Transcript The Commission's State Aid Policy and the Current

The Commission's State aid policy
and the current financial crisis
GCLC lunch talk - 20 February 2009
Jacques Derenne
Partner
Lovells LLP
Lovells LLP
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Selected issues
• Procedure
• Commission's communication
• Cases
– legal basis (Article 87 (3) b) EC)
– selective comments on the Fortis case
• 'Real economy' - Review phase
Lovells
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Procedure
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Procedure v Substance
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Substance
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October communication (general rules)
December communication (recapitalisation)
December Temporary Framework (real economy)
Handbook on Community State aid rules for SMEs
+ 50 cases since June 2008
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2 'Phase II'
10 on going cases (excl. cases 'under discussion')
8 real economy cases
Procedure
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Lovells
§ 53 October communication
Commissioner Kroes empowered by College
24h/WE decisions
ECB (confirmation of urgency)
Language
Economic Crisis Team (real economy)
New simplified procedure?
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Procedure – And Article 88 (3) EC?
• No specific initiative on notification obligation
• No public reminder
– Article 10 EC
• No sanction - No national court (except Fortis)
• Is the Commission in the driver's seat?
– car industry
– EC initiative v MS initiatives (see Article 100 ECCommunity financial assistance)
• For a systematic and close involvement of the
Commission
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Commission's communication
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Commission's visibility
• Unfortunate communication
– 29 September 12:00 am (Spokesman)
• "Justice must not only be done but should
manifestly and undoubtedly be seen to be done"
(ex parte McCarthy [1924] KB 256,259)
– Mrs Kroes v MS and Ministers of Finance
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reaction v proactivity
– work of State aid teams at Commission (Legal Service,
DG COMP)
• Pedagogical efforts
– competition v protectionism (Mrs Kroes, 17.2 + 19.2)
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Cases
• legal basis
• some selective comments on the Fortis case
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Legal basis – Article 87(3) b) EC
• (b) aid (...) to remedy a serious disturbance in the
economy of a Member State
– Precedents
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1974 crisis
1987 Greek economy (OJ (1987) L 76/18)
1991 Greek privatisation programme (XXI Competition Report, 1991, § 251)
– Rejected
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Crédit Lyonnais (OJ (1995) L 308/92), GAN (OJ (1997) L 78/1)
Northern Rock (NN70/07), WestLB (NN25/08), Sachsen LB (C9/08)
– Case law
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region not sufficient
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Lovells
Cases T-132/92 & T-143/96, Freistaat Sachsen v Commission, point 167
Case C-301/96, Germany v Commission, points 105-108
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Relevant test
Art. 87(3) b) EC
• well-targeted (remedying
serious disturbance)
Art. 87(3) c) EC (R&R)
• long-term viability
• proportionate (not going
beyond what is required)
• minimum necessary
• designed in such a way
as to minimize negative
spill-over effects
• avoiding excessive
distortions (compensatory
measures)
(§15 October communication)
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Comp. Article 87(3) c) EC
• (c) aid to facilitate the development of certain
economic activities or of certain economic areas,
where such aid does not adversely affect trading
conditions to an extent contrary to the common
interest
• R & R Guidelines
• Decisional practice in financial crisis cases
– serious disturbance
– equivalent conditions? Convergence?
•
Lovells
in Fortis – NN42/08- , the Commission renders the criteria
equivalent: see section 6.3
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Fortis case
Commercial Court/Court of Appeal
• President Brussels Commercial Court – 18.11.08
– no State aid debate
– what about public policy plea (proprio motu)?
• Brussels Court of Appeal – 12.12.08
– plea on 88(3)EC
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'BNP Paribas Agreement': no suspension since not executed
yet
'Benelux plan': no suspension since already executed
violation of 88(3) 'does not necessarily lead to the annulment
of the disputed conventions' (only annulment of the acts
implementing the State aid measures)
– refusal to re-open the oral hearing
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Fortis case
Commission Decision (3 Dec. 2008, NN 42/2008; NN46/2008; NN53/A/2008)
(NB: guarantee case 19.11.08, N 574/2008)
• aid to Fortis Banque (B measures)
– acquisition by SFPI of 49,9% of Fortis Banque (§35)
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€1,5-€2 (ING-BNP Paribas) v €5.2 (State)
– liquidity assistance by BNB (§46)
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€51bn in a few days; 15% GDP; 50% tax revenue of 2007!
– acquisition of 50% of Fortis Banque (§62-63)
– sale of 75% of Fortis Banque to BNP Paribas (§65-67)
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buy Fortis in cash and BNP buys Fortis from the State in shares
• no aid to BNP Paribas
– privatisation of Fortis Banque to BNP Paribas (§58-61)
– open and unconditional tender? (§58)
• compatible: Article 87(3) b) EC
Lovells
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Fortis case
Commission (3 Dec. 2008) - issues
• § 65: privatisation linked to nationalisation
• §§ 80-81: LT viability depends on BNP Paribas
• § 90: nationalisation should be short in order to
minimize the aid
• § 95: sale to BNP Paribas is a compensatory
measure
 if no BNP Paribas, is the aid still compatible?
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To be cont'd...
- 'Real economy'
- Review phase...
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Thank you for your attention!
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