The Altmark conditions. The Icelandic Government argued initially in its notification that the HFF system does not constitute State aid, because the system would, inter alia, not confer any advantage on the HFF. In this respect, the Icelandic Government referred to the Altmark ruling (1) of the Court of Justice and argued that the HFF system would comply with all of the four criteria that the Court of Justice established in that ruling. It needs to be recalled that the Court of Justice has established the following conditions, which need to be fulfilled cumulatively, for a State measure to escape the classification of State aid. These conditions are: – First, the recipient undertaking must actually have public service obligations to discharge, and the obliga- tions must be clearly defined. – Second, the parameters on the basis of which the compensation is calculated must be established in advance in an objective and transparent manner, to avoid it conferring an economic advantage which may favour the recipient undertaking over competing undertakings. – Third, the compensation cannot exceed what is necessary to cover all or part of the costs incurred in the discharge of public service obligations, taking into account the relevant receipts and a reasonable profit for discharging those obligations. – Fourth, where the undertaking which is to discharge public service obligations, in a specific case, is not chosen pursuant to a public procurement procedure which would allow for the selection of the tenderer capable of providing those services at the least cost to the community, the level of compensation needed must be determined on the basis of an analysis of the costs which a typical undertaking, well run and adequately provided with means so as to be able to meet the necessary public service requirements, would have incurred in discharging those obligations, taking into account the relevant receipts and a reasonable profit for discharging the obligations. It is the Authority's preliminary opinion that the HFF system neither complies with the second nor with the fourth condition (2). Concerning the second condition, the Icelandic authorities did not establish in advance, and in an objective and transparent manner, the parameters on the basis of which the compensation was to be calculated, in order to avoid conferring an economic advantage, which may favour the HFF over compe- ting undertakings. The Icelandic Government has not demonstrated that such an ex ante assessment has taken pl...
