Article 106 (2) TFEU in Case Law: Internalization and Customized Balancing of Welfare and Market Interests

The EU law on public services is characterized by the need to reconcile competing EU and Member States interests as well as to accommodate both market and welfare interests. This paper explores how the Court of Justice of the EU (CJEU) and the Commission conduct this multi-level balancing of interests in the context of Article 106 (2) TFEU. To provide a full picture, this balancing is assessed by looking into both the requirements for the derogation and its scope of application. In essence, it is suggested that the EU has internalized the aforementioned struggle of interests. On the one hand, the EU, represented by the CJEU and the Commission, has assumed an increasingly dominant role by gradually limiting the autonomy and margin of discretion of the Member States regarding the provision, commission and financing of public services. On the other hand, it is argued that Article 106 (2) TFEU allows only a ‘customized and limited derogation’ from market and competition rules and has to be construed in consideration of the ‘general compatibility test’ which identifies economic activities in the first place. As a whole, Article 106 (2) TFEU constitutes a working system that reconciles potentially conflicting interests in favour of functioning public services. However, it is crucial that its premises and limits are respected.