CJEU, 1st chamber, April 10, 2024, No T-486/18 RENV

1 By its action under Article 263 TFEU, the applicant, Danske Slagtermestre, seeks the annulment of Commission Decision C(2018) 2259 final of 19 April 2018 relating to State aid SA.37433 (2017/FC) – Denmark (‘the contested decision’).

 Background to the dispute

2 The applicant is a trade association that claims to represent small butcher’s shops, slaughterhouses, wholesalers and processing undertakings in Denmark.

3 On 26 September 2013, it lodged a complaint with the European Commission alleging that, by adopting lov nr. 902/2013 om ændring af lov om betalingsregler for spildevandsforsyningsselskaber m.v. (Betalingsstruktur for vandafledningsbidrag, bemyndigelse til opgørelse af særbidrag for behandling af særlig forurenet spildevand m.v.) (Law No 902/2013 amending the law establishing the rules relating to contributions payable to waste water treatment operators (structure of the contributions for the drainage of waste water, authorising special contributions for the treatment of particularly polluted waste water, etc.); ‘Law No 902/2013’), the Kingdom of Denmark granted State aid to large slaughterhouses in the form of a reduction in its contributions for waste water treatment.

4 Before that law entered into force, lov nr. 633/2010 om betalingsregler for spildevandsforsyningsselskaber m.v. (Law No 633/2010 establishing the rules relating to contributions payable to waste water treatment operators; ‘Law No 633/2010’) provided for a single charge per cubic metre of water for all water consumers connected to the same waste water treatment plant, regardless of their area of activity or their consumption. Law No 902/2013 introduced a degressive ‘staircase’ model providing for a rate per cubic metre of waste water determined on the basis of the volume of waste water discharged (‘the staircase model’).

5 The staircase model is designed as follows:

– Step 1 corresponds to water consumption of up to 500 m³ per year per property;

– Step 2 corresponds to the volume of water consumption of between 500 m³ and 20 000 m³ per year per property; and

– Step 3 corresponds to the volume of water consumption in excess of 20 000 m³ per year per property.

6 The rate per cubic metre is set for each of the steps as follows:

– the rate per cubic metre for Step 2 is 20% lower than that for Step 1;

– the rate per cubic metre for Step 3 is 60% lower than that for Step 1.

7 Under the staircase model, consumers covered by the rate in Step 3 thus first pay the rate specified for Step 1 until their water consumption exceeds 500 m3. They then pay the rate specified for Step 2 until their consumption exceeds 20 000 m3 and, finally, pay their contribution for the treatment of waste water in line with the rate provided for in Step 3.

8 Between 10 October 2013 and 12 September 2017, the Commission collected and exchanged information about the complaint with the applicant and the Kingdom of Denmark. On 23 July 2014 and 25 February 2016, the Commission sent preliminary assessment letters to the applicant, in which it took the view that the measure at issue did not constitute State aid.

9 On 19 April 2018, the Commission adopted the contested decision in which it found that the contribution introduced by Law No 902/2013 (‘the contribution for the treatment of waste water’) did not confer a particular advantage on specific undertakings and that it did not therefore constitute State aid within the meaning of Article 107(1) TFEU.

10 In support of that conclusion, the Commission considered that a market economy operator would have implemented the staircase model. In that regard, it first of all established, in paragraph 36 of the contested decision, that since the staircase model concerned the price setting of open infrastructures not dedicated to any specific user(s), it would assess, pursuant to paragraph 228 of its Notice on the notion of aid referred to in Article 107(1) [TFEU] (OJ 2016 C 262, p. 1; ‘the 2016 Notice’), whether, through the contribution for the treatment of waste water, the users of the waste water treatment plants in Denmark incrementally contributed, from an ex ante viewpoint, to the profitability of those plants. It also noted, in paragraphs 37 and 38 of that decision, that that would be the case if the contribution enabled the plants to cover incremental costs in the medium term.

11 Next, in paragraphs 39 and 40 of the contested decision, the Commission took the view that the Danish authorities’ approach, whereby 80% of the costs of waste water treatment plants was fixed and 20% was variable, the former having to be shared equally between all users while the latter could be attributed to the customer concerned, was ‘reasonable’. In paragraph 41 of that decision, the Commission took the view that the rates corresponding to Steps 2 and 3 were higher than the true costs of those plants and that they remained so even if the ratio of fixed to variable costs were not 80/20 but, for example, 70/30. It concluded, in paragraph 42 of that decision, that the users of the waste water treatment plants in Denmark contributed to their profitability, within the meaning of paragraph 228 of the 2016 Notice, through the contribution for the treatment of waste water determined on the basis of the staircase model.

12 Lastly, in paragraphs 43 to 45 of the contested decision, the Commission noted that, in the event of an increase in the contribution for the treatment of waste water, it would be possible for large undertakings to disconnect themselves from the existing waste water treatment plant network in order to set up their own facilities, in which case those large undertakings would no longer be obliged to pay that contribution.

13 By order of 1 December 2020, Danske Slagtermestre v Commission (T‑486/18, not published, EU:T:2020:576; ‘the initial order’), the General Court dismissed the action as inadmissible on the ground that the applicant lacked standing to bring proceedings.

14 By judgment of 30 June 2022, Danske Slagtermestre v Commission (C‑99/21 P, EU:C:2022:510), the Court of Justice set aside the initial order.

15 In accordance with the first paragraph of Article 61 of the Statute of the Court of Justice of the European Union, the Court held that it had the necessary information to enable it to give final judgment on the admissibility of the action. In that regard, it found that the contested decision was a regulatory act not entailing implementing measures, within the meaning of the fourth paragraph of Article 263 TFEU. It thus ruled that the applicant was directly concerned by the contested decision and had standing to bring proceedings against that decision, and that the present action before the General Court, seeking the annulment of that decision, was admissible.

16 The Court, reserving the costs, referred the case back to the General Court for it to examine it as to the substance.

 Forms of order sought

17 The applicant claims that the Court should:

– annul the contested decision;

– order the Commission to pay the costs.

18 The Commission contends that the Court should:

– dismiss the action;

– order the applicant to pay the costs.

19 The Kingdom of Denmark, intervening in support of the form of order sought by the Commission, claims that the Court should dismiss the action.

 Law

20 As a preliminary point, it should be noted that, in the judgment on appeal, the Court held definitively that the action brought by the applicant was admissible (see paragraph 15 above).

21 Accordingly, there is no longer any need to rule on the parties’ arguments relating to the admissibility of the action and it is appropriate to examine the pleas in law by which the applicant challenges the validity of the contested decision.

22 In that regard, in support of its action, the applicant relies on seven pleas in law, alleging, in essence, first, failure to observe the adversarial principle, as enshrined in Article 41(2)(a) of the Charter of Fundamental Rights of the European Union (‘the Charter’), second, infringement of the right of every person to have his or her affairs handled impartially by the institutions of the European Union, provided for in Article 41(1) of the Charter, third, infringement of Article 107(1) TFEU, in so far as the Commission considered that the contribution for the treatment of waste water did not confer an advantage, fourth, that that advantage was selective, fifth, that the staircase model was attributable to the Danish State and that it was granted by means of public resources, sixth, an obstacle to competition and, seventh, an effect on trade between Member States.

23 The Court considers it appropriate to begin by examining the second plea, which alleges, in essence, infringement of the requirement of impartiality.

 The second plea in law, alleging infringement of the requirement of impartiality

24 By its second plea, the applicant submits that the Commission failed to observe the requirement of impartiality laid down in Article 41(1) of the Charter, by reason of the conflict of interest of the member of the Commission responsible for competition matters, who signed the contested decision (‘the Commissioner in question’). In that regard, it claims that that Commissioner had participated, within the Danish Government, in the drafting of Law No 902/2013 as Minister for the Economy and the Interior, Deputy Prime Minister and member of the Coordination Committee of that government. According to the applicant, the Commission infringed certain provisions of its Rules of Procedure (OJ 2000 L 308, p. 26) and of its Decision of 31 January 2018 on a Code of Conduct for the Members of the European Commission (OJ 2018 C 65, p. 7).

25 The Commission contends that the second plea should be rejected. In its view, first, responsibility for the drafting of Law No 902/2013 lay with the Minister for the Environment and not with the Commissioner in question. Second, her status as a member of the Government Coordination Committee is irrelevant since approval of a draft law by that committee merely means that the government submits the draft to the Danish Parliament. Third, in the absence of the Commissioner in question having any personal interest that could influence the independent performance of her duties, in particular a potential benefit or advantage to her, her spouse or her direct family members, there is no conflict of interests within the meaning of Article 2(6) of its Code of Conduct. Fourth, the Commission points out that, pursuant to Article 250 TFEU and Article 2(4) of its Code of Conduct, its decisions are adopted by the College of Commissioners by a majority of its members, with the result that a single member cannot have a decisive influence on the adoption of a decision.

26 Article 41(1) of the Charter states, inter alia, that every person has the right to have his or her affairs handled impartially by the institutions, bodies, offices and agencies of the European Union.

27 In that regard, it should be noted that the requirement of impartiality, which applies to the institutions, bodies, offices and agencies in carrying out their missions, is intended to guarantee equality of treatment, which is at the heart of the European Union. Having regard to the fundamental importance of ensuring the independence and probity of EU institutions, bodies, offices and agencies as regards both their internal functioning and external reputation, the requirement of impartiality covers all circumstances in which an official or agent who is called upon to decide on an issue must reasonably consider that issue as being of such a nature as to be viewed by third parties as a possible source of impairment of his or her independence in that matter (see, to that effect, judgment of 27 March 2019, August Wolff and Remedia v Commission, C‑680/16 P, EU:C:2019:257, paragraph 26 and the case-law cited).

28 Thus, it is incumbent on those institutions, bodies, offices and agencies to comply with the requirement of impartiality in particular as regards its component relating to objective impartiality, according to which there must be sufficient guarantees to exclude any legitimate doubt as to possible bias on the part of the institution concerned (see, to that effect, judgment of 27 March 2019, August Wolff and Remedia v Commission, C‑680/16 P, EU:C:2019:257, paragraph 27 and the case-law cited), appearances possibly also being of importance (see, to that effect and by analogy, judgment of 19 November 2019, A. K. and Others (Independence of the Disciplinary Chamber of the Supreme Court), C‑585/18, C‑624/18 and C‑625/18, EU:C:2019:982, paragraph 128 and the case-law cited).

29 In that regard, it is apparent from the case-law that, in order to show that the organisation of an administrative procedure does not ensure sufficient guarantees to exclude any legitimate doubt as to possible bias, it is not necessary to prove lack of impartiality but is sufficient for a legitimate doubt to arise that cannot be dispelled (judgment of 21 October 2021, Parliament v UZ, C‑894/19 P, EU:C:2021:863, paragraph 54; see also, to that effect, judgment of 27 March 2019, August Wolff and Remedia v Commission, C‑680/16 P, EU:C:2019:257, paragraph 37).

30 Thus, the Court has previously held that the objective impartiality of a committee may be jeopardised where one of its members could have a conflict of interest as the result of an overlap in function, irrespective of that member’s actual conduct (see, to that effect, judgment of 27 March 2019, August Wolff and Remedia v Commission, C‑680/16 P, EU:C:2019:257, paragraph 30).

31 In the present case, in essence, the applicant challenges the objective impartiality of the Commissioner in question, noting that the latter had, first, taken part in the adoption of Law No 902/2013 by virtue of her duties within the Danish Government and, second, assumed ‘ultimate administrative responsibility’ for the handling of its complaint and the adoption of the contested decision.

32 In the first place it is true, as the Commission points out, (i) that it was the Danish Minister for the Environment and not the Commissioner in question who had presented the draft that led to the adoption of Law No 902/2013 and, (ii) that that law had been adopted following a majority vote of the members of the Danish Parliament.

33 However, first, it is not disputed that the Commissioner in question, prior to occupying that position, was, at the time of the submission of the draft giving rise to Law No 902/2013 and at the time of its adoption, Minister for the Economy and the Interior, that is to say, she held a senior position in the Danish Government. Nor is it disputed that, at the same time, that Commissioner was also Deputy Prime Minister of the Kingdom of Denmark and a member of the Coordination Committee of that government. Thus, before becoming a Commissioner, she held a particularly important position within the Danish Government.

34 Second, it should be noted that the purpose of Law No 902/2013 was to amend the existing rules on water pricing and therefore included measures intended to have an impact on the expenditure of private individuals and undertakings, such as the contribution for the treatment of waste water. It is reasonable to consider that such measures could have been proposed in agreement with the minister responsible for the economy, namely the Commissioner in question. Indeed, the law was part of an overall plan of action of the Danish Government at the time entitled ‘Growth Plan for Denmark’.

35 Third, it is apparent from a press article submitted by the applicant that, on 26 February 2013, the Commissioner in question had participated on behalf of the Danish Government, together with the Prime Minister, the Minister for Finance and the Minister for Taxation, in a press conference concerning the presentation of that action plan, which included the draft which gave rise to Law No 902/2013. In particular, during that press conference, the Commissioner in question had stated that ‘the Government [was] sending a very clear signal to undertakings’ and that it ‘[would] not impose any further general increases in taxes and duties on undertakings’. Moreover, during the same press conference, the Commissioner in question had also explained that ‘in addition to the corporation tax reductions …, there [would] be a number of tax reductions, including … a reduction in the tax on waste water’.

36 Accordingly, the Commissioner in question had taken a position at national level, publicly and explicitly, in favour of the reduction of the contribution for the treatment of waste water.

37 In the light of those factors, it may legitimately be considered that the Commissioner in question had an interest in the contribution for the treatment of waste water provided for by Law No 902/2013 – which is a measure reducing the charge for the treatment of waste water in favour of the largest consumers – not being called into question on the ground that it was unlawful under the rules of EU law concerning State aid.

38 It is therefore necessary, in the second place, to examine whether the organisation of the administrative procedure within the Commission that led to the adoption of the contested decision offered sufficient guarantees to prevent such an interest from vitiating that procedure by an infringement of the requirement of impartiality.

39 In that regard, it is true, as the Commission submits, that Article 250 TFEU provides that it is to act by a majority of its members, therefore the Commissioner in question had no casting vote in adopting the contested decision.

40 However, the fact remains that, under Article 248 TFEU, ‘the responsibilities incumbent upon the Commission shall be structured and allocated among its members by its President’, the President being able to ‘reshuffle the allocation of those responsibilities during the Commission’s term of office’. More specifically, under the second subparagraph of Article 3(2) of the Rules of Procedure of the Commission, as amended by Commission Decision 2010/138/EU, Euratom of 24 February 2010 (OJ 2010 L 55, p. 60), ‘the President shall assign to Members of the Commission special fields of activity with regard to which they are specifically responsible for the preparation of Commission work and the implementation of its decisions’.

41 Thus, despite the collegiate nature of the method of adopting decisions within the Commission, the Commissioner in question was, as the member responsible for competition, specifically responsible for the preparation of the contested decision – which the Commission moreover confirmed at the hearing, stating that she had ‘ultimate responsibility for the preparation of the proposal for that decision’. In that regard, the preparatory role is an important role as far as the decision ultimately adopted by the Commission is concerned (see, to that effect and by analogy, judgment of 27 March 2019, August Wolff and Remedia v Commission, C‑680/16 P, EU:C:2019:257, paragraph 33).

42 Such an assessment is reinforced, particularly in the perception of third parties, by the fact, emphasised in essence by the applicant, that the Commissioner in question is the only signatory of the contested decision.

43 It follows from the foregoing that, despite her interest as regards Law No 902/2013 (see paragraph 37 above), the Commissioner in question held a particular responsibility in the context of the administrative procedure that led to the adoption of the contested decision, concerning the examination of the measure provided for by that law in the light of the rules on State aid.

44 On the face of it, such a situation is such as to give rise, in the eyes of third parties, to a legitimate doubt with respect to possible bias on the part of the Commissioner in question, irrespective of her conduct. Moreover, the Commission has not adduced any evidence capable of calling into question the applicant’s allegations in order to dispel the doubt thus created. As a result, in accordance with the case-law referred to in paragraphs 28 to 30 above, it must be concluded that the procedure which led to the adoption of the contested decision did not offer sufficient guarantees of objective impartiality.

45 Consequently, the second plea in law must be upheld in its entirety. It is therefore not necessary to examine, first, the other arguments put forward by the applicant in the context of this plea or, second, the Commission’s arguments based on the lack of personal or family interest of the Commissioner in question, in so far as those arguments relate to subjective impartiality.

46 The Court considers that it is necessary to examine, for the sake of completeness, the third plea in law, which alleges that the Commission infringed Article 107(1) TFEU when it concluded, in the contested decision, that the contribution for the treatment of waste water did not entail an advantage.

 The third plea in law, alleging infringement of Article 107(1) TFEU in so far as concerns the condition of the existence of an advantage

47 By its third plea, the applicant claims that the Commission was wrong to find that the contribution for the treatment of waste water did not confer any advantage on specific undertakings and that it did not therefore constitute State aid within the meaning of Article 107(1) TFEU.

48 The third plea consists, in essence, of two parts. By the first part, the applicant submits that the market economy operator principle (‘the private operator principle’) was not applicable. By the second part, it claims that, assuming it is applicable, the principle is not satisfied.

 The first part of the third plea, alleging the non-applicability of the private operator principle

49 The applicant submits that the private operator principle was not applicable, given that, first, there is no real market for the collection of waste water in Denmark, second, such a principle has never been applied to a measure of general application or to a measure reducing charges or creating an exemption from charges and, third, the Commission did not examine the effects of the staircase model on the customers and suppliers of slaughterhouses.

50 The Commission, supported by the Kingdom of Denmark, contests the applicant’s arguments.

51 As a preliminary point, it should be recalled that Article 107(1) TFEU lays down several cumulative conditions that must be satisfied in order for a national measure to be classified as State aid, including a condition that the State measure at issue in a given case must confer a selective advantage on the undertaking or undertakings benefiting therefrom (see judgment of 17 November 2022, Volotea and easyJet v Commission, C‑331/20 P and C‑343/20 P, EU:C:2022:886, paragraphs 102 and 103 and the case-law cited). In that regard, any State measure which, whatever its form or objectives, is likely to favour one or more undertaking directly or indirectly, or which confers an advantage on them which they would not have been able to obtain under normal market conditions, confers an ‘advantage’ for the purposes of Article 107(1) TFEU (see judgment of 17 November 2022, Volotea and easyJet v Commission, C‑331/20 P and C‑343/20 P, EU:C:2022:886, paragraph 107 and the case-law cited).

52 The characterisation of such an advantage is, in principle, carried out by applying the private operator principle, unless there is no possibility of comparing the State conduct at issue in a particular case with that of a private operator because that conduct is inseparably linked with the existence of infrastructure that no private operator would ever have been able to create or unless the State acted in its capacity as a public authority, although it must be observed that the mere exercise of the prerogatives of a public authority, such as the use of means that are legislative or fiscal in nature, does not by itself render that principle inapplicable, nor does the pursuit of public policy objectives (see, to that effect, judgment of 17 November 2022, Volotea and easyJet v Commission, C‑331/20 P and C‑343/20 P, EU:C:2022:886, paragraphs 108 and 120 and the case-law cited). It is the economic nature of the State intervention at issue and not the means put into effect for that purpose that renders that principle applicable (see, to that effect, judgment of 20 September 2017, Commission v Frucona Košice, C‑300/16 P, EU:C:2017:706, paragraph 27).

53 In the present case, the measure at issue concerns the pricing of waste water treatment. In that regard, the waste water treatment service is carried out by the infrastructure operators in return for remuneration derived, inter alia, from the contribution for the treatment of waste water which is at issue in the present case. In particular, the purpose and effect of that measure is to reduce the charges applied to the biggest water consumers. It can therefore be likened to a quantitative rebate granted by the operator of an infrastructure to some of its customers, with the result that the State conduct at issue can be compared to that of a private operator.

54 Accordingly, irrespective of the general nature of the contribution for the treatment of waste water, the intervention of the Danish authorities at the time of the adoption of that measure is economic in nature, with the result that any advantage resulting from it must be assessed on the basis of the private operator principle, in accordance with the case-law cited in paragraph 52 above.

55 Such a conclusion is not called into question by the applicant’s argument that there is no market for the treatment of waste water. Indeed, even if it were established, such a circumstance would not, in itself, render the market economy operator principle not applicable, since, in the absence of any possibility of comparing the situation of a public undertaking with that of a private undertaking, normal market conditions, which are necessarily hypothetical, must be assessed by reference to the objective and verifiable elements which are available (see, to that effect, judgment of 3 July 2003, Chronopost and Others v Ufex and Others, C‑83/01 P, C‑93/01 P and C‑94/01 P, EU:C:2003:388, paragraph 38).

56 Moreover, as regards the applicant’s argument that the Commission failed to examine the effects of the staircase model on the customers and suppliers of slaughterhouses, it must be stated that, by such an argument, the applicant does not in fact claim that the private operator principle was not applicable, but disputes the application of that principle by the Commission. That argument is therefore irrelevant in the context of the present part of this plea.

57 In the light of the foregoing, it must be concluded that the private operator principle was applicable in the present case and, therefore, the first part of the third plea must be rejected.

 The second part of the third plea, alleging an error in the application of the private operator principle

58 By the second part of the third plea, the applicant submits that the Commission misapplied the private operator principle.

59 In that regard, it complains in particular that the Commission, when applying the private operator principle, took account of average values without examining the costs of each user, as required by paragraph 228 of the 2016 Notice. The Commission contradicted itself in that regard by stating, in the contested decision, that paragraph 228 was applicable and then basing its analysis on average values corresponding to a limited number of treatment plants. In addition, the applicant criticises the Commission for having regarded costs connected to the laying of pipelines as fixed costs, divided equally among all the various users, even though such pipelines were used only for certain specific undertakings located at a distance from the waste water treatment plant. Lastly, it argues that, contrary to what the Commission stated in the contested decision, it would in fact be extremely difficult for undertakings to disconnect from the existing network of treatment plants.

60 The Commission, supported by the Kingdom of Denmark, contests the applicant’s arguments.

61 First, the Commission notes that, in order to take a decision as to the existence of an advantage conferred on the end-users of an infrastructure, it must place itself at the point of view of the operator of that infrastructure. Thus, in its view, in the present case it had to ascertain whether a private operator in the same situation as the operator of a waste water treatment plant would have adopted the staircase model, therefore the applicant’s argument based on a comparison of the contribution between slaughterhouses is irrelevant.

62 Second, the Commission denies that it misapplied paragraph 228 of the 2016 Notice in the contested decision. In that regard, first of all, it argues that, since the staircase model is of general application for all users of waste water treatment plants in Denmark, it was not required to examine the amount of the contribution for the treatment of waste water paid by each individual user. Next, it points out that the staircase model is based on a formula which allows a calculation to be made for each user in Denmark by sharing the fixed costs among all users equally and attributing the variable costs to each user. Lastly, the Commission maintains that it verified that the reduced contributions, calculated on the basis of that formula, covered the costs incurred by the operators of waste water treatment plants, which was sufficient evidence to support the view that the private operator principle was satisfied.

63 Third, the Commission contests the applicant’s argument relating to the failure to take account of the costs associated with piping, pointing out that laying, maintaining and operating a network of pipelines benefits all users under the same conditions, therefore such costs must be regarded as fixed costs to be shared among all users, and not as incremental costs linked to the presence of a particular user.

64 Fourth, the Commission contends that the applicant’s argument that large slaughterhouses could not choose to disconnect from an existing waste water treatment plant is irrelevant, since it is not decisive for the conclusion that the contribution for the treatment of waste water does not entail an advantage. Moreover, that argument is unfounded inasmuch as those undertakings have a genuine option to carry out such a disconnection in accordance with the conditions laid down in the Danish legislation and referred to in the contested decision.

65 For its part, the Kingdom of Denmark submits that the staircase model does not confer an advantage on specific undertakings. In that regard, it points out that the various charges calculated on the basis of that model merely reflect the costs actually borne by the operators of waste water treatment plants, and do so more faithfully to reality than the single charge per cubic metre of water provided for by Law No 633/2010. According to the Kingdom of Denmark, a private operator would have adopted such a payment structure, given that it would primarily seek to cover its costs and retain the largest customers. Furthermore, as regards the applicant’s argument that the staircase model does not take into account piping costs specific to certain users, the Kingdom of Denmark points out that the contribution for the treatment of waste water at issue in the present case is not the only contribution paid to the operators of the treatment plants and that Law No 902/2013 also provides for a so-called connection contribution, which is a one-off, fixed charge that is paid when connecting a site to the infrastructure and which is based on a principle of geographical solidarity, according to which the price of the connection is the same irrespective of the distance between the site in question and the waste water treatment plant concerned.

66 According to settled case-law, the application of the private operator principle involves the Commission showing, following an overall assessment that takes into consideration all the relevant evidence in the case, that the undertaking or undertakings benefiting from the State measure at issue would manifestly not have obtained a comparable advantage from a normally prudent and diligent private operator in a situation that is as alike as possible and acting under normal market conditions. Within that overall assessment, the Commission must have regard to all the options that such an operator would reasonably have envisaged, all the information available and likely to have a significant influence on its decision, and the developments that were foreseeable at the time when the decision to confer an advantage was taken (see judgment of 17 November 2022, Volotea and easyJet v Commission, C‑331/20 P and C‑343/20 P, EU:C:2022:886, paragraph 113 and the case-law cited).

67 In particular, the Commission must assess whether, at that time, the transaction by which the advantage was conferred could be considered rational from an economic, commercial and financial perspective, taking account of its prospects for profitability over the short or longer term and of the other commercial or economic interests which it involved (see judgment of 17 November 2022, Volotea and easyJet v Commission, C‑331/20 P and C‑343/20 P, EU:C:2022:886, paragraph 114 and the case-law cited).

68 Moreover, it should be borne in mind that the examination which the Commission must carry out when applying the private operator test requires a complex economic assessment in which that institution has a broad discretion (see judgment of 10 November 2022, Commission v Valencia Club de Fútbol, C‑211/20 P, EU:C:2022:862, paragraph 34 and the case-law cited), and that, in the context of a review by the EU Courts of complex economic assessments made by the Commission in the field of State aid, it is not for those Courts to substitute their own economic assessment for that of the Commission. Nevertheless, the EU Courts must, inter alia, establish whether the evidence relied on is factually accurate, reliable and consistent and review whether that evidence contains all the relevant information which must be taken into account in order to assess a complex situation and whether it is capable of substantiating the conclusions drawn from it (see judgment of 11 November 2021, Autostrada Wielkopolska v Commission and Poland, C‑933/19 P, EU:C:2021:905, paragraph 117 and the case-law cited).

69 In that regard, the Commission has the burden of proving whether or not the conditions for the application of the private operator principle have been satisfied (see judgment of 26 March 2020, Larko v Commission, C‑244/18 P, EU:C:2020:238, paragraph 65 and the case-law cited), and that burden of proof cannot be discharged by making mere assumptions which are not substantiated to the requisite legal standard (see, to that effect, judgment of 16 March 2016, Frucona Košice v Commission, T‑103/14, EU:T:2016:152, paragraph 205).

70 It is in the light of those considerations that the Court must examine the applicant’s arguments seeking to call into question the way in which the Commission applied the private operator principle in the contested decision.

71 In the first place, it should be noted that, in order to reach the conclusion that the contribution for the treatment of waste water did not entail an advantage, for the purposes of Article 107(1) TFEU, inasmuch as it complied with the private operator principle, the Commission relied on the ex ante profitability analysis method provided for in the second to fourth sentences of paragraph 228 of the 2016 Notice. First, in paragraph 36 of the contested decision, it reproduced those sentences. Second, in paragraph 42 of that decision, it concluded that, ‘in line with [paragraph] 228 of the [2016 Notice], through [the contribution for the treatment of waste water], the users of each waste water treatment plant [contributed] to the profitability of that plant’.

72 In that regard, it is for the Commission, in the exercise of its broad discretion referred to in paragraph 68 above, to choose the appropriate method, within the framework of its obligation to carry out a complete analysis of all factors that are relevant to the transaction at issue and its context, including the situation of the beneficiary undertaking and of the relevant market, to verify whether the beneficiary undertaking has received an economic advantage which it would not have obtained under normal market conditions (see, to that effect, judgments of 13 December 2018, Ryanair and Airport Marketing Services v Commission, T‑165/15, EU:T:2018:953, paragraph 142, and of 29 September 2021, TUIfly v Commission, T‑447/18, not published, EU:T:2021:625, paragraph 80).

73 Nevertheless, where the Commission adopts guidelines or a notice designed to specify the criteria that it intends to apply in the exercise of its discretion, the Commission itself limits that discretion in that it must comply with the indicative rules it has imposed on itself, to the extent that they do not depart from the rules in the Treaty. In that respect, it is for the EU Courts to determine whether the Commission has observed the rules that it adopted (see, to that effect, judgment of 1 December 2004, Kronofrance v Commission, T‑27/02, EU:T:2004:348, paragraph 79 and the case-law cited).

74 Therefore, by choosing to apply the ex ante profitability analysis method, as defined in the second to fourth sentences of paragraph 228 of the 2016 Notice, the Commission was in principle required to comply with the conditions laid down therein. In the second to fourth sentences of paragraph 228 of the 2016 Notice, the Commission circumscribed its discretion as follows:

‘The Commission considers that the [market economy operator] test can be satisfied for public funding of open infrastructures not dedicated to any specific user(s) where their users incrementally contribute, from an ex ante viewpoint, to the profitability of the project/operator. This is the case where the operator of the infrastructure establishes commercial arrangements with individual users that allow covering all costs stemming from such arrangements, including a reasonable profit margin on the basis of sound medium-term prospects. This assessment should take into account all incremental revenues and expected incremental costs incurred by the operator in relation to the activity of the specific user.’

75 It follows that, according to the second sentence of paragraph 228 of the 2016 Notice, in order to determine whether the operator of a non-dedicated public infrastructure makes that infrastructure available to undertakings under market conditions, it must be ascertained whether the ‘users’ of that infrastructure contribute to its profitability in a ‘progressive’ manner, according to certain language versions of that communication (see, in that regard, the French and Danish language versions) or, according to other language versions, in an ‘incremental’ manner (see, in that regard, the English, German, Spanish and Romanian language versions). Thus, it must be held that the ex ante profitability analysis method requires determining the incremental (or marginal) costs and incremental (or marginal) revenues, that is to say, the costs and revenues directly generated by the use of the infrastructure by an additional user, in order to assess whether the presence of the additional user contributes to profitability. Therefore, despite the use of the term ‘users’ in the plural, that method implies, in principle, that it is possible to determine the costs and revenues resulting from the presence of each individual user of an infrastructure.

76 Such a reading is confirmed, first, by the third sentence of paragraph 228 of the 2016 Notice, from which it is apparent that users incrementally contribute to the profitability of an infrastructure where the operator of that infrastructure enters into arrangements ‘with individual users’ enabling it to bear all the resulting costs and to retain a reasonable profit margin on the basis of sound medium-term prospects.

77 Second, according to the fourth sentence of paragraph 228 of the 2016 Notice, the ex ante profitability analysis method involves taking into account all the incremental revenues and all the incremental costs expected to be incurred by the operator of an infrastructure in connection with the activities of ‘the user’, the latter being referred to in the singular, and certain language versions of the 2016 Notice referring, moreover, to the concept of ‘specific user’ (see, in that regard, the English, Italian, Spanish and Romanian language versions) or ‘user concerned’ (see, in that regard, the German language version).

78 Third, in footnote 330 at the end of paragraph 228 of the 2016 Notice, the Commission refers, first, to its Decision (EU) 2015/508 of 1 October 2014 on the alleged infrastructure aid implemented by Germany in favour of Propapier PM2 GmbH – State aid SA.36147 (C 30/10) (ex NN 45/10; ex CP 327/08) (OJ 2015 L 89, p. 72), which concerned the examination of a reduced fee that allegedly provided an advantage to a particular user of an infrastructure, and in which it applied the ex ante profitability analysis method. In that same footnote, the Commission refers, second, to points 61 to 64 of its Guidelines on State aid to airports and airlines (OJ 2014 C 99, p. 3; ‘the 2014 Guidelines’), which concern the assessment of arrangements concluded by airports with individual airlines (see point 61 of the 2014 Guidelines), for which an ex ante profitability analysis method is established in terms similar to those of paragraph 228 of the 2016 Notice.

79 In those circumstances, as the applicant rightly points out, in order to apply the ex ante profitability analysis method provided for in paragraph 228 of the 2016 Notice to the staircase model, the Commission was required to examine, in respect of each undertaking connected to a waste water treatment plant, whether the contribution for waste water treatment paid in accordance with the staircase model was capable of covering the costs arising from its use of the infrastructure in question.

80 It is common ground between the parties that the Commission was not in a position to examine the costs and revenues specific to each undertaking using the waste water treatment plants in Denmark, since it relied solely on average data relating to total costs and revenues of 6 out of the 98 municipalities of that country.

81 Accordingly, the applicant is right to claim that, by relying solely on such data, the Commission disregarded the limits that it imposed on its discretion in paragraph 228 of the 2016 Notice.

82 In any event, even if the Commission could have applied the ex ante profitability analysis method without carrying out an examination of each user, such a method entails at the very least that it is in a position to verify that the staircase model is based on an approach which makes it possible to allocate to users, in a sufficiently probable manner, the incremental costs, that is to say, the costs directly incurred by their use of a waste water treatment plant.

83 In that regard, first, the Commission noted, in paragraph 39 of the contested decision, that the staircase model was based on a distribution of the total costs borne by operators of waste water treatment plants between, on the one hand, the fixed costs, divided equally between all users and, on the other hand, the variable costs, allocated to the various users according to their consumption. Second, in paragraphs 40 and 41 of that decision, the Commission considered that the revenue from the contribution for the treatment of waste water, after application of the Step 2 and Step 3 charges, made it possible to cover all the costs borne by the operators of waste water treatment plants, on the basis of the Danish authorities’ estimate that those costs were 20% or even 30% variable costs and 70% or 80% fixed costs (see paragraph 11 above).

84 Indeed, it is apparent from those considerations that the Danish authorities followed an approach making the variable part of the contribution for waste water treatment dependent on the variable costs incurred by the operator of a waste water treatment plant, relative to each user.

85 However, in their reply of 18 May 2017 to a Commission request for information, the Danish authorities explained that, in the approach that served as a basis for developing the staircase model, variable costs included only operating expenses (‘OPEX’) related to the quantity of water consumed by a user.

86 It follows that, as the applicant submits, in essence, all the costs which were not linked to the quantity of water consumed were considered to be fixed costs and, therefore, were shared among all the various users, even if such costs existed merely because of the presence of a specific user on the network. That is the case, in particular, with investment expenditure (‘CAPEX’), such as that linked to the creation and extension of the network of pipelines, which were regarded as fixed costs, including if the sole purpose of that expenditure was the connection of a specific user to the network. In that regard, in response to a question put by the Court, the Kingdom of Denmark, while acknowledging that such costs vary according to the distance between the installation and the user, stated that they were shared equally between all users, in accordance with a principle of geographical solidarity.

87 The Commission was thus wrong to state, in paragraph 38 of the contested decision, that it had verified that the contribution for the treatment of waste water, determined using the staircase model, enabled the plant to cover incremental costs in the medium term, which, in its view, included ‘all categories of expenses or investments, such as personnel, equipment and investment costs, induced by the presence of the user’.

88 Therefore, it is clear that the approach on which the staircase model was based did not allow for an adequate definition of the incremental costs borne by the operators of waste water treatment plants.

89 Furthermore, the Kingdom of Denmark’s argument that there is a separate contribution for the connection of users to the waste water treatment network (see paragraph 65 above) cannot be taken into account, since the Commission did not take account of such a contribution in its assessment in the contested decision, at the end of which it concluded that the contribution for the treatment of waste water, determined on the basis of the staircase model, did not entail an advantage. It follows that taking such an argument into account would lead the Court to amend the grounds of the contested decision, in disregard of the settled case-law according to which, in the context of an action for annulment, the EU Courts cannot substitute its own reasoning for that of the author in the contested decision (see judgment of 5 May 2021, ITD and Danske Fragtmænd v Commission, T‑561/18, EU:T:2021:240, paragraph 249 and the case-law cited).

90 In any event, since such separate contribution is identical for all users, irrespective of their distance from the waste water treatment plant, in accordance with a principle of geographical solidarity, it does not make it possible to charge to a specific user the costs specifically incurred by its connection to the network.

91 It follows from the foregoing that the Commission disregarded the limits that it imposed on its discretion, in paragraph 228 of the 2016 Notice, when it considered, on the basis of the ex ante profitability analysis method, that the contribution for the treatment of waste water was consistent with the private operator principle.

92 In the second place, as noted in paragraph 67 above, the actions of a private operator is in principle guided by prospects of profitability. Thus, where the intervention of a public operator in favour of an undertaking disregards any prospect of profitability, even in the long term, it cannot be regarded as complying with the private operator principle (see, to that effect, judgment of 10 December 2020, Comune di Milano v Commission, C‑160/19 P, EU:C:2020:1012, paragraph 114 and the case-law cited).

93 Indeed, both in paragraph 228 of the 2016 Notice and in point 63 of the 2014 Guidelines, the Commission expressly made compliance with the private operator principle subject to the requirement of a ‘reasonable profit margin’ for the operator of infrastructure where such an operator grants an advantage to users of that infrastructure.

94 In the present case, as is apparent in particular from paragraphs 37 and 38 of the contested decision, and as it stated in response to a question put by the Court in the context of a measure of organisation of procedure, the Commission considered that the discounts introduced by the new staircase model could comply with the private operator principle on the sole condition that the contribution for the treatment of waste water covers the costs incurred by the operators of waste water treatment plants.

95 On the basis of such an assessment, which disregards any prospect of profitability, even in the long term, the Commission, which bears the burden of proving that the conditions for the application of the private operator principle have been satisfied (see paragraph 69 above), could not establish that the contribution at issue complied with that principle, as the applicant essentially submits.

96 Indeed, in response to a question put by the Court, the Kingdom of Denmark stated that the rules relating to the determination of the contribution for the treatment of waste water were governed by the principle of ‘self-financing’, which, first, requires that the amount of that contribution be sufficient to cover the costs borne by the operator of a waste water treatment plant and, second, excludes the possibility for such an operator to retain a profit margin, since the excess over costs has to be reinvested and no dividend can be distributed to shareholders.

97 Moreover, as is common ground between the parties, the application of the staircase model leads, on the whole, to a reduction in the amount of the contribution for the treatment of waste water compared to the unitary fee system which it replaces. In that regard, as it acknowledged at the hearing, the Commission assessed the conformity of the staircase model with the private operator principle without, however, examining whether such an operator would have abandoned the system of the unitary fee for the staircase model, even though it appeared less profitable. The ex ante profitability analysis defined in paragraph 228 of the 2016 Notice, the terms of which are reproduced in paragraph 74 above, involves the national measure examined by the Commission contributing ‘incrementally’ to the profitability of the operator of an infrastructure, so that, in order to comply with the private operator principle, that measure is supposed to increase such profitability, even in the long term, and not decrease it.

98 It must therefore be concluded that, by failing to examine whether the contribution for the treatment of waste water enabled the operators of waste water treatment plants to retain a profit margin, the Commission misapplied the private operator principle and, therefore, infringed Article 107(1) TFEU.

99 In the third place, the applicant disputes the Commission’s determination in paragraphs 43 to 45 of the contested decision that, in essence, the maintenance of high charges for water treatment entails a risk that large undertakings on Step 3 will choose to disconnect from the centralised waste water treatment network by creating their own installation and, therefore, will no longer be subject to the contribution for the treatment of waste water.

100 In that regard, it must be stated at the outset that such an argument is not ineffective, contrary to what the Commission maintains. By that argument, the applicant disputes a factor which the Commission took into account in the contested decision in order to support its conclusion that the contribution for the treatment of waste water complied with the private operator principle and, therefore, did not involve an advantage and did not constitute State aid (see paragraph 12 above).

101 As regards the merits of the Commission’s assessment relating to the option to disconnect from the centralised waste water treatment network, it should be noted that, first, such an option is subject to the fulfilment of several cumulative substantive conditions set out in Paragraph 16(1) and (2) of the bekendtgørelse nr. 1469 om spildevandstilladelser m.v. efter miljøbeskyttelseslovens kapitel 3 og 4 (Decree No 1469 on waste water treatment authorisations issued under Chapters 3 and 4 of the Law on environmental protection) of 12 December 2017. In particular, those provisions provide that such disconnection may be authorised only if (i) the overall financing of the operator of the waste water treatment plant is not substantially reduced and (ii) that installation can continue to operate correctly from a technical point of view. Thus, as the applicant rightly submits, such conditions are unlikely to be satisfied by the users on Step 3, who are the biggest and whose disconnection is therefore the most likely to affect the proper functioning of a waste water treatment plant from a technical and financial point of view.

102 Second, even where the conditions referred to in the preceding paragraph are satisfied, the option to disconnect from the centralised waste water treatment network does not constitute an acquired right, but is subject to authorisation from the municipal authorities, which have a broad discretion in that regard, as the Kingdom of Denmark clarified at the hearing.

103 Third, in response to a question put by the Court in the context of a measure of organisation of procedure, the Commission and the Kingdom of Denmark stated that, at the time of the adoption of the contested decision, they were not aware of specific examples of undertakings which had disconnected completely from the centralised waste water treatment network to which they were connected, in order to create their own plant.

104 It follows that the risk that users on Step 3 might disconnect from the centralised waste water treatment network, which the Commission took into account in paragraphs 43 to 45 of the contested decision, was hypothetical and not sufficiently substantiated. Accordingly, when the Commission found that a private operator would have taken account of such a risk in order to determine the amount of the contribution for the treatment of waste water, the Commission did not discharge its burden of proof under the case-law referred to in paragraph 69 above.

105 In the light of the foregoing, the Court concludes that the Commission infringed Article 107(1) TFEU and paragraph 228 of the 2016 Notice when it took the view that the contribution for the treatment of waste water did not entail the existence of an advantage on the ground that it would have been decided upon by a private operator. Therefore, the third plea in law must be upheld.

106 In the light of all the foregoing, the second plea must be upheld as must, for the sake of completeness, the third plea in law and, accordingly, the contested decision must be annulled, without there being any need to examine the other pleas raised by the applicant.

 Costs

107 Pursuant to Article 219 of the Rules of Procedure of the General Court, in decisions of the General Court given after its decision has been set aside and the case referred back to it, it is to decide on the costs relating to the proceedings instituted before it and to the proceedings on the appeal before the Court of Justice.

108 In the judgment on appeal, the Court of Justice set aside the initial order and reserved the costs. It is therefore for the General Court to rule in the present judgment, first, on all the costs relating to the proceedings brought before it, namely the proceedings in Cases T‑486/18 and T‑486/18 RENV and, second, on the costs relating to the appeal proceedings, that is to say, the proceedings in Case C‑99/21 P.

109 Under Article 134(1) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings.

110 Since the Commission has been unsuccessful both in the appeal proceedings and in the present referral proceedings, it must be ordered to pay the costs relating to the present case and those relating to Cases T‑486/18 and C‑99/21 P, in accordance with the form of order sought by the applicant.

111 In addition, in accordance with Article 138(1) of the Rules of Procedure, the Kingdom of Denmark is to bear its own costs.

On those grounds,

THE GENERAL COURT (First Chamber)

hereby:

1. Annuls Commission Decision C(2018) 2259 final of 19 April 2018 relating to State aid SA.37433 (2017/FC) – Denmark;

2. Declares that the European Commission is to bear its own costs and orders it to pay the costs incurred by Danske Slagtermestre in the proceedings before the General Court and before the Court of Justice;

3. Declares that the Kingdom of Denmark is to bear its own costs.