State aid: Commission refers France to Court of Justice for failure to recover illegal aid
European Commission - IP/06/1471 25/10/2006
Brussels, 25th October 2006
The European Commission has decided to institute proceedings in the Court of Justice in view of France's failure to comply with the Commission decision of 16 December 2003, which indicated that aid awarded by France in the form of exemption from tax for takeovers of ailing companies was incompatible with the state aid rules laid down in the EC Treaty and should be recovered from the recipients (see IP/03/1738). Almost three years later, France has still not taken measures to recover the aid as required by the decision.
Competition Commissioner Neelie Kroes said "The Commission intends to deal very strictly with Member States that fail to implement its state aid decisions. This is crucial to ensure the credibility of policy in this field."
This strict approach is also in keeping with the state aid action plan presented by the Commission in June 2005, which is designed to ensure the effectiveness and credibility of state aid controls through the implementation of Commission decisions (see IP/05/680 and MEMO/05/195).
The Commission found that France failed to take action to recover aid awarded under Article 44 septiès of the General Tax Code from certain companies which have taken over the activities of ailing companies.
In accordance with the rules governing recovery of illegal aid, France should have taken all measures available under national law to obtain immediate and effective application of the Commission's decision and so restore fair competition.
More than three years after the decision, the Commission finds that France has taken preliminary measures only, and that no practical action has been taken to recover aid from recipients.
On 16 December 2003 the Commission concluded that the special tax regime applicable in France for takeovers of ailing companies under Article 44 septiès of the General Tax Code was incompatible with the state aid rules laid down in the EC Treaty.
The Commission decided that the French authorities should take all necessary measures to recover aid awarded unlawfully under the tax regime, thus restoring fair competition. Since its assessment focused purely on the existence of aid within a regulatory framework and did not cover application of the tax regime to individual cases, and given that the amount of aid received was mainly contingent on the recipient's ability to generate profit, the Commission did not rule out that recovery might not be necessary in some cases. For example, measures might be compatible under certain exceptions to the prohibition on state aid or they might be below the threshold above which they would constitute state aid within the meaning of the EC Treaty. Otherwise, however, the aid had to be recovered.