On 30 November 2016, the European Court of Justice ("ECJ") issued its second judgment in the case concerning public statements made by the French authorities in support of France Télécom ("FT" – now Orange) and the offering of a shareholder loan to FT.
In 2002, FT, a public limited company, was facing serious financial difficulties. Between July and October 2002, the French Minister for Economic Affairs made several statements aimed at assuring FT that it had the support of the French Authorities. In the meantime, FT initiated a restructuring process. Subsequently, in December 2002, the French state offered a shareholder loan in the form of a credit line to FT. The offer was, however, neither accepted nor acted upon.
By decision of 2 August 2004, the European Commission (the "Commission") concluded that the credit line, placed in the context of the public statements, constituted state aid incompatible with EU law. The French government, FT and other interested parties brought an action before the General Court seeking annulment of the Commission's decision.
In a judgment of 21 May 2010, the General Court annulled the Commission's decision on the ground that the measures at issue did not involve a transfer of state resources, despite the financial advantage thereby conferred on FT (see VBB on Competition Law, Volume 2010, No. 5, available at www.vbb.com). However, this judgment was set aside by the ECJ on 19 March 2013 (see VBB on Competition Law, Volume 2013, No. 3, available at www.vbb.com). According to the ECJ, the shareholder loan, although unimplemented, entailed a transfer of state resources insofar as the state budget was potentially burdened. The ECJ referred the case back to the GC for judgment on the remaining issues.
By judgment of 2 July 2015, the General Court again annulled the Commission's decision, this time on the ground that the Commission had not correctly applied the test of the prudent private investor (see VBB on Competition Law, Volume 2015, No. 7, available at www.vbb.com). Under this test, the Commission has to determine whether a prudent private investor in the same position as the French state would have acted in the same way. The General Court concluded that the Commission applied the test neither to the correct measures, i.e., the offering of the shareholder loan rather than the previous public statements, nor to the correct timeframe, i.e., December 2002 rather than July 2002.
This second judgment of the General Court was again appealed. The Commission claimed that the General Court had (i) infringed the obligation to state reasons, (ii) infringed Article 107(1) TFEU, (iii) exceeded the limits of judicial review, and (iv) distorted the Commission's decision. In its judgment of 30 November 2016, the ECJ rejected each of the Commission's grounds of appeal and upheld the General Court's judgment of 2 July 2015.
In particular, the ECJ confirmed that the prudent private investor test should have been applied to the shareholder loan, which was only granted in December 2002. By assessing the prudent private investor criterion in relation to the situation as it existed in July 2002, the Commission necessarily excluded from that assessment relevant factors that occurred between July 2002 and December 2002. On these grounds, the ECJ concluded that the Commission failed to take account of all relevant factors for the assessment of the state aid character of the measures.
In consequence of this second judgment of the ECJ in this case, the Commission's decision of 2 August 2004 is definitively annulled.
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