• Professional News
  • 13 August 2012

State aid to lender when the Danish State has provided a guarantee in respect of the lender

The recipient of State aid in a loan arrangement may in some cases also be the lender where a guarantee has been provided in respect of the lender.

The case relates to a guarantee provided by a municipality in respect of a lender, the business Residex, in order to cover an amount lent to a borrower. As Residex subsequently unsuccessfully invoked the guarantee via-à-vis the guarantor, Residex brought proceedings against the municipality. During these proceedings, the issue arose as to whether the guarantee amounted to State aid to the benefit of Residex. 

The European Court of Justice was therefore asked who the actual recipient of State aid is when a guarantee is a necessary pre-condition in order for a business to grant a loan.

The Court of Justice noted that when aid is granted in the form of a guarantee, the recipients of this aid can according to the circumstances, be either the borrower or the lender, or under certain circumstances, these parties jointly.

(Case no. C-275/10 Residex Capital vs. Gemeente Rotterdam)

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