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The Antimonopoly Committee of Ukraine Orders Municipal Transport Company to Repay Nearly EUR 13 Million of Illegal State Aid

On 20 November 2018, the Antimonopoly Committee of Ukraine (AMC) took its first ever decision on recovery of State aid. The decision followed the review under the formal investigation procedure in relation to the aid measure notified by Vinnytsia city. 

The measure involves financial support with the budget of nearly EUR 13 million spread over the period from 2018 to 2023. This was reserved to a municipal transport company to compensate for a public service obligation – provision of transportation services, including to passengers eligible for reduced fares. 

The AMC pointed to the fact that the municipality failed to:

  • respect standstill obligation envisaged by the Ukrainian state aid rules and put into effect the aid measure ahead of the AMC clearance by way of approving the program to support local transport (by providing subsidies) shortly after this program was notified to the AMC.
    Moreover, during 3Q 2018, the municipal transport company was already allocated nearly EUR 800 000 in subsidies (more than 50% of the aid reserved for 2018). 
  • ensure competition while selecting a candidate which is able to provide public transport services in Vinnytsia. The municipal authorities appointed the transport company as a public service provider eligible for compensation without a tender, while that was in fact mandated by both the Ukrainian and the EU (instructive for Ukraine under Article 264 of the EU-Ukraine Association Agreement) legislation.

To this end, the AMC added that the appointment of the municipal transport company without the proper tender distorted competition as this conferred advantage to this company (to the detriment of other companies providing bus transport services in the city) not available under normal market conditions. 

Where illegal aid is found to be incompatible with competition, the AMC is required to recover it from the beneficiary. For this reason, the AMC ordered the municipal transport company to pay back the aid within 6 months of the AMC decision becoming public.  

The decision of the AMC highlights the importance of the new state aid regime in Ukraine. It demonstrates the obvious risks for beneficiaries associated with failure of donors of the aid to comply with the new state aid rules. 

For further information please contact Asters Partner Igor Svechkar, Counsel Sergiy Glushchenko or Associate Olena Gadomska. 

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