France Dinged for $193M Bailout of Ferry Service

     (CN) – A $193 million bailout of now-defunct SeaFrance by France’s national transportation carrier SNCF amounted to illegal state aid, the EU’s general court found Thursday.
     As maritime passenger and freight carrier SeaFrance’s financial condition deteriorated at the end of the last decade, SNCF first set up a rescue credit line – which was approved by the European Commission in 2010. French authorities then announced a $259 million bailout of the carrier, reducing it to $193 million from SNCF after SeaFrance’s competitors complained.
     The commission reversed course in 2011, finding that both the rescue aid it approved in 2010 and the subsequent bailout constituted illegal state aid. The EU’s administrative body then ordered France to recover the initial rescue aid granted to SeaFrance.
     France challenged that order before the General Court of the European Union, arguing that the commission should have looked at the rescue aid separately from the $193 million bailout of the failing company.
     On Thursday, the EU’s lower court said it was impossible to dissociate the rescue aid from the bailout loans since the measures were all part of the same restructuring plan submitted to the commission.
     Additionally, the Luxembourg-based court said that the rescue aid and the bailout – which was comprised of two loans – had the same purpose: to keep SeaFrance afloat.
     “Accordingly, the various measures, due to their timescale, their purpose and SeaFrance’s circumstances at the time, are so closely linked that they are inseparable as regards the private investor test,” the court wrote in its opinion, which was not translated into English.
     The court also noted that the commission applied the correct standard – “Would a private investor make the same loans to SeaFrance?” – and correctly concluded that none would, given the dismal rate of return and the likelihood of the carrier’s failure.
     And state-aid rules also require that a private company receiving a government bailout must make their own contribution of no less than 50 percent of the aid received so that financial markets can believe in the feasibility that the company will become viable again. SeaFrance did not – and could not – make that contribution, at least not with its own money, the court said.
     France has 60 days to appeal the lower court’s decision to the Court of Justice of the European Union.

%d bloggers like this: