The General Court has recently put into question the status of public establishments of an industrial and commercial character (EPIC) in France, in a ruling which could have wide-ranging consequences. The proceedings in Case France c./ Commission (T-154/10) arose after the European Commission adopted a decision holding that the unlimited State guarantee resulting from La Poste’s status as an EPIC constituted State aid incompatible with the internal market.
Until the 2010 reform which converted it into a public limited company, La Poste was governed by public law. EPICs perform public service tasks, and their status entails a number of derogations from the law applicable to other undertakings, notably regarding insolvency and bankruptcy rules. Instead of the ordinary judicial winding-up procedure, the law governing EPICs implements a claims recovery procedure, which simply postpones payment of creditors’ claims, but does not extinguish them. Moreover, the Commission argued that, if necessary, State funds are likely to be used to honour the debts of such an establishment, although there is no express provision to that effect. EPICs thus benefit from an implicit unlimited state guarantee, which allows them to obtain more favourable credit terms than they would under normal market conditions.
France argued that the Commission had not established the existence of State aid to the requisite legal standard, and that it had made errors of law and fact both in finding that there was an unlimited State guarantee, and that this led to an advantage for the purposes of State aid law. The General Court ruled that the Commission had put forward sufficient evidence, including case-law from the Conseil d’État, and the objective differences between the provisions applicable to La Poste and to ordinary undertakings. In order to establish the existence of an unlimited guarantee, the Commission did not need to prove that an EPIC cannot go bankrupt. The claims recovery procedure and the likelihood of State resources being used in the event of an EPIC defaulting constitute indicia of the existence of an unlimited State guarantee.
The Court also upheld the Commission’s finding that EPICs enjoy an economic advantage over private companies, since the State guarantee enables them to obtain more favourable credit terms than they would on their own merits, under normal market conditions. The Commission was also justified in referring to the methods used by ratings agencies in order to confirm that the State guarantee was liable to give rise to such an advantage.
The General Court dismissed the action, hence upholding the Commission’s approach. This ruling, and the test applied by the Court, could call into question the very existence of EPICs, since it appears to be based on the existence of specific legislation providing unlimited State guarantees for public establishments engaged in industrial or commercial activities. This could mean that other French EPICs, including the SNCF or local public transport operators, but also similar legal entities in other Member States, should all be considered to benefit from State aid. An appeal before the Court of Justice therefore appears likely.
Reproduction autorisée avec l’indication: Araceli Turmo, "The unlimited State guarantee enjoyed by La Poste constitutes State Aid", www.ceje.ch, actualité du 30 septembre 2012