Decision n. 407003, 8th June 2023, Council of State, Adm. Sect., Ass., consultative opinion, Avis portant sur la sécurisation des mesures permettant d’assurer une meilleure prise en compte de l’intérêt public dans l’équilibre des contrats de concession autoroutière, France
Article(s) in Directive 2014/24/EU: Art. 5, 43 and 44
Topic: Contractual amendment; Time reduction; Evaluating the profitability of a concession; Termination of concessions
Member State: FR
Court/rev. board: Council of State
1. IMPLEMENTATION / RELEVANT NATIONAL LEGISLATION
The article 5 of the Directive 2014/23/EU was implemented by the Code de la commande publique (CCP), with the article L. 1121-1. The wording of national legislation regarding the concession’s definition (including transfer of risk) is similar to the wording of the Directive.
The article 43 of the Directive 2014/23/EU was implemented by the CCP with several articles (articles L. 3135-1, R. 3135-4, R. 3135-7, and R. 3135-8). The wording of national legislation regarding the modification without a new competitive tendering procedure (admissible cases and limits concerning value and substantial nature of the modification) is similar to the wording of the Directive.
The article 44 of the Directive 2014/23/EU was implemented by the CCP with two articles (articles L. 3136-5 and L. 3136-6). The wording of national legislation regarding contract termination is similar to the wording of the Directive.
2. FACTS
On 2023, April 7th, the Minister of the Economy referred, to the Conseil d’État, a request for an opinion on the evaluation of the profitability of a concession and the possibilities legally open to the State to reduce the duration of a concession contract.
The government asked the Conseil d’État whether it would be possible to tax not motorway concessionaires but, more broadly, concessionaires, it being noted, however, that the specific contribution would be levied on concessionaires “whose annual turnover and profitability exceed certain thresholds, defined in such a way that this contribution would be payable mainly by motorway concession companies”.
On the other hand, a second issue is limited to motorway concessionaires, namely that of compensation for the new charges.
3. JUDGMENT
CONSULTATIVE OPINION
Where there is a tax, there is a law, and, therefore, a question of constitutionality.
It is a question of compliance with the principle of equality: “It follows from the case law of the French Constitutional Council (CC, no. 2007-550 DC, February 27th, 2007; no. 2009-599 DC, December 29th, 2009; no. 2010-52 QPC, October 14th, 2010) that a tax imposed on only one category of operator may be introduced on the twofold condition that the taxpayers are defined according to objective and rational criteria in line with the aim pursued by the legislator and that this tax does not result in a clear breach of equality before public charges”.
Can all concessionaires be taxed?
The Conseil d’État responded positively. It deduced from an analysis of the financial characteristics of the concession that concessionaires constitute a homogeneous category and that therefore “it is open to the legislature, for budgetary yield purposes, to impose a specific tax on the income they derive from concession contracts or similar contracts of which they are holders”. On the other hand, there is no difference in circumstances that would justify limiting the scope of the new tax, either because the contract was entered into with the State or because it was entered into before 2017, the year in which the rate of corporation tax was reduced.
As far as the tax base and threshold are concerned, the legislator is given a great deal of freedom.
Motorway concessionaires could therefore be taxed, and they could even be taxed without any need to target them by setting the tax threshold, since the opinion considers, moreover, that “motorway concession companies constitute a homogeneous category which it is therefore open to the legislator to tax in a specific way for budgetary yield purposes” (§24).
However, to avoid shifting previous taxation onto users, the terms and conditions of APRR, AREA, ASF, Escota, Sanef and SAPN companies’ specifications were amended by the memorandum of understanding signed with the French State on 9 April 2015. Article 32 of these specifications provides for compensation: “In the event of the modification, creation or abolition (…) of a tax, charge or fee, including a non-tax, specific to motorway concession companies, the parties will meet, at the request of either party, to examine whether this modification, creation or abolition is likely to worsen or improve the economic and financial balance of the concession, as it existed prior to the creation, modification or abolition of the said tax, charge or fee. If this is the case, the parties shall decide, as soon as possible, on the compensatory measures to be taken, especially tariffs, with a view to ensuring that the economic and financial conditions are neither worsened nor improved, while respecting the public service“.
Article 32 raises two problems of interpretation: what is a specific tax? Is any new tax likely to undermine the economic and financial balance of the concession?
On the question of specificity, the opinion warns against hypocrisy: “any new contribution which, without being explicitly aimed at motorway concession companies, would have the practical effect, given its terms and conditions, of weighing exclusively or almost exclusively on them could, subject to the assessment of the contract judge, fall within the scope of article 32 and, consequently, give these companies a right to compensation“.
On the question of the deterioration in the balance, the Conseil’ d’État does not express an opinion; it points out that a dispute is underway. But the opinion also states that “Article 32 provides for the principle of compensation for increases in this specific tax“, as if any increase were compensable. For its part, the government seems to implicitly admit that any new taxation leads to a deterioration, since it also asked the Conseil’ d’État about the possibility of “neutralising” article 32 of the specifications by law.
The answer was unambiguous: such a legislative provision would be exposed to a very high risk of unconstitutionality and unconventionality.
The constitutional rule infringed would be that “the legislature may not interfere with lawfully concluded contracts unless this is justified by a sufficient reason of general interest, without disregarding the requirements resulting from Articles 4 and 16 of the Declaration of 1789 (CC, no. 2016-736 DC, 4 August 2016; CC, no. 2017-685 QPC, 12 January 2018; CC, no. 2020-813 DC, 28 December 2020; CC, no. 2021-968 QPC, 11 February 20”2)”.
None of the grounds of general interest put forward by the government were accepted by the Conseil’ d’État.
The first reason cited was the “windfall effect” resulting from changes in taxation and the economic context. On this point, the opinion reiterates the “spirit of the legal model for concessions” in the form of a reminder of basic facts: “changes in general taxation must be considered not as ‘windfall effects’ but as uncertainties“, and even more : “It is inherent in the very principle of a concession agreement that the concessionaire assumes all, or at least a significant proportion, of the economic and financial risks of operation, whether these result in developments are favourable or unfavourable to the concessionaire“.
Another reason given was to protect users from price increases. According to the Conseil’ d’État, this is indeed a reason in the general interest, but it is irrelevant, given that Article 32 leaves open other means of compensation than fare increases.
The objective of reducing greenhouse gas emissions is no more successful when “the increase in taxation specific to motorway concession companies envisaged in this case pursues an exclusively revenue-generating objective” and “does not constitute a behavioural tax measure“.
Reasons of general interest that are not relevant under constitutional law would not be relevant under Article 1 of Protocol No. 1 to the ECHR, which protects the right to property. The Conseil’ d’État points out that in the case law of the European Court of Human Rights, “the protection of property may cover assets, including claims, by virtue of which the concessionaire may claim to have at least a legitimate and reasonable expectation of obtaining enjoyment of the fruits of his operation“. When it interferes with this right, the legislature must justify a relevant general interest and only take measures that are proportionate to that aim (ECHR, no. 33704/04, 11 February 2010, Sud Parisienne de Construction v France). According to the opinion, this is unlikely to be the case here.
