Dispute Revived Over French Guarantee to Oil & Gas Entity

(CN) – The European Court of Justice revived proceedings Wednesday over the finding that France awarded state aid by guaranteeing an organization dedicated to oil and gas research and development.

New energy-policy guidelines adopted in France prompted the controversy at issue by causing the conversion of Institut Francais du Petrole from a private entity to a publicly owned industrial and commercial establishment.

Such establishments are abbreviated in the case record as EPICs. The decision says they are financially independent and considered separate legal personalities from the state, but usually are required to perform various public service.

“As legal persons governed by public law, they are not subject to the ordinary law applicable to insolvency procedures by virtue of the general principle of the immunity from seizure enjoyed by public assets,” the ruling states.

In a 2010 case involving France’s postal service, another EPIC, regulators at the European Commission determined that La Poste received state aid by virtue of obtaining borrowing terms that were more favorable than those it would have gotten otherwise.

The commission decided to open a separate investigation of Institut Francais du Petrole while La Poste proceedings were underway.

Since 2010 the institute has been known as IFP Energies Nouvelles, and the commission determined in 2011 that its conversion into an EPIC conferred an implied and unlimited state guarantee, which amounted as state aid.

France and IFPEN, as the institute’s name is abbreviated in the case record, brought a successful challenge to that designation before European General Court, but the Fifth Chamber of the European Court of Justice annulled that decision Wednesday.

“Contrary to the findings of the General Court … the mere fact that the beneficiary of such a guarantee in the past derived no real economic advantage from its EPIC status does not suffice, in itself, to rebut the presumption of the existence of an advantage,” the ruling out of Luxembourg states.

“Consequently,” the opinion continues, “the General Court was wrong to hold … that the possibility of relying on the presumption established by the court … was based on the existence of actual effects on the part of the beneficiary of the guarantee, and, consequently … that, with respect to IFPEN’s dealings with banks and financial institutions, that presumption had been rebutted.”

The court also found that the General Court mistakenly applied certain precedent.

“It should be noted that the argument which the General Court … intended to derive from the observations made by the court in the judgment of 3 April 2014, France v Commission, … lacks, at the very least, clarity,” the ruling states. “It is not clear how those observations confirm, as the General Court nevertheless stated, that the alleged means of proof accepted by the Court to establish whether an implied and unlimited state guarantee, associated with the EPIC status, constitutes an economic advantage is solely applicable to the case of a borrower who, as a result of that guarantee, benefits from lower interest rates or is able to provide less security.

“In those circumstances, it must be noted that the General Court erred in law when it held … that the presumption of the existence of an advantage established by the Court in the judgment of 3 April 2014, France v Commission, is restricted to dealings which involve a financing transaction, a loan or, more broadly, credit from an EPIC’s creditor, in particular that EPIC’s dealings with banks and financial institutions.”

The Court of Justice referred the case back to the General Court for further proceedings.

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