• Professional News
  • 23 May 2013

State aid: must the financial advantage equal the government funds?

In a matter of general public importance, the European Court of Justice has established that state aid may exist even though the financial advantage obtained by a company is not equivalent to the amount of government funds granted.

State aid implies that a company obtains a financial advantage by way of a grant of government funds. In its judgment of 19 March 2013, the European Court of Justice established, however, that it is not a prerequisite for state aid that the financial advantage obtained by a company equals the amount of the government funds granted. The judgment is of general public importance as the European Court of Justice pronounces on two fundamental state aid conditions.

In 2002, France Télécom experienced financial trouble. The French authorities made several public statements declaring their willingness to help the company in distress, if necessary. The French state also offered to grant a shareholder loan of 9 billion euro.

The EU Commission found that, together with the public statements, the offered shareholder loan constituted state aid due to the fact that the loan and the statements improved France Télécom’s credit rating and enabled external financing.

The EU General Court averred that the financial advantage obtained by a company by means of government funds, must be closely connected with – and be equivalent to – the reduction in the state budget, or a sufficient and specific risk thereof must exist. This was not the case in the France Télécom matter and, as a result, the General Court annulled the EU Commission’s decision.   

The European Court of Justice, however, disagreed with the General Court as it declared that it is not a requirement that the state budget reduction is equivalent to the financial advantage obtained. Consequently, the European Court of Justice annulled the General Court’s judgment.

(Please click to read the judgment made by the European Court of Justice)

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