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European Commission

MEMO

Brussels, 19 March 2013

State aid: Commission welcomes Court judgment on French State intervention in France Télécom

The European Commission welcomes a judgment by the Court of Justice of the European Union in joined cases C-399/10 P and C-401/10 P, regarding a shareholder declaration and loan carried out by the French State in favour of the national telecommunication incumbent France Télécom. In particular, the Court of Justice invalidated the General Court's (GC) findings of May 2010 (case T-425/04) that the public declaration of support for France Télécom by the Minister for economic affairs and the subsequent shareholder loan by the French State did not entail a transfer of State resources – and thus did not constitute state aid. The Court of Justice found that the General Court wrongly required a close connection between the advantage and the commitment of State resources. Although this loan was not taken up by France Télécom, it conferred an advantage granted through State resources that could potentially have burdened the State budget. The Commission was therefore right to qualify that advantage as state aid in favour of France Télécom. The judgment clarifies the position with regard to EU state aid rules of a State that intervenes in favour of a company of which it is also the owner. The case has been sent back to the General Court, which will have to rule on the other aspects of the case that it had not dealt with when it annulled the Commission decision.

Background

In December 2001, France Télécom was in great financial difficulties. It experienced share price losses and a downgrading of its credit rating. On 12 July 2002, the French minister for economic affairs made the following statement:

'The State shareholder will behave like a prudent investor and would take appropriate steps if France Télécom were to face any difficulties … I repeat, if France Télécom were to face any financing problems, which is not the case today, the State would take whatever decisions were necessary to overcome them.'

This statement prevented France Télécom's rating from being downgraded to junk status. Rating agencies quoted the statement of the French authorities and this was decisive for their decision to maintain an investment rating for the company. As a consequence, the price for France Télécom shares soared. On 4 December 2002 the French authorities announced their intention to grant a shareholder loan of €9 billion in favour of France Télécom. That proposal was neither accepted nor acted on by France Télécom.

In August 2004, the Commission concluded that this shareholder loan proposal together with the declarations by the French Minister constituted state aid (case C13a/2003, published in OJ L 2006 257). Under EU state aid rules, state interventions in companies carrying out economic activities can be considered free of aid if they were carried out on terms that a private player operating under market conditions would have accepted (the market economy investor principle – MEIP). The Commission found that while the proposal in itself would probably not have constituted state aid, the previous statement, which had the effect of restoring the confidence of the market in France Télécom and raising the share price, had made it impossible to apply the MEIP to the shareholder proposal.

France, France Télécom and Bouygues appealed the Commission's decision before the General Court (GC).

The GC found that, while the statement of the French authorities did confer a financial advantage to the company, the Commission had not adduced sufficient proof that the announcement itself entailed a transfer of State resources (Cases T-425/04, T-444/04, T-450/04, T-456/04) and, in particular, that France specifically envisaged such a transfer or loan already in July 2002, when the statement was made. Only in December 2002 France considered that all the conditions for a financial support were fulfilled.

The Commission and the other parties involved appealed the judgment. France and France Télécom claimed that the Commission should not have qualified the proposal of a shareholder loan as state aid, but that the behaviour of the French State was that of a prudent private market investor.

The Court of Justice now finds that, although this loan was not accepted by France Télécom, it conferred an advantage granted through State resources that could potentially have burdened the State budget. The General Court erred in law in holding that it was necessary to identify a reduction of the State budget or a sufficiently concrete economic risk of burdens on that budget, closely linked and corresponding to a specific advantage deriving either from the announcement of 4 December 2002 or from the shareholder loan offer. Thus the General Court wrongly required a close connection between the advantage and the commitment of State resources.

A State intervention capable of both placing the undertakings which it applies to in a more favourable position than others and creating a sufficiently concrete risk of imposing an additional burden on the State in the future, may place a burden on the State’s resources. The Court agrees that, when determining the existence of State aid, the Commission must establish a sufficiently direct link between the advantage given to the beneficiary and a reduction of the State budget or a sufficiently concrete economic risk of burdens on that budget. However, it is not necessary that such a reduction, or even such a risk, should correspond or be equivalent to that advantage, or that the advantage should have as its counterpart such a reduction or such a risk, or be of the same nature as the commitment of State resources from which it derives.

In that regard, the Court of Justice points out that it is clear that the announcement of 4 December 2002 is inseparable from the shareholder loan offered in the form of a €9 billion credit line which the announcement expressly mentions. In addition, the Commission rightly considered that the shareholder loan conferred an advantage on France Télécom by enabling it ‘to increase its means of financing and to reassure the market as to its capacity to meet its maturities’.

As for the condition relating to the commitment of State resources, the Court of Justice finds that the shareholder loan concerns the opening of a credit line of €9 billion. While it is true that France Télécom did not sign the loan agreement sent to it, the company could nevertheless have signed it at any time, thereby acquiring the right to obtain immediate payment of the sum of €9 billion.

Having regard to the potential additional burden of €9 billion on the State’s resources, the Commission rightly found that the announcement of a shareholder loan was an advantage granted through State resources.


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