Ireland must update its state aid arrangements

The European Commission (EC) has told the Irish government that it must reform its home-to-school transport arrangements, as they constitute illegal state aid, under current EC rules.

The practical effect will be to open the market to proper competition, as required when the EU opened the bus sector to competition in 1995.

It is the end of seven years’ in-depth investigation, the outcome of which is that the EC has concluded that payments to Bus ireann and Dublin Bus need to be altered.

Historical arrangements were considered to be allowed under EC rules, but from December 2009 new arrangements were made, that still remain in place.

The EC “will now initiate a dialogue with Ireland to update those arrangements and bring them into line with EU state aid rules.” In other words, it will instruct the Irish Government to follow EC laws on state aid, which it is not doing at the moment.

When the EC finds existing aid to be in breach of EU state aid rules, it does not ask for the Member State to recover the aid granted, but asks it to stop the grants.

The action follows a com-plaint by Irish trade association the Coach Tourism and Transport Council, against the State-owned operators, prompting the EC to start its investigation in July 2007 examining:

  • Payments for bus services operated until December 2009 under a ‘public service obligation’, with annual operating payments and grants for new buses and infrastructure upgrading, such as bus stations and garages
  • Payments to Bus ireann for operating home-to-school transport
  • Grants in 2001-03 for drivers’ disability awareness training.

While the EC has ruled that the training grants are allowed, under block exemption rules, the other payments were based on historical domestic laws that pre-dated the opening of the EU bus sector to competition in 1995.

With regard to the School Transport Scheme, in its current form “the scheme is not compatible with EU rules.”

The full text of the decision has yet to be released by the EC.