When presumptions are anything but simple
A seemingly ordinary ruling sheds some confusion on the European Court of Justice’s case law in the politically sensitive area of state aid.
Two weeks ago, the European Court of Justice released its judgment in a sensitive case for one of its biggest Member States. In IFPEN, the legal status of French public companies, also known as EPICs, was called into question due to what was considered by the Court to be an implicit unlimited state guarantee attached to this status.
Under French law, the goods of public persons cannot be seized, and they cannot default. These characteristics were considered to form an implicit and unlimited state guarantee by the ECJ in the landmark La Poste judgment of 2014, inducing financial advantages for public companies constitutive of state aid. State aid is in principle prohibited under Article 107 TFEU. The Court thus created in La Poste a simple presumption that the status of EPIC generated an illegal advantage for these public companies. La Poste created shockwaves in France, where not only does the status of EPICs protect key public services such as railway company SNCF, but also covers public actors involved in activities as diverse as cultural heritage, research, money coining, blood collection, forest protection, space programmes, nuclear activities, and community planning... In this context, IFPEN is an institute conducting research, developing new technologies and training staff for the energy sector.
In 2006, IFPEN became an EPIC, and this change of status was notified to the European Commission. The European Commission considered that it constituted state aid in a decision of 2011. France and IFPEN attacked this decision before the CJEU. In the first instance, the General Court found for France and IFPEN, and partly annulled the Commission’s decision. The Commission thereafter appealed to the Court of Justice, the judgment of which we now turn to. The whole point of this case was for the Commission to confirm and, where possible, to extend the principles of La Poste, and for France to engage in some damage control.
The Court of Justice (fifth chamber) confirmed some of the General Court’s findings, by accepting that the status of being an EPIC did not generate any real advantage to IFPEN (§ 88), as it was proven by the Commission itself. Nevertheless, these findings do not preclude the existence of potential advantages in the future, according to the Court (§ 117). The absence of any real advantage is insufficient to reverse the presumption of state aid (§ 118). To ensure that there is no state aid, potential advantages granted by the EPIC status should, in addition, not be ‘plausible’ in the future (§ 117). What does plausible mean in this context? Is it only an argument that has not been used? Thus, does it mean that it should be enough for the defendant to argue that in the absence of a change in circumstances in the future, and given the economic and legal context, the absence of potential advantages would ‘plausibly’ follow the absence of real advantages? This reading of the judgment would actually create a simple presumption in favour of the defendant, while complicating the accepted presumption of state aid. Turning to an interpretation more consistent with La Poste, the defendant may have to demonstrate that an unlimited state guarantee would not plausibly create any potential advantage in the future. The effect of this burden of proof would grant to the Commission a wide margin of discretion against EPIC statuses, but it would also de facto transform a simple presumption into a quasi-irrefragable presumption that an EPIC status constitutes state aid, given the difficulty of the demonstration.
There is more. Indeed, the Court also accepted the Commission’s argument that the status of an EPIC did not only create advantages for IFPEN in its relationships with credit and financial institutions, but also with its clients and providers. Although the Court admitted extending the presumption accordingly (§§ 139, 147), the presumption was, in this regard, weakened. While there is no need for the Commission to examine whether the advantages in the relationship with clients and providers of an EPIC are ‘similar’ to the advantages it enjoys with credit and financial institutions (§ 149), the Court conceded that, actually, yes, it must nevertheless ‘examine the economic and legal context of the market affected by the dealings in question. In particular, the Commission is required to verify whether the conduct of players on the market concerned justifies a hypothesis of an advantage similar to that found in the EPIC’s dealings with banks and financial institutions.’ (§ 150)
The presumption does not seem that simple anymore...
As a result, the implications of this case are not straightforward. While apparently confirming and extending La Poste, the Court’s ruling also seems to open a path (a tightrope?) for France to defend itself against the Commission’s epic crusade. To many in the field, this judgment is a reminder of how the Court applied the selectivity criteria of state aid in very different ways in two Grand Chamber judgments of 21 December 2016, World Duty Free Group and Lübeck Flughafen. One can only wish good luck to the practitioners in charge of putting the state aid house in order!