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State aid is more than just statements. Public statements made by French authorities may have helped France Télécom’s (FT) financial standing, but mere words cannot constitute illegal State aid. This was the conclusion of the General Court of the EU in France and Others v Commission, 21 May 2010, and a victory for France and FT.

FT is a public limited company quoted on the stock exchange. In 2002, the time relevant to the present case, FT was a group providing telecommunications networks and services. At that time, the French State held about 56% of the share capital.

In 2001, FT’s finances started to look bleak, and its accounts showed a net debt of € 63.5 billion, and a loss of € 8.3 billion. Things worsened by June 2002, when FT’s net debt reached € 69.69 billion, including € 48.9 billion of bonded debt. Despite the mounting debt, the French Minister for the Economy manifested the state’s belief in FT by stating in a French newspaper, on 12 July 2002, that, “. . . the shareholder State will act as a prudent investor and were FT to encounter difficulties, we would take the appropriate measures . . . I repeat that were FT to face funding problems, which is not the case today, the State would take the necessary decisions in order to overcome them”. In September and October of that year, additional public statements were made reiterating that FT had the support of the French authorities.

In December of that year, the French State announced a proposal for a shareholder loan, consisting of a € 9 billion credit line which it was considering extending to FT. FT neither accepted nor acted on the offer. However, the EU Commission, on 2 August 2004, found that this credit line, in the context of the earlier statements, constituted State aid in violation of EU law. The French Government and FT inter alia, challenged that Commission decision before the General Court.

In its decision, the General Court noted that there are two prerequisites for a measure to be deemed to be State aid: first, it must entail a financial advantage, and, second, that the advantage must come directly or indirectly from State resources. In this case, it was crystal clear that the first element was fulfilled. The statements conferred a financial advantage on FT by improving its image in the eyes of investors, creditors and ratings agencies, i.e. the financial market players who then participated in FT’s refinancing. However, the second element was not fulfilled because the statements were so vague and conditional, in particular regarding the nature, scope and conditions of possible State intervention. Although the December proposal was more concrete, it was never accepted or acted upon and did not entail a transfer of state resources. Consequently, the General Court annulled the decision of the Commission.

Sometimes it’s better not to put your money where your mouth is, at least where State aid is concerned.