Thanks to Emily Neill from Blackstone Chambers for today’s blog
Action speaks louder than words, but not nearly as often – Mark Twain
The events which were the subject of the France Telecom judgment handed down today suggest somewhat to the contrary, involving as they do an interesting case of State words speaking much louder than the eventual State action. The ECJ’s judgment involves some nice points on the assessment of whether there is an advantage entailing the commitment of State resources in a scenario involving several consecutive State measures, not all of which could be classed independently as a State aid. In this case the words provided the advantage, but only the “action” could be considered to involve a commitment of State resources.
The case concerned the failing fortunes of France Telecom, in which the French State was a majority shareholder, in 2001-2002. France FT had been downgraded by the credit rating agencies, with the result that by the summer of 2002 Standard and Poor and Moody’s were about to downgrade the rating of FT’s debt to junk bond level.
The French State intervened in July 2002, in the form of some very powerful words. The French minister for economic affairs made a statement that “if France Telecom were to face any financing problems… the State would take whatever decisions were necessary to overcome them”. That statement had the result that the credit rating agencies changed their assessment of the management of FT’s debt, which was saved from junk bond status. State action then came in the form of an offer of a shareholder loan from the French State in December 2002. The loan offer was accompanied by an announcement that the State was taking certain measures to assist FT. However, the loan offer was never accepted by FT and the action was never implemented. Nevertheless, in the days following the December announcement the FT successfully issued bonds which ensured liquidity for the next year.
The Commission’s subsequent decision that there was a State aid in the announcement of the December loan was overturned by the General Court. The ECJ, however, has now upheld the Commission’s analysis.
The issue before the Commission and the Courts was whether there was an advantage which derived from State resources. The General Court took the view that although the announcements of State support conferred an advantage on FT, there was no transfer of State resources, since the anticipated financial support was not sufficiently precise. By contrast while the shareholder loan could have been considered to be a commitment of State resources, it was not considered by the General Court to confer an advantage because it was never accepted.
On appeal, the ECJ held that the General Court was wrong to require such a close connection between the advantage and the commitment of State resources, seemingly accepting the Commission’s argument that it should not be obliged to assess in relation to each intervention measure individually whether it conferred a specific advantage through State resources. Noting that “State interventions take various forms and have to be assessed in relation to their effects … it cannot be excluded… that several consecutive measures of State intervention must for the purposes of Article 107(1), be regarded as a single intervention”, the ECJ considered that the December announcement and the offer of the shareholder loan, taken together, conferred an advantage entailing the commitment of State resources.
Given that the ECJ termed the December announcement and the December loan proposal “inseparable”, its application of its approach to the assessment of consecutive measures in this case was perhaps unsurprising. It would have been interesting to see what approach the Court would have taken if it had been necessary to consider a different combination of successive measures, which were not so closely connected.
The case has been remitted to the General Court, which will have to rule on the other aspects of the case not dealt with in its original judgment.
This is not the only case in which ministerial statements have been held to amount to a commitment of State resources for State aid purposes. See the EFTA Surveillance Authority decision at http://www.eftasurv.int/media/state-aid/290-12-COL.pdf (restructuring aid granted by Iceland to Landsbanki), where ministerial statements to the effect that all depositors would be protected (§§83-87) were regarded as State aid (§§150-153) (the pledge went beyond the schemes for the protection of depositors mandated by EU/EEA Directives).
The ESA based its conclusion that the ministerial pledge was unconditional, precise and legally binding on the fact that Iceland had stated in other cases that it had felt compelled to honour that pledge. Since the ESA’s decision was taken at a time when the General Court decision in the France Telecom case still stood, it felt it necessary to find that there was an unconditional, precise, and legally binding guarantee: but it may be wondered whether that finding was in fact necessary given today’s ECJ judgment – it would perhaps have been enough to show that the markets believed that the Icelandic Government’s intervention had had the effect of ensuring the protection of depositors (see the France Telecom case at §134).
I should credit my colleague Tim Ward QC (expert in Iceland’s efforts to rescue its banks – see http://www.thesundaytimes.co.uk/sto/newsreview/features/article1210681.ece) for drawing my attention to this case.
George Peretz