EU Adviser Raps Belgium on Illegal State Aid

LUXEMBOURG (CN) — An adviser to Europe's highest court recommended that Belgium face discipline for guaranteeing investor shares in three now-defunct financial cooperatives.

Advocate General Juliane Kokott penned the nonbinding opinion in the face of EU regulatory action against Belgium.

The European Commission initiated proceedings over Belgium's decision in November 2011 to give 800,000 shareholders in three financial cooperatives —Arcopar, Arcofin and Arcoplus — up to 100,000 euros in protection each, the same protections as were provided for certain life insurance policies.

Not to be confused with the former Atlantic Richfield oil giant owned by BP, the Arco that held these three Belgian cooperatives operated as the financial and investment arm of the Confederation of Christian Trade Unions.

It went bankrupt in 2011 after the collapse of Belgian-French Dexia Bank, of which it had significant holdings.

In total, the Belgian government had guaranteed nearly 1.5 billion euros.

The European Commission contends that the guarantees represented illegal state aid, initiating action against Arco after finding that its shareholders do not enjoy the guarantees of bank depositors.

Kokott agreed Thursday the investor guarantees of roughly $112,000 each violated EU law because the investors' cooperative shares should not have been treated as bank deposits or credit institutions. The opinion is not available in English.

Kokott's recommendation is not binding on the EU General Court, which begins examination of the proceedings at the request of the Belgian Constitutional Court.

"The judgment of the court would certainly constitute a not insignificant de facto precedent from the point of view of the outcome of those proceedings," the European Court of Justice said in a press release.

Belgium issued a royal decree in November 2011 to bail out the 800,000 investors in Arcopar after its investors sued to receive compensation from the Belgian government.

The commission's 2014 action calls the deposit guarantee "incompatible with the internal market," but Belgian Finance Minister Koen Geens argued that Arco shareholders had been promised a state guarantee of their investment, which is why many of them kept their money in Arco even as Dexia began to collapse.

Kokott sided with the commission.

"Neither the EU Directive on deposit-guarantee schemes nor the general EU-law principle of equal treatment obliged the member states to include, within their national deposit-guarantee schemes, shares held by natural persons in recognized financial cooperatives," according to the court's statement on her opinion.

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