Technicality saves Gozo Channel

A legal technicality led the European Court of Justice to dismiss a case filed by the European Commission against Malta over a direct contract signed with Gozo Channel days before EU accession.

The ECJ ruled that “the (Commission’s) contention that Malta was not in compliance with its obligations under EU regulation (freedom to provide maritime transport services) as from May 1, 2004 does not correspond to the form of order sought in the application”.

“The court cannot adjudicate on such a contention without ruling ultra petita (beyond what is sought),” the court said.

The court decided to dismiss the Commission’s application and ordered Brussels to pay for the costs of the case.

The EU Executive had argued that a direct contract signed by the government with Gozo Channel on April 16, 2004 breached EU rules because no call for an open tender had been made.

However, though the ECJ accepted the island was not under any obligation to follow EU rules when the contract was signed, 14 days before accession, the Commission argued the government had already been expected to follow EU rules.

The court decided otherwise, pointing out that the “Commission in no way based the pleas put forward in support of its action on the possible existence of such obligations”. The issue goes back to April 2004 when the government signed a contract with Gozo Channel to continue offering its ferry services on the Malta-Gozo crossing free of any competition. In terms of the contract, Gozo Channel was given millions of euros each year in subsidies within the framework of a public service obligation.

The European Commission had reacted by instituting infringement procedures against the island and accused the Maltese government of breaking EU rules when it did not issue any international call for tenders prior to the signing of the contract with Gozo Channel.

However, the government argued it was not bound by EU regulations at the time because Malta did not yet form part of the EU on the date the contract was signed.

During a hearing last May in front of five judges in Luxembourg, Malta argued its actions were in “good faith” and according to what had already been discussed and agreed with the Commission prior to the island’s accession. Malta said that according to a common position reached with the EU in 2001 on this issue, Malta had already declared it would be giving a public service obligation contract to Gozo Channel and Sea Malta and this was what was actually done.

On the other hand, the Commission argued that a common position was not EU law and that by giving a contract to Gozo Channel without any call for tenders, the island clearly infringed EU cabotage rules.