The Altmark criteria

The Altmark criteria are four cumulative conditions established by the Court of Justice of the European Union in Altmark Trans GmbH (Case C-280/00, 24 July 2003). Where all four are met, compensation paid by a public authority for the provision of a service of general economic interest does not constitute State aid within the meaning of Article 107(1) TFEU. The judgment is the foundation of the modern European law on public service compensation, and in rail it sits alongside Regulation (EC) 1370/2007 as one of the two central analytical frames for Verkehrsverträge.

The four conditions

1. Clearly defined public service obligations

The recipient undertaking must actually be entrusted with discharging public service obligations, and those obligations must be clearly defined in an act of entrustment. In German SPNV practice this is satisfied by the combination of the Verkehrsvertrag, the underlying tender documentation and the Landesnahverkehrsgesetze, which together describe the service package in the detail required.

2. Objective and transparent parameters for compensation

The parameters on the basis of which the compensation is calculated must be established in advance, in an objective and transparent manner, so as to avoid conferring an economic advantage that favours the recipient over competitors. The Verkehrsvertrag must therefore set out the payment mechanics, the index, the incentive and malus structures and the adjustment rules ex ante; retroactive top-ups are problematic under this head.

3. No overcompensation

Compensation cannot exceed what is necessary to cover all or part of the costs incurred in discharging the public service obligations, taking into account the relevant receipts and a reasonable profit. This is the head under which the «reasonable profit» concept in Article 4 and the Annex of Regulation 1370/2007 does its work, and under which guarantees, re-use mechanisms and pool-access charges need to be sized carefully.

4. Efficient-operator benchmark

Where the undertaking is not chosen through a public procurement procedure that would allow the service to be provided at least cost to the community, the level of compensation must be determined on the basis of an analysis of the costs a typical, well-run undertaking — adequately equipped to meet the public service requirements — would have incurred. This is the Altmark criterion that matters most in practice in German SPNV, because it ties State aid analysis directly to the procurement regime.

Why it matters for German SPNV

The fourth criterion is the reason competitive tendering under Article 5(3) of Regulation 1370/2007 is so central to the regional rail market. A properly conducted competitive procurement is generally taken to satisfy the efficient-operator test, with the result that the compensation paid under the resulting Verkehrsvertrag falls outside the State aid regime altogether.

Where a direct award is used instead — for example under Article 5(2) (in-house), Article 5(4) (small contracts or emergency measures) or Article 5(6) (rail-specific direct awards) — the fourth Altmark condition has to be demonstrated through a benchmarking exercise against the costs of a typical well-run undertaking. This is analytically harder and evidentially demanding, which is why direct awards in practice often rely on the parallel compatibility route under Article 93 TFEU and Regulation 1370/2007 as lex specialis, rather than on passing the Altmark test.

If the criteria are not met

Failure to meet any one of the four conditions means that the compensation is State aid within the meaning of Article 107(1) TFEU. It may still be lawful if it is compatible with the internal market, assessed either under the 2012 SGEI package (the SGEI Decision 2012/21/EU, the SGEI Framework, and the SGEI de minimis Regulation (EU) 360/2012) or, for land transport, directly under Regulation 1370/2007, which operates as lex specialis to the general SGEI regime. The CJEU confirmed the priority of Regulation 1370/2007 over the general SGEI framework in the rail and road transport sector in subsequent case law.

In rolling-stock financing the point bites in three places: PTA-side vehicle guarantees (Kapitaldienstgarantie, Wiedereinsatzgarantie), pool access fees, and direct subsidies for alternative-drive rolling stock. Each of these touches on the amount and the structure of compensation flowing to the operator, and each needs to be tested against the Altmark analysis (or, if Altmark fails, against the compatibility framework).

Relationship with Regulation 1370/2007

Regulation 1370/2007 is not a free-standing substitute for Altmark; it is a sector-specific implementation of the same policy. Article 1 and Article 3 of the Regulation require an act of entrustment; Article 4 and the Annex set out the compensation parameters and the «reasonable profit» ceiling; Article 5 sets the procurement architecture (competitive tendering as the rule, with specified grounds for direct award). Compliance with Regulation 1370/2007 therefore delivers many of the Altmark safeguards in an operational form specific to land transport. Where compensation is paid in conformity with Regulation 1370/2007 it is deemed compatible with the internal market and exempt from the Article 108(3) TFEU notification obligation (Article 9 of the Regulation), which is the practical exit route used by most German Verkehrsverträge that cannot rely on a pure Altmark fit.

Primary source

Case C-280/00 Altmark Trans GmbH and Regierungspräsidium Magdeburg v. Nahverkehrsgesellschaft Altmark GmbH, judgment of 24 July 2003, ECLI:EU:C:2003:415 — available on the CJEU case-law portal.