The concept of undertaking strikes back – the activity of religious orders and congregations

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by Ana Filipa Afonseca, member of CEDU

The Court of Justice, final interpreter of the Treaties, has dealt with a broad spectrum of concepts of undertaking, making certain decisions somewhat perplexing to lawyers unsuspicious of the particularity of the concept of undertaking in the context of competition rules. These decisions are still the living proof that competition is at the heart of legal (and political) modeling process of European integration.

On the other hand, regarding the field of state aids, in the Congregación de Escuelas Pisa’s ruling, Case C-74/16, 27th June 2017, the Court of Justice had the important and difficult task of deciding whether the activities carried out by Spanish religious establishments were of economic nature. With this assumption, the Congregación de Escuelas Pías had received an illegal fiscal exemption and this measure is a forbidden state aid in the terms of the Article 107(1).


In the decision, the court emphasizes that “(…) the fact that the offer of goods or services is made on a not-for-profit basis does not prevent the entity which carries out those operations on the market from being considered an undertaking, since that offer exists in competition with that of other operators which do seek to make a profit.”

First, the Court of Justice noted that the Congregación de Escuelas Pías was involved in three distinct types of activities: religious activities, educational activities subsidized by the Spanish State, non-mandatory educational activities non-subsidized by the Spanish State as well as providing catering and transportation services for its students.

According to the Court of Justice:  “(…) the Congregation’s educational activities that are not financed by the Spanish state, corresponding to early-years teaching, extracurricular activities and post-compulsory education, meet all the criteria (…) for classification as ‘economic activities’. According to that information, those activities are not funded by the Spanish State. Rather, they are organized by the Congregación itself and are financed essentially by private contributions, especially from students and their parents, to school costs.”

In practical terms, the Court of Justice determined the end of tax exemption for the Church, at least when the value of this exemption is not intended to compensate the activity that this entity performs for the pursuit of a public purpose, according to the emblematic Altmark judgment. It is therefore important to note that the State’s non-interference with the market cannot be confused with the dismissal of its essential functions, the so-called prerogatives of public authority, which will always be up to the State to guarantee through its own means. But, in this case, that doesn’t mean that the Congragación is a part of the rules of competition.

Especially in states where religion plays a significant role, this type of measures that aid religious entities have are not yet completely dissipated. For example, in Portugal since 1990 there are VAT exemptions for the Catholic Church, episcopal conferences, dioceses, seminaries and other training centers for the preparation of priests and religious, orders and congregations. Therefore, the economic issues – such as the ones this decision embodies –  seem to prove that the competition rules also aim at achieving other purposes, as in this case, constitute a true apology to cultural and religious diversity.

Picture credits: Gottweig…  by falco.

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