, the Advocate General do not agree with the reasoning of the Italian Government, which maintained that the temporary renewal of the existing concessions can be justified as a transitional measure due to legal certainty. This extension should be necessary in enabling the existing concessionaires to recuperate the cost of the investments made, as they could reasonably expect the authorisations to be renewed automatically.

However, Mr. Szpunar points out that the authorisations at issue in the proceedings behind the Regional Administrative Courts were granted in 2004 and 2006 when the application of the principle of transparency to concessions was already set out. Moreover, the expiration date of the concessions had already been fixed when they were granted, thus making it possible for the concession holders to forecast the value of their investments and to determine the period in which to amortise them.

Furthermore, the Italian administrative case-law has also sided with the Advocate General’s conclusion. In fact, it has recently underlined that the concessions for the commercial exploitation of publicly-owned maritime assets have to be awarded by public tendering procedure. Their automatic renewal can neither be justified by Article 51 TFEU, which states that the freedom of establishment shall not apply to activities involving the exercise of official authority. “In fact, this article has to be interpreted strictly. It requires the exercise of a public authority, which is absent in a concession” (Regional Administrative Court, Calabria – Reggio Calabria, 31 March 2016, judgment No. 345).

Finally, a few days ago, the European Court of Justice has issued its judgement (Judgement in Joined Cases C-458/14 and C-67/15, 14 July 2016). As foreseeable, it has not diverged from the Advocate General’s opinion. Firstly, the Luxembourg judges state that it is for the Italian national Courts to determine whether the number of the concessions must be limited due to the scarcity of the natural resources. If it is the case, the directive 2006/123/CE will be applicable and “the grant of authorisations... must be subject to a selection procedure for potential candidates which must ensure full guarantees of impartiality and transparency, in particular adequate publicity”. Even the legitimate expectation of the holders of the authorisations cannot justify their automatic extension since this expectation should be evaluated case by case and no selection procedure was organised at the time of the initial grant of the authorisations.

Secondly, the Court clarifies that, even if the directive is not applicable, the automatic renewal of the existing concessions of cross-border interest would be inconsistent with the freedom of establishment consecrated by Article 49 TFEU. In this case, the principle of legal certainly cannot be invocated because the concessions were granted when it was perfectly known that these authorisations were subject to a duty of transparency.

In other words, the Court of Justice has clearly affirmed that the European Law (both Article 12 of the directive no. 2006/123/CE and article 49 TFEU) precludes the automatic extension of the concessions for the exercise of tourist and leisure-oriented business activities on State-owned and lakeside property. A public selection of the potential candidates is, in fact, necessary.

As a result, it is immediately clear that the new regime of the concessions will have to be built carefully. Firstly, the legislature will have to establish the maximum number of tenders to which an operator may request to participate. In addition, he will have to lay down some rules to protect the existing concessionaires to which any maritime and lakeside asset will be awarded. These concessionaires have generally been running a bathing business for several generations, have made investments and have built bars, restaurants, football fields, etc. Even if European principles of free concurrency have certainly been affirmed for a long time, the existing operators have always counted on the automatic renewal of their concessions granted by the Italian laws.

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