Last Thursday 26th February the General Court gave its rulings in Cases T-135/12 and T-385/12 France v Commission and Orange v Commission. In both of these cases Commission decision 2012/540/EU finding that the financial measure reforming the way of financing pensions of civil servants working for France Telecom after its conversion into a public limited company (PLC) was compatible with the common market, subject to some conditions, was questioned by the applicants. The GC confirmed the Commission decision, finding that the Commission was entitled to decide that the financing mechanism was compatible State aid so long as the conditions imposed by it were applied.
In 1996 France Télécom was privatised at which point the financing mechanism for the pensions of its civil servants was changed. This change set the employer’s contribution (paid by France Télécom to the French State) at a ‘competitively fair rate’ to the ‘social security contributions and taxes payable by its competitors operating in the telecommunications sector’ and France Télécom paid an extra sum to the tune of €5.7 billion as a flat rate contribution to meet future retirement costs. The ‘competitively fair’ contribution did not however take into account extra-ordinary risks such as ‘unemployment and employee claims in cases of winding-up by court order’ which would normally have had to be taken into account.
In Decision 2012/540/EU of 2011, the Commission found that the financing measure was indeed State aid: until the conversion to a PLC the contribution paid by France Télécom to the State was reduced, and that aid ‘did not comply with the principle of proportionality, in so far as the financial contribution paid by France Télécom to the French State was not equal to the social security charges payable by the competitors of France Télécom’ because it did not take risks not common to ordinary employees and civil servants into account. The Commission decision required these be taken into consideration, at which point the financing could be considered as compatible aid.
These two cases before the GC questioned the Commission’s ability to make such a demand, however ultimately the Court declared that the aid granted by France was compatible aid in accordance with the conditions laid out by the Commission:
- The adoption of the Law by France created a selective advantage for France Télécom that distorted or threatened to distort competition in the newly opened up telecoms market
- There was nothing to stop the Commission from drawing the conclusion that the system – in excluding non-common risks – did not result in a competitively fair rate, and from asking for the new rate‘to ensure that France Télécom bears the same level of costs for social security charges as its competitors, including the charges which are not part of its budget due to its special status’
- The Commission correctly assessed the effects of the €5.7 billion flat rate contribution as neutralising the aid for approximately 15 years. However, according to the GC, it cannot be ‘automatically inferred’ that the contributions during this time necessarily ensured fair competition.
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