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4.8.

98 EN Official Journal of the European Communities C 244/9

STATE AID
C 31/98 (ex NN 64/97 and N 9/98)
France

(98/C 244/08)

(Text with EEA relevance)

(Articles 92 to 94 of the Treaty establishing the European Community)

Commission communication pursuant to Article 93(2) of the EC Treaty to the other Member
States and other interested parties concerning aids in the shipping sector (State aids for the
shipping company Brittany Ferries (BAI))

With the following letter, the Commission informed the those of its competitors, paying an annual aid of FRF
French authorities of its decision to initiate the 10 million from 1 January 1994 (according to the
procedure: French authorities, this payment would not go
beyond 31 December 1998). The French Government
stresses that Brittany Ferries is obliged to employ
only seamen from the European Community.
‘The facts Accordingly, the labour costs, social contributions
and applicable labour law are significantly different
from those of the competition. It also points out that
the financial situation of the company has
Following information which appeared in the press at the deteriorated because of the ‘‘strong franc’’ policy and
beginning of 1996, the Commission received a complaint the unfavourable trend in sterling parity, in so far as
about the intention of the French authorities to grant three-quarters of its revenue is denominated in
financial support to the shipping company Bretagne pounds whereas its expenses are in francs (wages,
Angleterre Irlande (BAI — hereinafter referred to as port fees, financial expenses, fixed charges);
‘‘Brittany Ferries’’) as part of an operation to rescue that
company. This case was registered under the reference
NNØ64/97. By letter of 26 March 1996, the Commission
asked the French Government for any information which
would enable it to examine whether the proposed aids
were compatible with EC Treaty rules. The French auth-
orities replied by letter of 26 April 1996 that the — measure 2: the establishment of an ‘‘intersport soli-
measures proposed to enable the company to make darity’’ fund between the various Channel ports,
reasonable profits had not been finally approved. whereby ports on the eastern part of the Channel
(from Le Havre to Dunkirk) would effectively fund a
reduction in costs in the western ports of Normandy
and Brittany (Caen-Ouistreham, Cherbourg,
Saint-Malo and Roscoff). Brittany Ferries serves
The proposed aid measures these ports where charges are higher than the first
group. The French authorities have calculated that
Brittany Ferries could receive an annual reduction in
its landing charges in the ports that it serves of
As the French Government stated in its letter of 26 April around FRF 70 million, such are the annual
1996, the proposed measures and the justification additional costs for the company. The cost reduction
therefore were as follows: for Brittany Ferries would therefore amount to FRF
210 million over the same three years. However, it
appears that port fees have recently been reduced
substantially in these four ports;
— measure 1: direct financial support form the State
under the scheme concerning aid for the consoli-
dation and modernisation of French maritime
transport companies (ACOMO — general aid
scheme the application of which was approved by the
Commission until the end of 1997). Under this
scheme, the French authorities indicated compen- — measure 3: measure to compensate Brittany Ferries
sation for Brittany Ferries for social costs higher than for the strict application in France of controls on
C 244/10 EN Official Journal of the European Communities 4.8.98

tax-free sales on board ships and on the identification owned 44,9Ø% and the local and regional authorities
of passengers embarked (aid of FRF 37,5 million 55,1Ø% of the capital.
between 1996 and 1998). The French companies,
including Brittany Ferries, appear to be penalised by
the differences in rules on tax-free sales on board
ships between the longer Channel crossings and the Subsequently, two other identical companies were set up
short routes across the Straits of Dover. Moreover with the same type of structure, Senacal (Soci~t~
Brittany Ferries is obliged to identify individually all d’^quipement Naval du Calvados) in 1986, to develop
passengers for each crossing which gave rise to the activities of Brittany Ferries on the Normandy coast,
additional operating costs of FRF 12,5 million for and Senamanche (Soci~t~ d’^quipement Naval de la
1996 and FRF 25 millon over the years 1997 and Manche) in 1991. The local and regional authorities
1998. have a majority holding in these three companies, and
Brittany Ferries a minority holding.

Case presented by the plaintiff The Commission has received documents from the
French authorities relating to the profit and loss accounts
of the three semi-public companies: Sabemen, Senacal
and Senamanche. According to these documents, the
three companies suffered losses in the 1996 financial year
The plaintiff puts forward opinions which are contrary and are acumulating debts. The losses were around FRF
to those of the French Government. It states that the 50 million for Sabemen, FRF 22 million for Senacal and
‘‘strong franc’’ policy is a general economic policy FRF 12 million for Senamanche. The debts of the three
measure which cannot justify the grant of State aids to companies on 30 September 1996 were FRF 489 million,
an individual company. As regards operating costs, the FRF 151 million and FRF 54 million respectively. The
plaintiff considers that French companies receive three companies receive investment subsidies from the
government subsidies under general merchant shipping State and substantial loan guarantees from the regional
aid schemes, which in practice reduces operating costs to authorities.
a significant extent. It also maintains that Brittany Ferries
was not able to negotiate competitive contractual
conditions with the representatives of its employees; the
social costs of employment are based on levels estab- The function of the semi-public companies is the
lished at national level which apply to all sectors of the purchase and operation of ships, which represents the
economy and cannot be considered as a specific major share of the capital to be mobilised, through
structural problem affecting only the maritime transport economic interest groupings (EIG). Among the members
sector. The plaintiff also considers that it is not correct of the EIG are several regional funds of Cr~dit Agricole
to maintain that British operators do not exercise and the Caisse Nationale de Cr~dit Agricole. Brittany
effective controls over tax-free sales. Finally, it claims Ferries operates the ships in return for the payment of a
that the higher charges in western Channel ports affect rent, which in principle covers the writing off of these
all operators to the same extent, and not only Brittany investments and the repayment of loans contracted by
Ferries. those companies. In this connection, according to the
information at the Commission’s disposal, the three
companies enjoy preferential rates granted to local and
regional authorities for the purchase of ships, and as a
consequence Brittany Ferries benefits directly from
favourable ship rentals.
Brittany Ferries and the semi-public companies

Brittany Ferries currently operate seven vessels for both


To understand the background a brief description should passengers and commercial vehicles. Truckline Ferries, a
be given of the history and structure of Brittany Ferries. subsidiary, operates two ro-ro vessels exclusively for
The company was set up in 1972 by Breton farming freight. In total, the Brittany Ferries group operates eight
interests and Cr~dit Agricole to facilitate exports to the cross-Channel routes. Brittany Ferries has a turnover of
United Kingdom and Ireland. In 1982, when Brittany FRF 1,6 billion and employs 1Ø800 permanent staff and
Ferries was facing serious financial difficulties, the public 700 seasonal workers. In 1995, the economic situation on
authorities set up a company structure to fund its the market deteriorated as a result of competition from
activities. Thus, the local and regional authorities the Tunnel and the decline in the purchasing power of
(Breton departments, Brittany and Pays-de-Loire British citizens and companies linked to the reduction in
regions) set up, with Brittany Ferries, the company the value of the pound. Business declined by around
Sabemen (Soci~t~ Bretonne d’^conomie Mixte and 12Ø% and the ferry companies had to cut their unit
d’^quipement Naval). At the time, Brittany Ferries transport rate significantly. However, the pound made a
4.8.98 EN Official Journal of the European Communities C 244/11

significant recovery in 1996/97, which should have asked them if they confirmed the decision to introduce
positive effects on the company’s situation. the aid measures mentioned by the press.

In spite of internal rationalisation, the company has been The French Government replied on 28 April 1997. As
loss-making since 1993. Deficits increased sharply in regards the action taken on the three measures proposed
1995 (losses of FRF 80,2 million) and 1996 (losses of at the outset, it stated the following: measure 1, i.e. a
FRF 16,2 million). Interest payments on the company’s payment of FRF 30 million to Brittany Ferries between
debts rose from FRF 14 million in 1992 to FRF 21 1994 and 1996, took effect under the ACOMO scheme;
million in 1993 and FRF 25 million in 1996. measure 2 had not been implemented; and measure 3
would be replaced by discussions with the British
Government with a view to harmonising the obligations
of all shipping companies operating on cross-Channel
routes, thus placing competition conditions on an equal
footing; this measure would not involve funding by the
The first exchanges of letters with the French authorities State. However, as regards measure 2 in particular, in a
subsequent letter of 18 November 1997 (see below) the
French authorities announced that port charges had
recently been reduced, without explaining whether this
Taking account of the abovementioned information on was a commercial decision taken by the port authorities
Brittany Ferries, the Commission examined the reply or, on the other hand, the effect of the planned measure.
from the French authorities and then asked for further
details on 28 May and 11 October 1996. By letters of 26
July and 18 November 1996 the French Government
stated that it had abandoned the plans concerning the
second of the above measures (the setting up of a port As regards the social plan presented by the company to
‘‘solidarity fund’’) and provided information on a the Government, the French Government maintained
proposed restructuring plan for Brittany Ferries to that this came under normal French law and that no
reduce operating costs. The social part of the plan additional aid had therefore been granted to Brittany
provided for 88 job losses (64 seamen and 24 office Ferries.
staff). According to company estimates, this social plan
would cost FRF 27,8 million over a period of three
years, FRF 11 million of which would be borne by the
State under statutory schemes in force in France. This As regards the press reports published at the beginning
plan would be accompanied by measures such as workers of 1997, the French Government stated that a set of
taking early retirement, early cessation of activity or aid measures to support the company had indeed been taken
to switch to part-time working. by the public and private economic entities involved:

Press articles concerning measures in favour of Brittany —Ùthe banks agreed to cover the cash requirements of
Ferries were published at the beginning of 1997. These the company, increasing their assistance from FRF
articles reported that the Brittany regional authority and [.Ø.Ø.] million in 1995 to FRF [.Ø.Ø.] million in 1997,
the French Government had decided to grant financial
assistance to Brittany Ferries under an aid programme
totalling FRF 550 million. This programme would be
made up of two types of aid: State aid amounting to —Ùthe shareholders agreed to forego any remuneration,
FRF 300 million which would be used to reduce social
charges and set up a system for the equalisation of port
fees; and an aid from the regional authorities in the form
of a capital increase for the companies Sabemen (FRF —Ùthe company undertook a programme of cost
150 million) and Senamanche (FRF 100 million). rationalisation by reducing its fleet (two ships out of
nine were withdrawn and the Saint-Malo-Poole
route discontinued) and cutting jobs; the reduction in
costs thus achieved by the company is estimated at
The publication of these articles led the Commission to FRF 110 million each year,
put further questions to the French authorities on 24
February 1997. In its letter, the Commission asked the
French authorities to state the position regarding the
three support measures proposed at the beginning of —Ùthe semi-public companies (Sabemen, Senacal and
1996 (see beginning of this letter) and the social plan and Senamanche), the owners of the ships, granted a
C 244/12 EN Official Journal of the European Communities 4.8.98

temporary and partial reduction in rents for the these entities acted in the same way as private
vessels over three years, subject to a ‘‘better fortunes’’ investors.
clause requiring full reimbursement form Brittany
Ferries at the end of the period of application of its
rent reduction,
—ÙAs regards the company’s deficit: Do the French
authorities confirm that Brittany Ferries generated
—Ùthe public shareholders of these three companies losses of FRF 80,2 million 1995 and FRF 16,2 million
(regional councils of Brittany, Basse-Normandie, in 1996 and if so how was this deficit financed? Did
local councils of Calvados, Cøtes-d’Armor, Finistre, this give rise to operating aid from the state?
d’Ille et Vilaine, Manche and Morbihan) increased
the capital of the companies to FRF 150 million for
Sabemen FRF 64 million for Senacal and FRF 36
million for Senamanche; with this operation, the
public shareholding in the companies’ capital —ÙOn the restructuring measures and the participation
increased from 55 to 69Ø% for Sabemen, 51 to 66Ø% of the public authorities: Did the company initiate a
for Senacal and 51 to 69Ø% for Senamanche. study which on the one hand enabled it to conclude
that the restructuring measures taken would allow
elimination of the deficit and a return to better
fortunes and which, secondly, demonstrated to the
French authorities that the investors, both public and
private, adopted sound investment principles in
Letter from the Commission of 13 June 1997
providing aid for Brittany Ferries?

The examination of this information by the Commission


raised further questions put to the French authorities by
letter of 13 June 1997. Essentially, the Commission
French reply of 18 November 1997
requested the following information:

—ÙAs regards the social plan presented by Brittany The French authorities replied by letter of 18 November
Ferries to the French authorities, the Commission 1997. They stated that the winding-up of the company
asked for a copy of the documents and the decisions would have adverse effects on employment and in
by the Government on this plan. It also asked for a general on business in economic sectors such as agri-
copy of the provision of French law relating to State culture, agri-foodstuffs and tourism in the regions
aids in support of restructuring measures applicable concerned. They pointed out that they wished to
to shipping companies, and which concern the maintain competition on cross Channel routes other than
sea-going personnel. in the Straits of Dover because of the volume of traffic
involved and their contribution to the development of
the regional economies of the countries concerned
(France, United Kingdom, Ireland and Spain). The main
—ÙAs regards the covering of risks by the banks, the points of the reply were as follows:
Commission posed the following question: what
types of bank guarantees covering the needs of
Brittany Ferries were put in place and by which
banks? On the basis of what guarantees did the banks
agree to increase their funding from FRF [.Ø.Ø.] —ÙUnder the social plan, Brittany Ferries undertook to
million in 1995 to FRF [.Ø.Ø.] million in 1997? cut its workforce by 64 seamen and 19 office staff at
a cost of FRF 10 million spread over the 1996/97
and 1997/98 financial years, which the company bore
in full under the normal French laws governing
—ÙAs regards the operations to reduce ships’ rent and redundancies. Efforts to reduce operating costs were
increase the capital of the semi-public companies, the also made including the withdrawal of two ships and
Commission requested documentation concerning the the scrapping of one route.
operations whereby firstly the semi-public companies
(Sabemen, Senacal and Senamanche) owning the
ships agreed to a reduction in ships’ rents over three
years and secondly the public shareholders (regional
authorities) increased their holdings in the capital of The French authorities enclosed an agreement of
these companies. It also asked for any other 25 April 1985 introducing a special early cessation
information which could enable it to assess whether of activities scheme for merchant seaman. So far,
4.8.98 EN Official Journal of the European Communities C 244/13

Brittany Ferries has forwarded 32 individual dossies, show that these companies have acted in the way that
presumably for State aid. private investors would.

The French authorities enclosed copies of the


agreements whereby the three companies agreed to a
Note: The Commission has not received a copy of partial renunciation of the rent for the 1995/96,
the documentation concerning the social plan as it 1996/97 and 1997/98 financial years for an amount
had requested. It notes that in their letter of a year totalling FRF 150 million (in the case of Sabemen),
before the French authorities stated that the cost of FRF 64 million (Senacal) and FRF 36 million
the social plan would be divided between the State (Senamanche). For its part, Brittany Ferries
and the company under the existing regulations on undertakes to repay these reductions on precisely
social aid for shipping companies. These provisions, defined terms, in the event of a return to better
including those relating to early cessation of activities fortunes.
for seamen, constitute aid from the French State
specifically in favour of the maritime sector. The
Commission stresses however that cutting 83 of the
1Ø800 jobs does not necessarily mean that the It should however be stressed that in the explanatory
company has been restructured. memorandum to the agreements it was stated that
‘‘the economic and social importance of the company
BAI led the State to grant financial support to enable
the company to overcome this particularly unfa-
vourable economic situation’’, with no indication of
the nature of this support anywhere in the reply by
—ÙAs regards bank guarantees to cover risks, it was the French authorities.
pointed out that the Caisse R~gionale du Cr~dit
Agricole de Bretagne has covered the cash losses
incurred by Brittany Ferries. The French authorities
stated that they have no specific documents on these Note: The Commission considers that in principle the
bank overdraft authorisations since these are matters three companies do not appear to have acted in these
between the company and its bank. operations in accordance with the ‘‘principle of an
investor in a free market economy’’. In this
connection, the Court of Justice of the European
Communities has had occasion to rule, in its
judgment of 21 March 1991, that ‘‘although the
Note: In the light of this reply, the Commission does conduct of a private investor with which the inter-
not, at this stage, have sufficient information to vention of the public investor pursuing economic
conclude that this measure does not constitute aid policy aims must be compared need not be the
using public funds granted through the Caisse conduct of an ordinary investor laying out capital
R~gionale du Cr~dit Agricole de Bretagne. Under with a view to realising a profit in the relatively short
normal commercial conditions, a bank would not term, it must at least be the conduct of a private
agree to cover the cash deficits of a company which holding company or a private group of undertakings
since 1993 has generated losses which increased pursuing a structural policy — whether general or
sharply in 1995 and 1996, without having solid guar- sectoral — and guided by prospects of profitability in
antees. It does not appear therefore that the inter- the longer term’’Ø(Î). ‘‘Nonetheless, the Commission
vention by Cr~dit Agricole was under conditions is correct in stating that a private investor pursuing a
which would be acceptable to a private investor structural policy — whether general or sectoral —
operating in a free market economy. and guided by prospects of viability in the long term
could not reasonably allow itself, after years of
continuous losses, to make a contribution of capital
which, in economic terms, proves to be costlier than
selling the assets, .Ø.Ø., which removes any hope of
profit, even in the longer term’’Ø(Ï). Where the
—ÙThe companies owning the ships operated by Brittany company has a deficit, this long term investor will
Ferries (Sabemen, Senacal and Senamanche) take its decision on the basis of whether a coherent
concluded individual agreements with the latter in and adequate restructuring plan exists. This does not
February 1997 laying down the conditions for however appear to have been the case here.
repaying the rent reductions granted. In return, the
regional authorities increased their capital holdings in
the three companies by the same amount as the rent
reductions. The French Government maintains that
the provisions contained in these agreements, (Î)ÙCase C-305/89, [1991] ECR, p. 1603, point 20.
particularly those concerning ‘‘better fortune’’ clauses (Ï)ÙCase C-287, [1994] ECR, p. I-4103, point 26.
C 244/14 EN Official Journal of the European Communities 4.8.98

Notification of additional restructuring aid for Brittany —Ùless revenue from tax-free sales in the western part of
Ferries the Channel,

—Ùunfavourable trend in the value of the pound,


In this connection, it should be pointed out that with the
dossier sent to the Commission on 18 November 1997,
the French authorities gave notification of their intention
to grant Brittany Ferries additional restructuring aid of —Ùdrop in business of around 12Ø% and fall in prices,
FRF 70 million in the form of a capital injection. The
aid, which has been announced to the company but has
not yet been granted, is intended to restore the economic —Ùsignificant extra operating costs specific to Brittany
viability of the company in the long term. It is Ferries,
considered by the French Government to be essential if
the measures to restructure the company are to be fully
effective. The notification was registered under the —Ùcost of French registers remains among the highest in
reference NØ9/98. Europe.

According to the French authorities, the company, for its


As this notification was incomplete, on 2 January 1998
part, has implemented internal rationalisation measures
the Commission sent a request to the French authorities
consisting mainly of the withdrawal of two ships,
for further information pointing out clearly that for the
reduction of selling costs and internal savings. At the
assessment of whether State aids for the restructuring of
same time, a social plan resulting in a reduction in the
companies are compatible with the Treaty, a restruc-
workforce which, according to the letter of 18
turing plan which meets the guidelinesØ(Ð) must be
November 1997 from the French authorities, has been
submitted to the Commission. By letter of 4 February, on
implemented for the financial years 1996 to 1998 with a
expiry of the time limit set for a reply, the French auth-
budget of FRF 10 million, is apparently costing,
orities requested a further 15-day period to be able to
according to the letter of 16 February 1998, more than
give a complete reply. The Commission subsequently
FRF 13 million.
received certain additional information by letters of 11
and 16 February 1998 which according to the French
authorities completes the reply to the Commission’s letter
of 2 January 1998. In the same letter, the French authorities also point out
that the agreements on the partial and temporary
renunciation of the rent with better fortunes clauses
signed between Brittany Ferries and Sabemen, Senecal
Essentially, the French authorities maintain that Brittany and Senamanche, as referred to above, form part of the
Ferries is suffering the cumulative effects of a number of process of restructuring the company.
handicaps which have been aggravated by the deterio-
ration in market conditions, namely:
Moreover, this letter states that the amount of FRF 70
million in the present notification under reference
NØ9/98 is in addition to the FRF 50 million of aid paid
—Ùbecause it transports passengers, the company is
for 1997 alone under the ACOMO scheme. In order to
obliged to have only Community nationals crewing
establish the total amount of subsidies granted to
its ships; the labour costs, social charges and
Brittany Ferries with a view to its restructuring, it should
applicable labour law place it at a disadvanatage
however be borne in mind that the aid paid under the
compared with its competitors,
ACOMO scheme amounts to a total of FRF 80 million,
or an amount of FRF 30 million paid for the years 1994
to 1996 and, according to the letter of 16 February 1998,
the aid paid for 1997 alone amounted to FRF 50 million.
—Ùthe particularly high cost of purchasing car ferries,
As stated above, these arrangementsØ(Ñ) were given
general approval by the Commission for the years 1990
to 1994 and 1995 to 1997.
—Ùsailings between ports on the western Channel are
subject to higher charges than those on the eastern
part of the Channel, In view of the above, the Commission finds that the
information provided up to 16 February 1998

(Ð)ÙCommunity guidelines on State aid for rescuing and restruc-


turing firms in difficulty (OJ C 368, 23.12.1994, p. 12). (Ñ)ÙState aid NNØ51/97 (ex NØ48/96).
4.8.98 EN Official Journal of the European Communities C 244/15

is necessary for the assessment of whether the aid is Legal position


compatible with the Treaty. However, it should be
emphasised that the main item of information required,
namely a restructuring plan which shows among other
things that the aid will restore the long term viability of According to Article 92(1) of the EC Treaty, any aid
the company within a reasonable period of time and on granted by a Member State or through State resources in
the basis of realistic hypotheses regarding future any form whatsoever which distorts or threatens to
operating conditions and which conforms to the above- distort competition by favouring certain undertakings or
mentioned guidelines, has not so far been submitted to the production of certain goods shall, in so far as it
the Commission. affects trade between Member States, be incompatible
with the common market.

Moreover, in their correspondence of 16 February 1998, For it to be possible to grant aid, it would be necessary
the French authorities indicated that they had decided for a derogation to Article 92(1) to apply. The only
‘‘to submit the company Brittany Ferries to an audit by a derogation which is conceivable in the case in quesiton is
group of independent experts to have a more detailed that referred to in Article 92(3)(c) (‘‘aid to facilitate the
assessment of the impact of the restructuring measures development of certain economic activities, where such
that it has adopted and whether the aid is matched to the aid does not adversely affect trading conditions to an
needs of the company’’. extent contrary to the common interest’’).

The Community guidelines on State aid to maritime


According to this information, the question of whether transportØ(Ó) established the types of aid that may be
the aid is matched to the needs of the company has not considered compatible with the objectives of the
yet been established. There is reason to fear therefore common market, as well as an acceptable maximum
that the aid in favour of Brittany Ferries (notified under ceiling in order to avoid any distortion of competition.
NØ9/98) does not so far form an integral part of a Specific criteria have been drawn up to justify decisions
complete restructuring plan which would meet the on the merits of each State aid. As regards restructuring
criteria set out in the Community guidelines on State aid aid in particular, the Community guidelines lay down
for rescuing and restructuring firms in difficultyØ(Ò). that this will be subject to the specific guidelines on
restructuring and rescuing firms in difficultyØ(Ô). The
measures taken by the French authorities to support
Brittany Ferries will be examined by the Commission
under the appropriate provisions depending on the type
By letter of 10 March 1998, the Commission informed of aid granted.
the French authorities that the documents forwarded by
letters of 11 and 16 February 1998 do not satisfactorily
complete the information given to the Commission on
the abovementioned aid, given that they do not contain However, as regards the capital injection notified, as it
the required restructuring plan. has been substantiated it does not meet the criteria on
which the Commission bases its examination of the
merits of aid for the restructuring of companies. Firstly,
a restructuring plan for the company has not been
presented to the Commission. Secondly, it appears
Taking account of the above, the Commission inconsistent to the Commission that, on the one hand,
considered that it would be desirable to examine the the previous aid measures (from the public authorities
notification of the additional aid of FRF 70 million in and private shareholders) should have been considered
the more general context of measures to support Brittany by the French authorities as conforming to the principle
Ferries, in so far as all these actions are ultimately aimed of a private investor in a free market economy (and
at helping to restore the financial balance and economic consequently not considered as aidØ(Õ), while on the
viability of the company through its restructuring. This
letter therefore deals simultaneously with questions
which were the subject of the complaint against Brittany
Ferries, aid measures adopted subsequently and the aid (Ó)ÙOJ C 205, 5.7.1997.
notified on 18 November 1997. (Ô)ÙCommunity guidelines on State aid for rescuing and restruc-
turing firms in difficulty (OJ C 368, 23.12.1994, p. 12).
(Õ)ÙUnless the making available of public funds on preferential
terms is treated as an aid and assessed on the basis of one of
the derogations provided for by the Treaty, there is
(Ò)ÙCommunity guidelines on State aid for rescuing and restruc- infringement of the principle of equal treatment of public or
turing firms in difficulty (OJ C 368, 23.12.1994, p. 12). private companies (OJ C 307, 13.11.1993, p. 3).
C 244/16 EN Official Journal of the European Communities 4.8.98

other, they now consider that the company requires very clear for which economic reasons and with
additional State aid in the form of a capital injection. which guarantees the bank agreed to cover the
company’s deficits. Under normal market conditions,
a bank would not agree to cover the cash deficits of
a company in such an economic position without
On the basis of the facts set out, the Commission is in a having solid guarantees. It does not appear,
position, given the present state of the dossiers in its therefore, that the intervention by Cr~dit Agricole
possession, to express serious doubts as to the compati- has been made on terms which would be acceptable
bility of the measures in question with Article 92 of the to an investor operating under free market
EC Treaty, and in particular paragraph 1 and paragraph conditions;
3(c) of that Article. These measures concern both those
implemented without the Commission having been
notified (dossier NNØ64/97) and that which was the
subject of the subsequent notification (dossier NØ9/98). (d) As regards the semi-public companies (Sabemen,
Senacal and Senamanche), it was stated that they
agreed to reduce the rents for the ships paid by
Brittany Ferries over three years and that in return
the public shareholders increased their capital
As regards the first dossier (NNØ64/97), the main
holdings in these companies. However, the three
questions still to be resolved concern the following
companies have generated losses and accumulated
points:
successive debts in spite of the fact that they receive
investment subsidies from the state and loan guar-
antees from the regional authorities. Serious doubts
persist, therefore, as to whether, in the two cases, the
A.ÙWhether there are aids to be authorised within the
entities concerned (the three companies and the
meaning of Article 92(1) of the Treaty
public shareholders) acted in the way private
investors wouldØ(ÎÍ);

(a)ÙThe Commission reminds the French that the current


general French scheme for aid to merchant shipping
(which includes ACOMO aid) approved by the (e) The French authorities maintain that the measure
Commission extends over three years (1995 to 1997) relating to the port solidarity fund has not been
and can no longer be applied in 1998, contrary to implemented. However, they have stated that port
what they have stated. Any new aid scheme would charges have recently been reduced as a result of
therefore have to conform to the new ‘‘Community commercial decisions taken by the port authorities.
guidelines’’; The Commission would like more information on
the ports concerned, the underlying reasons and the
beneficiaries of the reductions.

(b) In the application of its social plan, Brittany Ferries


appears to have received State aid under the Consequently, it is necessary to obtain from the French
statutory provisions which apply specifically to the authorities any new information making it possible to
maritime sector. The Commission would like to establish whether the aid measures in favour of Brittany
receive further informationØ(Ö) on all these provisions Ferries satisfy the criterion of a private investor in a free
which would allow it to determine whether these aid market economy.
measures form part of measures applicable to all
sectors of the economy or whether this is a special
scheme for shipping companies;

B.ÙCompatibility

(c) It was stated that the Caisse R~gionale du Cr~dit


Agricole de Bretagne has covered the successive cash
In the event that the measures referred to in A constitute
losses incurred by Brittany Ferries since 1993
aid and as regards the aid notified (NØ9/98), the
(including those of FRF 80,2 million in 1995 and
Commission would emphasise that these would have to
FRF 16,2 million in 1996). In spite of the restruc-
be based on a plan aimed at restoring the long-term
turing measures taken by the company and its
partners, both public and private, it is not

(ÎÍ)ÙParticularly within the meaning of the Commission


communication to the Member States published in OJ 307,
(Ö)ÙSubject to the discretionary powers in favour of certain 13.11.1993, concerning the principle of an investor in a free
companies. market economy.
4.8.98 EN Official Journal of the European Communities C 244/17

viability of Brittany Ferries. The French authorities did which could allow the company to be competitive so that
not include such a plan with the notification. Moreover, it is able to cover all its costs, including depreciation
the Commission does not consider that the planned costs and financial charges (including ships’ rents), and
capital injection could overcome the structural handicaps to generate a minimum capital return. Following this
suffered by the company, as detailed by the French restructuring, Brittany Ferries should not require further
Government, which have led to the present financial State aids and should be capable of facing up to market
situation. competition with its own resources.

In general terms, the Commission considers that aid for It would also have to be demonstrated that the aid
the restructuring of companies may facilitate the devel- would serve only to restore the viability of Brittany
opment of economic activities without adversely Ferries and would not allow it, during the implemen-
affecting trading conditions to an extent contrary to the tation of the restructuring plan, to develop activities
common interest if a number of conditions are metØ(ÎÎ): which are capable of distorting competition in the sector
in question.

—Ùthe aid must be linked to a viable restructuring or


recovery plan in accordance with the criteria of the
abovementioned guidelines, which must be presented It should also be emphasised that the aid to Brittany
to the Commission with all the necessary information Ferries should be limited to the strict minimum needed to
and which must make it possible to restore the enable it to restructure effectively. The company should
competitiveness of the company, i.e. its return to also make a substantial financial contribution to the
long-term viability, within a reasonable period, restructuring plan. No additional aid should therefore be
granted to Brittany Ferries which would provide it with
surplus funds that it could use for activities capable of
distorting competition on the market such as through an
—Ùmeasures such as a reduction in capacity must be aggressive pricing policy and which would not be linked
taken to mitigate as far as possible any adverse to the restructuring process.
effects for competitors,

—Ùthe amount and intensity of the aid must be limited Originally, the French Government did not notify a
to the strict minimum needed for restructuring, must restructuring plan for the company to the Commission.
be proportionate to the anticipated benefits from a Brittany Ferries has in the process implemented a
Community point of view and must be accompanied rationalisation plan of which the Commission was
by a substantial contribution from the company itself, informed, involving among other things a social plan
comprising a reduction in the workforce and measures to
reduce operating costs.

—Ùas the Commission’s contact, the French authorities


must guarantee that the company implements in full
the restructuring plan submitted to and approved by The Commission considers that, nothwithstanding this
the Commission and that the company complies with plan, the company and the French authorities have not
any requirement imposed by the Commission, so far provided significant evidence that a restructuring
process is under way with the aim of restoring long-term
viability. As a general rule, the measures to support the
—Ùannual reports on the implementation of the plan will company appear to have been implemented as a reaction
have to be presented to the Commission. to the unfavourable financial situation in which the
company has found itself since 1993 in order to cover
successive operating losses and protect the company
against the effect of market forces. Such aids are likely
to distort competition between shipping companies in the
If the restructuring plan meets all these conditions, the
various Member States to an extent contrary to the
Commission will be able to authorise this aid.
common interest.

In the two cases in question, the Commission would


have to verify that the aids are linked to a plan The French authorities should therefore present a sound
restructuring plan to which the aids are tied and furnish
systematic proof that the proposed aid meets all the
(ÎÎ) Idem. general conditions for authorisation referred to above.
C 244/18 EN Official Journal of the European Communities 4.8.98

Conclusion provided for in Article 93(2) of the Treaty has resulted


in a final decision by the Commission. In this
In the light of the above considerations, the Commission connection, the Commission refers the French
has decided to initiate the procedure provided for in Government to its letter of 3 November 1983 addressed
Article 93(2) in respect of the aid measures which are the to all Member States concerning their obligations under
subject of cases NNØ64/97 and NØ9/98. Article 93(3) of the Treaty and to the communication
published in Official Journal of the European Communities
As part of this procedure, the Commission hereby gives C 318 of 24 November 1983 to the effect that any aid
notice to the French Government to submit its comments granted illegally, i.e. without awaiting the final decision
within a period of one month from the date of this letter adopted by the Commission at the end of the procedure
and to provide any information that it deems necessary provided for in Article 93(2) of the Treaty, may be the
for an examination of the case. subject of recovery proceedings.

Moreover, the Commission informs the French Any repayment will have to be carried out in accordance
Government that as part of the same procedure it will with the provisions of French law, inlcuding interest
invite the other Member States and other interested calculated on the basis of the interest rates used as a
parties, by means of a notice in the Official Journal of the reference in the assessment of regional aid schemes and
European Communities, to submit their comments. Under running from the date on which the illegal aid was
Protocol 27 of the Agreement on the European granted.’
Economic Area, it will also forward a copy of this
communication to the supervisory authority of the The Commision invites the other Member States and
European Free Trade Association (EFTA) and will other interested parties to submit their comments on the
publish a notice in the EEA supplement of the Official measures in question to the following address within one
Journal. It will invite that supervisory authority, the month of the date of this communication:
Member States of EFTA which are parties to the
Agreement on the European Economic Area and European Commission
interested third parties to submit their comments. Rue de la Loi/Wetstraat 200
B-1049 Brussels.
The Commission reminds the French Government that,
pursuant to Article 93(3) of the EC Treaty, no aid These comments will be communicated to the French auth-
measure may be put into effect until the procedure orities.