25.04.2019 | KPMG Law Insights

If university continuing education falls under the concept of aid in Art. 107 para. 1 TFEU?

Facts: In a case currently before the ECJ (C-393/17), two operators of a non-accredited private university in Belgium are seeking the annulment of the fines imposed on them. The reason for the criminal sanction payment is what the Flemish law enforcement agency considers to be the illegal awarding of academic titles.

Significance for state aid law: The facts of the case, which take place in criminal law, largely revolve around the concept of service and its applicability to state and private universities. The argumentation presented here by the Attorney General is, however, equally relevant with regard to the question of whether university offers for the further education of professionals, which are provided in return for payment, are to be regarded as economic activities within the meaning of state aid law.

The “Humbel Criteria”: According to Art. 57 TFEU, a service is a service rendered for remuneration, whereby this must be understood in the sense of an economic consideration for the service rendered. Despite the levying of a school fee, since the ECJ ruling Humbel and Edel (263/86), education is fundamentally not considered a service, since the state does not take up a profit-making activity within the national education system, but fulfills its social, cultural and educational duties. According to recent case law, this also applies to institutions of higher education in the state education system, insofar as these would be financed primarily from public funds, even if fees occasionally had to be paid to cover costs.

Expansion to private colleges: The Attorney General is challenging this assessment, which dates back to the 1980s. He argues that the sharp boundary of fee-for-service for public and private universities can no longer apply in today’s higher education landscape:

“What is governmental in a world where (even) state universities are setting up campuses in other member states or entering into joint ventures with various other institutions and/or creating spin-off companies for teaching and research?”

The image of the noble state university, exclusively concerned with the common good, versus the capitalist construct of the private university, is outdated, he said, as the former also charge fees for courses of study as well as (weekend) events for managers. There is a parallel with the health care system, which, although partly characterized by private providers, is classified as a non-economic service of general interest to which the freedom to provide services does not apply. Consequently, an exclusion of the general interest could not be assumed from the outset in the case of private education providers.

Therefore, it would have to be delineated as follows:

  • After each individual activity (especially each course of study).
  • By level of education, since only in primary and secondary education the social character of education is evident, but not in higher education
  • According to financing of the study program and the question of consideration, the following aspects play a role here:
  • Cost bearing (not exclusively and directly by the customer)
  • Market criterion (the larger the market for a program [national, European, global], the less it can be assumed that a special and unique social and cultural objective is pursued.

Significance for the practice of state aid law: If the ECJ were to follow the argumentation of the Attorney General, the example of the paid further training of professionals would probably constitute an economic activity due to the fact that the costs are borne by the customer, which would consequently have to be shown as such in the separation calculation. However, such a ruling would have an influence on further areas of university activity, so that the decision of the ECJ must be awaited here for the time being.

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