The prohibition of overcompensations to services of general economic interest

European State aid law allows Member States to compensate selected companies that are entrusted with the operation of Services of General Economic Interest ("SGEI"). Overcompensation - compensation that exceeds what is necessary to cover all or part of the cost of the SGEI including a reasonable profit - is prohibited. The application of the prohibition to ex post overcompensation leads to altered risk for companies entrusted with the operation of SGEI and to weakened incentives for an efficient operation of the SGEI. This can either result in a failure of public procurement procedures for the SGEI, or, ironically, in overcompensation. The prohibition of ex ante overcompensation sets incentives right and is therefore preferable.