Commission Decision
of 29 June 2011
on State aid granted by France to the Institut Français du Pétrole (Case C 35/08 (ex NN 11/08))
(notified under document C(2011) 4483)
(Only the French text is authentic)
(Text with EEA relevance)
(2012/26/EU)
THE EUROPEAN COMMISSION,
Whereas:
By letters dated 3 August 2007 and 7 May 2008, the Commission requested information from the French authorities; they replied by letters dated 28 September 2007 and 26 June 2008 respectively.
The Commission published the opening decision in the Official Journal of the European Union on 11 October 2008, asking interested parties to submit their comments on the measure.
The Commission received observations from France by letter dated 14 October 2008.
By letter dated 6 November 2008, registered as received by the Commission on the same day, the legal advisers of UOP Ltd (‘UOP’) informed the Commission that their client wished to comment on the measure. In view of the time needed for translation, they asked for extra time until 30 November 2008 in which to send their comments. By letter dated 7 November 2008, the Commission accepted that this request was justified and agreed to extend the deadline for UOP’s reply until 30 November 2008. By letter dated 28 November 2008, registered as received by the Commission on the same day, UOP’s legal advisers forwarded their client’s comments on the opening decision.
In the same letter of 28 November 2008 UOP’s legal advisers sought permission for their client to submit additional comments in the course of the proceeding. By letter dated 17 December 2008, the Commission acceded to this request, agreeing to extend the deadline for UOP’s reply until 23 January 2009 to enable it to submit any additional comments. By letter dated 23 January 2009, UOP’s legal advisers forwarded additional comments from their client.
By letter dated 6 May 2009, the Commission communicated to the French authorities all the comments made by UOP on the opening decision, where necessary in a confidential version. It asked them to send it their comments by 8 June 2009 at the latest. By letter dated 2 June 2009, the French authorities requested that this time limit be extended until 22 June 2009, since, in their view, the comments submitted by the third party required detailed and in-depth analysis and the consultation of several ministerial departments. By letter dated 9 June 2009, the Commission agreed to this extension until 22 June 2009. By letter dated 22 June 2009, the French authorities forwarded their observations on the comments made by UOP.
By letter dated 29 July 2009, the Commission asked the French authorities for additional information, requesting a reply by 24 August 2009. By letter dated 19 August 2009, the French authorities asked for an extension until 7 September 2009, to which the Commission acceded by letter dated 20 August 2009. The French authorities finally provided the information requested by letter dated 8 September 2009.
By letter dated 20 November 2009, the Commission requested further information from the French authorities, asking for a reply within twenty days. By letter dated 14 December 2009, the French authorities asked for an extension until 22 January 2010, which the Commission granted by letter dated 18 December 2009. The French authorities finally supplied the information requested by letter dated 13 January 2010.
By letter dated 29 September 2010, the Commission asked the French authorities to transmit additional information, requesting a reply within 20 days. By letter dated 7 October 2010, the French authorities asked for an extension until 26 November 2010; the Commission agreed by letter dated 8 October 2010. The French authorities finally provided the information requested by letter dated 26 November 2010.
research and development in the fields of oil and gas prospecting and refining and petrochemicals technologies,
the training of engineers and technicians, and
the provision of sector information and documentation.
A contract of objectives with the State lays down the broad lines of its work for five years at a time.
Furthermore, IFP directly and indirectly controls commercial enterprises with which it has concluded exclusive research and licensing agreements. On the basis of a body of consistent evidence, the details of which are recalled in recital 137, the Commission considered in decision C 51/2005 that the combination of the public limited companies Axens, Beicip-Franlab and Prosernat, together with their parent, IFP, constituted an economic group (the ‘IFP group’) for purposes of competition law.
Beicip-Franlab specialises in the publication and distribution of deposits exploration software and in consultancy and advisory services. In 2006, its turnover was EUR 42 million. An exclusive development, marketing and use agreement, signed in 2003 for a period of ten years, provides that Beicip-Franlab [receives proposals from IFP relating to the results of its research] (**) into the algorithms, models and methodologies [constituting the outcome of the research of] (**) IFP in the field of deposit exploration, and may request permission from IFP to produce products on that basis. Beicip-Franlab covers all of the product development costs borne by IFP. In addition, Beicip-Franlab makes various additional payments […] (*) to cover maintenance and rights of use. An amendment was signed in 2005, which modifies the payment arrangements while at the same time retaining the principle of total coverage of development costs by Beicip-Franlab.
Prosernat provides consultancy and other services and supplies gas treatment and sulphur recovery plants. In 2006, its turnover was EUR 49,9 million. On 18 August 2003 IFP and Prosernat signed a framework licensing agreement and an industrial research agreement, with retroactive effect from 1 January 2002, for a period of 10 years. Under these agreements, Prosernat has an exclusive licence for the patents of IFP and [IFP offers it the results of its] (**) research […] (*) in the field of gas treatment and sulphur recovery technologies. Prosernat pays its parent a fee out of the annual turnover for the licence for the processes, and a fee on a case-by-case basis for equipment. The IFP’s remuneration for Prosernat’s access to the results of the research work amounts to […] (*) % of Prosernat’s global annual turnover.
Until 2006, IFP was a legal person governed by private law, a trade body within the meaning of Law No 43-612 of 17 November 1943 on the management of trade interests, placed under the economic and financial supervision of the French Government.
The principle that IFP was to be converted into an EPIC was laid down in Article 95 of Programme Law No 2005-781 of 13 July 2005 establishing the energy policy guidelines. The conversion became effective from the publication in the Journal Officiel de la République Française of Decree No 2006-797 of 6 July 2006 establishing the constitution of the publicly owned establishment IFP.
The legal implications of the EPIC form are explained in detail in part 2 of decision C 56/2007 (‘Description of the measure’) and in part 3.2.1 of the opening decision, to which the Commission refers mutatis mutandis.
- EPICs, as legal entities governed by public law, are not subject to insolvency and bankruptcy procedures, by virtue of the general principle of the immunity from seizure of the assets of legal entities governed by public law, which has been recognised by the French courts, including the Court of Cassation19, since the late nineteenth century. For further details, the Commission refers to section 3.2.1.1 of the opening decision, recitals 38 to 4020.
- EPICs are subject to the Law of 16 July 1980 and its implementing rules. These expressly identify the State as the authority responsible for covering the debts of publicly owned establishments. They confer on it important prerogatives, such as the issuing of a mandatory payment order and the creation of sufficient resources, and organise a principle of last-resort State liability for the debts of legal entities governed by public law. For further details, the Commission refers to section 3.2.1.2 of the opening decision, recitals 41 to 4521.
- In the event of the winding up of an EPIC, the general principle applies that its debts will be transferred to the State or to another public entity22, which means that creditors of an EPIC have an assurance that they will not lose the money they are owed by a publicly owned establishment. For further details, the Commission refers to section 3.2.1.3 of the opening decision, recitals 46 to 5123.
- EPICs may possibly also have preferential access to Treasury imprest accounts. For further details, the Commission refers to section 3.2.1.4 of the opening decision, recital 5224.
As explained in recitals 65 to 74 of the opening decision, to which the Commission refers for more details, the clarifications to legislation and regulations proposed by the French authorities did not at first sight seem sufficient to assuage these doubts.
The Commission said that it could not be ruled out that there might be a selective economic advantage, mainly through funding terms considered more favourable, even if IFP and its subsidiaries were not the subject of a financial rating by an external rating agency. The IFP group might also have been advantaged in its dealings with customers and suppliers in so far as they believed their claims to be covered by a State guarantee. Consequently, it could not be ruled out at the preliminary examination stage that in the case of the supply or purchase of goods or services involving a claim, the suppliers or customers concerned would grant terms to IFP that were better than those they would have granted to an undertaking not benefiting from a State guarantee.
On the basis of the information available at the end of its preliminary examination, the Commission considered that the unlimited nature of the guarantee, especially as regards its duration, amount and scope, made it extremely difficult to calculate the amount of the market premium that IFP ought to pay the State for such protection.
Finally, the Commission doubted whether the aid was compatible with the internal market, particular because it did not at first sight appear to be intended to facilitate the development of certain economic activities or regions.
The French authorities disputed the existence of State aid, since, in their opinion, two of the conditions laid down in Article 107(1) TFEU were not met: the mechanism at issue did not involve any transfer of State resources (5.1.1) and did not confer any advantage on IFP (5.1.2).
According to the French authorities, (A) publicly owned establishments do not enjoy any guarantee because of their legal form, and (B) the Commission’s argument in the opening decision is flawed.
As explained in recitals 41 to 45 of decision C 56/2007, to which the Commission refers mutatis mutandis, the French authorities develop five pleas in law in support of their arguments.
First, no legislation or decision lays down the principle that the State would, out of principle, indefinitely guarantee the debts of EPICs.
The French authorities consider that, as far as EPICs are concerned, (a) the reimbursement of individual claims is not guaranteed, and (b) there is no assurance of the continued existence of the publicly owned establishment or of its obligations.
Furthermore, as indicated in recitals 50 to 53 of decision C 56/2007, to which the Commission refers mutatis mutandis, the French authorities maintain that the State cannot incur strict liability solely on the ground of a lack of assets. According to the French authorities, any guarantee requires the guarantor to accept the fact of the guarantee. Where liability arises out of responsibility for a fault or, in the case of strict liability, for the consequences of one’s own actions, there can be no question of a guarantee. According to France, the liability of the State cannot be incurred on the sole ground that the prefect or supervising authority was unable to take any measures that could allow the claim to be repaid because of the financial and asset situation of the publicly owned establishment. There is no fault: inaction on the part of the prefect or the supervising authority is not necessarily a fault. The French authorities recognise that when implementing the procedure laid down by the Law of 16 July 1980 the representative of the State is subject to the requirement of continuity of the public service, but consider that even if a court were to order that a creditor be compensated, such compensation would merely place the creditor in the same position that he would have been in under ordinary law, because under ordinary law the asset would have been sold and the body of creditors would have received the corresponding sum. There is therefore be no advantage to the creditor.
- (a)If there is no requirement for continuity of the public service, in the event of lack of assets of the publicly owned establishment, application of the procedure introduced by the Law of 1980 would not place the creditors in a more favourable position than if the procedure under ordinary law had been applied: they would recover the same amount as the creditors of an entity subject to commercial law, i.e. the proceeds from the sale of the assets, and would no longer have any redress at the end of the procedure42, since, according to France, the State cannot be held liable solely on the ground of lack of assets. Only two aspects would be different:
The absence of a single procedure for all creditors: unlike the procedure under private law, whereby claims are processed en masse and creditors are satisfied in decreasing order of priority and pro rata from the amounts available, the procedure introduced by the Law of 16 July 1980 requires creditors to take action to protect their rights. The approach of the Law of 16 July 1980 is ‘first come, first served’.
It is the representative of the State who, under the supervision of the administrative court (monitoring for gross negligence as established by the Council of State in the Campoloro judgment cited above), takes on the role equivalent to that of the liquidator and court-appointed administrator.
- (b)
In the event that the continuity of the public service has to be guaranteed, the French authorities admit that the representative of the State, when exercising the powers conferred by the Law of 16 July 1980, could decide not to sell certain assets needed to perform a public service task. This failure to sell certain assets would then be reflected, if the State did not pay compensation, in lower proceeds from the assets and a corresponding reduction in the amounts recoverable by creditors. According to the French authorities, such a procedure would not confer on IFP’s creditors rights greater than those they would have had under commercial law. However, the French authorities admit that, in such an event, the State might incur strict liability, and would have to compensate creditors for the loss they had suffered (not exceeding the market value of the assets retained by the State for the continuity of the public service). The creditors would therefore potentially be reinstated in the same situation as that which would have resulted from the application of ordinary law. The French authorities conclude that the procedure introduced by the Law of 16 July 1980 does not confer any advantage over the procedure under ordinary law and that there is therefore no justification for subjecting IFP directly to a procedure such as that which applies under ordinary law.
In the opening decision, in particular in recital 82, the Commission referred specifically to the French consolidating instruction No 02-060-M95 of 18 July 2002, on the financial and accounting regulation of national publicly owned industrial and commercial establishments, and to the guide to the financial organisation of the creation, conversion and abolition of national publicly owned establishments and of public interest groups (Guide sur l’organisation financière des créations, transformations et suppressions des établissements publics nationaux et des groupements d’intérêt) of 14 November 2006; as explained in recital 68 of decision C 56/2007, to which the Commission refers mutatis mutandis, the French authorities contend that the instruments in question are neither applicable nor transferable to IFP.
- On the one hand, the Commission commits an error in its reasoning regarding any support that IFP could provide to its subsidiaries through an intra-group transfer, since the conditions on which the parent of a group can support one of its subsidiaries in difficulty are strictly regulated by company law, even if it is a legal person governed by public law43, and are totally unrelated to the concept of undertaking within the meaning of competition law.
- On the other hand, the French authorities deny that the EPIC status of IFP, with any possible State guarantee that such a status might imply, enables it to recapitalise its subsidiaries more easily than group parent companies with a legal form governed by private law. According to the French authorities, the fact that a company temporarily bears the losses of one of its subsidiaries is part of the normal operation of a group, as the European Union court has already recognised44, and the intervention of a public investor acting according to the same rules of conduct as a private investor is not considered to contain State aid elements within the meaning of Article 107(1) TFEU45. This is the case in particular for IFP, which has the legal possibility (and not the obligation) to recapitalise a subsidiary in difficulties according to the same assessment criteria as any prudent investor. Finally, the French authorities deny that EPICs have any possibility at all of ‘direct access’ to ‘Treasury imprest accounts’. They say that the budgetary mechanism of the ‘financial assistance account’, regulated by Article 24 of the Organic Law governing the Finance Act, provides for the constitution of appropriations accounts, capped by the Finance Act, which allow the State to grant advance payments to various bodies, if it wishes and if it is able to do so (in particular in the light of European Union law). According to the French authorities, EPICs have not got ‘direct access’ to these accounts.
The French authorities consider, first, that it cannot be concluded from the Guarantees Notice cited above that an advantage exists in the present case; second, that an extension to IFP’s subsidiaries, which are public limited companies under ordinary law, of any advantages from which IFP might benefit on account of its EPIC status would be in contradiction with the Commission’s decision-making practice; and third, that no proof has been given of an actual economic advantage to IFP and its subsidiaries in the present case.
Firstly, the French authorities deny that IFP, as an EPIC, possesses a legal status which rules out any bankruptcy or insolvency proceedings. In any event, they say, the Commission has not proved this, but provided evidence to show only that IFP’s status would not allow the application of one specific procedure (namely the procedure introduced by the Law of 25 January 1985).
Secondly, the French authorities deny that the fact that under the law and its own constitution a body cannot be made the subject of bankruptcy or insolvency proceedings automatically secures it more favourable funding terms on the market. In order to conclude that an enterprise is receiving aid in the form of a guarantee, the Commission must first, in application of point 1.2 of the Guarantees Notice cited above, demonstrate that it dos indeed receive more favourable funding terms.
the financial situation of IFP and its subsidiaries is sound, which makes the question of possible bankruptcy and consequently last-resort State intervention irrelevant;
the terms for the short-term funding of IFP and its subsidiaries are different for each of these entities, and result from specific negotiations conducted on a one-to-one basis with their respective banks;
the relations that IFP and its subsidiaries maintain with their suppliers and customers do not give rise to preferential conditions resulting from an expectation on the part of these suppliers and customers of a State guarantee.
the analysis set out by the Commission in its opening decision is questionable: IFP and its subsidiaries do not enjoy any State guarantee;
the Commission has not demonstrated the existence of an advantage to IFP and its subsidiaries deriving from IFP’s EPIC status;
the Commission has not, therefore, demonstrated the existence of State aid to IFP and its subsidiaries.
clarification of the Decree implementing the Law of 16 July 1980;
incorporation of a reference spelling out the absence of a guarantee in IFP’s contracts involving a claim;
incorporation of a reference spelling out the absence of a guarantee in the financing contracts of IFP’s subsidiaries.
‘The issue/programme/loan does not enjoy any form of direct or indirect State guarantee. In the event of insolvency, the State would not be obliged to act as financial substitute for IFP for payment of the claim.’
As explained in recital 101 of decision C 56/2007 cited above, to which the Commission refers mutatis mutandis, the French authorities have also noted the misgivings set out by the Commission in recital 71 of the opening decision, which indicated that the plea of accepted risk was a rule established by case-law that could develop; that it was based on secondary law instruments which could be annulled in the event of conflict; and, finally, that the proposal of the French authorities did not cover all possible scenarios, since debts could be not only financial but also commercial or other forms of debt again.
- (a)
The French authorities consider that the Commission’s first objection would seem to say that even if there is no actual provision to this effect in the national law of a Member State, the mere risk of a change in the case-law, i.e. a change in national law, is enough to create State aid. The Commission cannot argue that there is State aid because of a possible change in the law, which in this case is highly improbable, the plea of accepted risk being a general principle of public law that has been confirmed by case-law on many occasions, has never been contradicted, and has been widely commented.
- (b)
Concerning the second objection, the French authorities recognise that statute law and regulations take precedence over contracts, and that a disputed clause can always be annulled. However, they consider that the objection does not in fact refer to any higher-ranking text, that it is not substantiated, and therefore has no weight.
- (c)
Finally, as regards the third objection, the French authorities consider that it is based on a mere supposition of a possible belief or expectation among suppliers that their claims enjoy a State guarantee, a supposition which cannot by itself serve to demonstrate the existence of an advantage, but must be corroborated by information establishing that IFP and its subsidiaries have actually benefited from an economic advantage of this kind.
Nevertheless, as specified in recital 106 of decision C 56/2007, to which the Commission refers mutatis mutandis, the French authorities indicate that they are willing to extend their proposal to include a statement concerning the absence of a guarantee to include all contracts involving a claim, so as to explicitly rule out any risk that the State might incur strict liability on the basis solely of the insolvency of IFP.
To supplement the proposed mechanism, the French authorities make an additional proposal to the Commission, similar to that made on the creation of La Banque Postale, with regard to the terms on which IFP’s subsidiaries (Axens, Beicip-Franlab and Prosernat) are able to borrow on the market, under which an undertaking would be given that in the financing contract for each transaction (for all instruments covered by a contract) the following clause would be included in writing: ‘Pursuant to French law (in particular the need for express statutory authority for each guarantee), the present financing transaction shall not enjoy any form of direct or indirect State guarantee’.
As specified in recitals 107 to 110 of decision C 56/2007, to which the Commission refers mutatis mutandis, the French authorities consider that the two clarification measures proposed (the details of which are set out in recitals 55 and 59) would allow the creditors of IFP and its subsidiaries to be made fully aware of their rights, so that France could not be held ‘responsible for the expectations created in the minds of IFP’s creditors concerning the existence of a guarantee’, or regarded as voluntarily maintaining an opaque legal situation that procures an advantage for IFP and is liable to commit the State’s resources, as the Commission indicated in recital 87 of the opening decision.
By letters dated 16 July 2010 and 26 November 2010, the French authorities provided additional information which in their opinion showed that there was no State aid to IFP.
Furthermore, in the view of the French authorities, the Commission considers that IFP could benefit from an advantage at three levels: (i) that of its relations with banks and financial institutions, (ii) that of its relations with suppliers, and (iii) that of its relations with third-party industrial partners that make use of its research services.
Finally, with regard to IFP’s dealings with its customers, France says that the contract research activities concerned are the services provided by IFP at the request of a customer, third party or subsidiary, on a subject which comes within the scope of IFP’s task, does not involve strategic interests for IFP in terms of ownership of the results, is of a nature to enrich IFP’s knowledge and skills in the conduct of the public R&D programmes that it carries out, and does not come within the exclusive field of activities of its subsidiaries. The French authorities note that the research services that these customers acquire call for specific equipment and expertise.
France contends that even if IFP were to benefit from its EPIC status in the performance of these economic activities, the advantage would have no material impact on the market. In particular, it would not be liable to distort competition or to affect trade between Member States. Over the period since the change of IFP’s status (which occurred in July 2006), the French authorities nevertheless acknowledge that IFP may potentially have benefited from a reduction in charges as a result of the lack of subscription to performance bonds, but say that on the basis of the sums usually charged by banks and insurance companies to provide this type of service the amount involved is negligible. The French authorities conclude that any such effect would not have the character of an advantage, which calls into question the very existence of State aid to IFP.
IFP/Axens, consisting of the publicly owned establishment and its subsidiary Axens, is undeniably perceived by the market as a public entity (5.1.1);
the award of EPIC status to IFP/Axens has allowed and continues to allow significant distortion of competition in the process technologies market in which UOP operates, as it confers advantages in relations with suppliers, capital providers and customers (5.1.2).
According to UOP, the French authorities’ argument that Axens is a separate economic entity, like the other IFP subsidiaries, is untenable. The Commission, argues UOP, has rightly pointed out that (i) Axens is wholly owned by IFP; (ii) the implementation by Axens of the R&D of IFP reflects strategic priorities decided by the State; (iii) the managers of the publicly owned establishment IFP participate in the management of Axens; (iv) Axens has an exclusive contract with IFP, which is crucial to the subsidiary’s economic activity; and (v) there is in particular an agreement providing for first call on and provision of staff.
- IFP and Axens present themselves on the market as a single economic entity, ‘IFP/Axens’. Axens’s Internet site mentions in particular that the company is ‘backed by nearly fifty years of R&D and industrial success’61. Axens’s advertisements for its technology refer to IFP. Axens and IFP staff sometimes visit their licensees together.
The industrial press illustrates the market perception of IFP/Axens as a single economic entity. UOP encloses extracts from press cuttings referring to the activities of ‘IFP/Axens’ in the field of process technology licences, or alternatively referring to such licences being provided by IFP via its subsidiary Axens. UOP also provides examples of articles or presentations in which Axens staff have given the impression that Axens is seen by IFP as comprising the entire activities of the industrial and procatalysis divisions.
UOP indicates that the fact that Axens is perceived by both suppliers and customers as disposing of unlimited State resources to finance its activities gives it a significant market edge. Even supposing that this is only a market perception, its importance is magnified in the context of the world economic crisis.
As regards suppliers, UOP considers that preferential terms may be granted to IFP/Axens as compared with its competitors; UOP cites the contracts signed jointly by IFP and Axens mentioned in the opening decision.
As regards the financial markets, UOP considers that IFP/Axens benefits from preferential terms and interest rates on the capital markets as a result of the role of guarantor of last resort played by the State. Furthermore, in a context of financial crisis, the presence of the State, and the security it represents for investors, makes it possible to attract private capital at a time of shortage. Competing undertakings cannot obtain access to comparable funding, or can obtain it only on far less favourable economic terms. According to UOP, the effects of the economic and financial crisis have strengthened the potential of the measure to distort competition still further.
In its letter dated 23 January 2009, UOP refers to its previous observations and to those sent in the course of the proceedings that led to decision C 51/2005 cited above. UOP considers that this information provides sufficient evidence of the importance of the solvency of co-contractors on the process licensing market concerned. It reiterates the argument that the customers of the IFP/Axens entity assume they are in a trading relationship with a State body, the long-term viability of which ensures that there is no risk. Finally, UOP asks the Commission to analyse the agreements between Axens and its customers, indicating that it is convinced that they contain no clause that would limit liability to Axens alone.
In their letter dated 22 June 2009, the French authorities consider that UOP’s comments are based on assertions that are mistaken, or in some cases entirely false, and in any event are not founded on any evidence that might demonstrate the existence of State aid to IFP or Axens.
In substance, the French authorities deny any relevance to the allegation made that ‘IFP/Axens’ is perceived by the market as a public entity benefiting from advantages in relation to customers, suppliers and the financial markets, and reject the assertion that this ‘IFP/Axens’ is a State body whose long-term viability is assured.
firstly, ‘IFP/Axens’ is not a State body with unlimited resources at its disposal; moreover, there is no proof that this entity is perceived as such on the market (6.2.1);
secondly, IFP’s EPIC status confers no market advantage on Axens (6.2.2).
The French authorities contend that contrary to UOP’s affirmations the suppliers and customers of ‘IFP/Axens’ do not perceive this undertaking as a State body with unlimited resources.
Firstly, the French authorities refer to the legal analysis which they have sent the Commission and to their previous comments, which, they maintain, show that IFP’s EPIC status confers no State guarantee of any kind.
Secondly, the French authorities note that UOP relies on an alleged belief in an unlimited State guarantee for IFP/Axens, a belief which has no existence in law and which is not by itself sufficient to demonstrate that there is State aid.
UOP has argued, the French authorities say, that the market is likewise of the belief that the IFP/Axens entity is a State body with unlimited resources, and enjoys advantages in relation to customers, suppliers and creditors; but the French authorities contend that this argument is not based on any reliable evidence, and is undeniably refuted by the facts.
The French authorities contend that the rule described in recital 84, according to which the subsidiary is not to apply for any guarantee from the parent, also applies to any guarantee that Axens might negotiate or conclude with a customer. They illustrate their argument with the example of aromatic compounds mentioned by UOP in its observations. They say that as a general rule, Axens chooses to limit its liability to a certain fraction of the fee […] (*). This guarantee limitation policy, which is one of the ‘Principles of legal security of Axens’, is consequently quite different from the customs of other undertakings operating in this field, which, according to the French authorities, are in the habit of granting unlimited guarantees in certain cases.
- (a)
in the event of default by Axens, the capacity offered by its civil liability insurers through the various insurance policies under its world programme is well in excess of the maximum liability of Axens contractually agreed with its licensees;
- (b)
the capacity for immediate or rapid mobilisation of Axens’ resources is also very considerable, in particular because of its low debt level;
- (c)
the agreements between IFP and Axens explicitly limit IFP’s liability in the event of default on the part of one of Axens’ licensees to sums which are necessarily small, as they are correlated to the fee received by IFP;
- (d)
Axens’ civil liability insurer expressly waives any recourse against IFP, for any reason whatsoever.
The French authorities conclude that UOP’s assertions concerning advantages allegedly obtained by Axens on the process licensing market are invalidated especially by the fact that Axens has continually conducted a policy of limiting guarantees of liability granted to its customers.
In addition, it should be pointed out that the licensing agreements between Axens and its customers provide, conversely, that Axens’ financial liability is generally confined to […] (*) % of the royalties paid for each unit for which a claim is made. If for commercial reasons the guarantee given by Axens to its customer proves to be higher than that given to it by IFP, IFP’s liability is totally independent of that of Axens. The same principle is applied to any licence that IFP grants to third parties other than its subsidiaries.
Finally, the French authorities add that when IFP performs services (studies, research to order, tests, etc.) for its customers, whether subsidiaries or firms outside the group, IFP always seeks to limit its liability. The liability accepted by IFP then consists in a commitment to rectify the work carried out, while at financial level the principle is that the liability is limited to […] (*) % of the remuneration actually received, with a maximum which may reach up to […] (*) % depending on the case. Therefore if the customer considers that the work carried out by IFP is defective, IFP can never be obliged to repeat the work ad infinitum.
The French authorities deny any relevance to the assertion by UOP that the alleged belief in the existence of unlimited financial resources available to Axens secures it preferential terms from either its suppliers or the financial markets. France says that UOP has not provided the slightest proof in support of this allegation.
The French authorities consider that the rule described in recital 84, according to which the subsidiary is not to apply for any guarantee from the parent, is sufficient to invalidate the hypothesis put forward by UOP.
Article 107(1) TFEU reads: ‘Save as otherwise provided in the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.’
To establish the existence of State aid in the present case it must first be considered whether the EPIC status granted by France to IFP on 7 July 2006 involves the use of State resources (7.1.1) to provide an unlimited public guarantee covering economic activities (7.1.2). The extent of the cover by the State guarantee and the nature of the activities covered will allow the scope of this decision to be defined (7.1.3), and it will then have to be considered whether the measure in question confers a selective advantage on the IFP group (7.1.4) which may affect trade between Member States (7.1.5).
As regards the publicly owned establishment IFP, the impact of the unlimited guarantee arises directly from its EPIC status: as a legal person governed by public law, IFP is not subject to the ordinary law governing the administration and winding up of firms in difficulty. In the light of this particularity, the parent of the IFP group may carry on economic activities itself, under more advantageous conditions than other market participants not benefiting from comparable protection (7.1.1.1).
As regards the activities carried out directly by the IFP subsidiaries governed by private law, which, for their part, are entirely subject to the ordinary law of bankruptcy, any direct liability of the publicly owned establishment, and therefore of the State, seems impossible. If a subsidiary’s assets are insufficient, therefore, it has to be considered whether the creditors of Axens, Prosernat and Beicip-Franlab could benefit from an indirect mechanism whereby the parent would be liable for its subsidiaries, equivalent to a guarantee mechanism (7.1.1.2).
In the present case, the Commission considers that the arguments set out in decision C 56/2007 can essentially be transposed to the EPIC status of the publicly owned establishment IFP, and that IFP also enjoys a special legal position with regard to the payment of its creditors and its continuation in business in the event of insolvency. For the purposes of the present analysis, therefore, the Commission will refer to the arguments set out in section 4.1, ‘Classification as aid’, of decision C 56/2007.
It is first necessary to consider the argument of the French authorities that the existence of a State guarantee in favour of EPICs is ruled out by the legislation or the case-law, before showing that in the event that IFP were in default its creditors would benefit from a more favourable procedure than the creditors of undertakings governed by ordinary law.
Contrary to the French authorities’ affirmation, the Commission is able to conclude that French law does acknowledge the existence of implied guarantees, and in particular the existence of a State guarantee deriving from the status of publicly owned establishment. The Commission rejects the arguments of the French authorities for the following reasons.
Firstly, where the French authorities assert that there is no legislation or decision laying down the principle that the State is to guarantee the debts of EPICs, the Commission refers to recitals 120 and 121 of decision C 56/2007, mutatis mutandis. The Commission considers, on the contrary, that although it is true that there is no legislation or decision confirming or excluding the existence of an express State guarantee in favour of EPICs, this absence does not mean that there can be no implied guarantee.
- (a)The Commission emphasises that the change of legal form of the publicly owned establishment IFP occurred on 7 July 2006, i.e. after the entry into force of the Organic Law governing the Finance Act. Under such circumstances, it is not necessary to examine the arguments put forward by the French authorities’ expert in the postal case regarding debts contracted before 1 January 2005, despite the fact that the French authorities refer to this mutatis mutandis in their comments. Debts contracted by IFP before 1 January 2005 were contracted by a trade body within the meaning of Law No 43-612 of 17 November 1943 on the management of trade interests, and therefore by a legal person governed by private law, and consequently could not be covered, at the time they were entered into76, by the unlimited guarantee conferred by the EPIC status.
- (b)The Commission nevertheless notes, as its expert pointed out in the postal case, and as it explained in recital 130 of decision C 56/2007, to which it refers mutatis mutandis, that the obligation to enter State guarantees in a Finance Act is confined to the ‘giving’ (octroi) of such guarantees. To ‘give’ a guarantee the State must confer a guarantee on an organisation or an operation by an express manifestation of its intention. The scope of the obligation to enter guarantees in the Finance Act does not extend to guarantees that arise out of the legal form of an organisation, or out of an obligation established in case-law, which are guarantees of an implied and automatic character. This category is not the result of a decision of the State, but of the fact that the State places itself in an existing legal framework, the guarantee being only one effect of that framework77.
- (c)The Commission concludes, as it did in recital 131 of decision C 56/2007, to which it refers mutatis mutandis, that the argument put forward by the French authorities on the basis of the Organic Law governing the Finance Act is not convincing, because the fact that it is not stated in any Finance Act that the State extends a guarantee to IFP by virtue of its legal form does not mean that there is no implied guarantee. The Commission is not in any event bound by the description of the measure as a ‘guarantee’ for purposes of French law, or by the fact that a guarantee is or is not caught by the Organic Law governing the Finance Act. The only relevant consideration is how the measure is to be described for purposes of Union law. Union law recognises the existence of an implied guarantee once a Member State legally has to repay a claim on another person in the event of that person’s defaulting78.
- (a)
As pointed out by the Commission’s expert in the postal case, and as recalled in recital 133 of decision C 56/2007, to which it refers mutatis mutandis, the Commission considers that this assertion is based on too broad an interpretation of the constitutional protection of the right of property.
- (b)
The Commission takes the view, as it did in recital 134 of decision C 56/2007, to which it refers mutatis mutandis, that in the same way, when an EPIC is converted into a company that can be made the subject of court proceedings for administration or winding up, the right of property does not require that a specific measure be taken to preserve the entitlements of creditors, and that the fact that no such measure has been taken does not constitute evidence that there is no implied guarantee.
- (c)The Commission adds that, as explained in recitals 135 and 136 of decision C 56/2007, to which it refers mutatis mutandis, the fact that the French authorities decided to give an express guarantee to La Poste when it obtained a legal form equivalent to that of an EPIC in 199080 does not mean that there was no implied guarantee before that date.
As explained in recitals 142 to 145 of decision C 56/2007, to which it refers mutatis mutandis, the Commission does not share the interpretation put forward by the French authorities that this opinion of the Council of State cannot be transposed to the case of IFP. The opinion makes no reference to the aims of the establishment or to whether or not a public accountant is present within it. Moreover, the French authorities do not explain why, in their view, this opinion should apply to publicly owned establishments only if they have a public accountant. The Commission rejects the arguments put forward by the French authorities to the effect that the opinion is not applicable because it predates the Organic Law governing the Finance Act and is contrary to the subsequent case-law of the Council of State: in recital 104 above, and in decision C 56/2007, the Commission concluded that the Organic Law governing the Finance Act did not stand in the way of an implied guarantee given by the State to IFP.
Following the example of the argument in section 4.1.1.A(b) of decision C 56/2007, to which it refers mutatis mutandis, the Commission will now set out to demonstrate that in the event of a default by IFP, its creditors would be in a more favourable position than that of creditors of an enterprise governed by commercial law.
unlike the creditors of undertakings governed by commercial law, creditors of IFP (which is not subject to the ordinary law governing the compulsory administration or winding up of firms in difficulty) are not in danger of seeing their claim cancelled in whole or in part as an outcome of compulsory winding-up proceedings;
the fact that IFP has legal personality is no bar to the existence of a guarantee given by the State;
in the absence of any express limitation on the State’s liability in respect of IFP, IFP’s creditors may legitimately act on the principle that the State will bear the debts of IFP, even though IFP possesses legal personality.
Following the example of the argument in recitals 162 to 168 of decision C 56/2007, to which it refers mutatis mutandis, the Commission considers that the specific procedure laid down by the Law of 1980 and the measures implementing it is a procedure only for the recovery of claims, and not for winding up, and that at the end of the procedure the claim is not cancelled, whereas at the end of winding-up proceedings under ordinary law a judgment terminating the proceedings on the ground that the assets are insufficient, without penalty, prevents creditors from pursuing the proceedings further. The Commission also notes that the Law of 1980 and the measures implementing it provide for the deferral of a payment order, and nowhere envisage a cessation of payments, and thereby give creditors to understand that there are or that there will be the resources necessary to settle a claim they hold on the public entity. These two factors lead to it consider that a shortage of funds will be covered, if necessary by the State, or is temporary only. But winding-up procedures never provide for the possibility that a third party can become liable for the debts of the insolvent party, except of course in the case of a guarantor.
In accordance with the analysis developed in recitals 170 to 180 of decision C 56/2007, to which it refers mutatis mutandis, the Commission considers that in the event of a shortage of funds, French legislation authorises or indeed encourages the State to provide capital to publicly owned establishments, rather than expecting them to secure conventional bank loans; the ‘additional resources’ referred to in the Law of 16 July 1980 may consist of contributions of this kind. The Commission also considers that the relevant legislation is known to creditors, who consequently have good reason to believe that the supervising authority will be in a position to secure the resources necessary to ensure that their claims are satisfied. Consequently, the Commission takes the view that the probability that a creditor might not succeed in obtaining satisfaction of his claim under the procedures laid down by the Law of 16 July 1980 is low.
However, contrary to the conclusion it drew in respect of La Poste in decision C 56/2007, the Commission observes that in this case the resources of its own that IFP would be able to mobilise are relatively high, since, as the French authorities have explained (see recital 44), available funds and investments at the end of 2007 (EUR 150,3 million) represented approximately five times the amount of borrowings and financial liabilities (EUR 25,2 million). Consequently, the Commission recognises that in its present financial position, it seems unlikely, at least in the near future, that a shortage of own resources could lead to IFP being unable to meet its debts and give rise to the need for State intervention.
Thirdly, for the reasons already set out in recitals 185 to 226 of decision C 56/2007, to which it refers mutatis mutandis, the Commission considers that, in the unlikely event that the procedure laid down by the Law of 16 July 1980 does not result in payment of creditors, the courses still open to them to render the State liable have the characteristics of a guarantee mechanism.
- (a)
The French authorities propose to amend the Decree implementing the Law of 1980 as follows (the amendment is shown in italic): ‘If the notice given has had no effect by the time these deadlines expire, the representative of the State or the authority responsible for supervision shall enter the expenditure in the budget of the defaulting authority or publicly owned establishment. The representative of the State or the authority responsible for supervision shall, as appropriate, release the necessary resources from the budget of the defaulting authority or establishment either by reducing the appropriations allocated to other expenditures and still available or by increasing resources’.
- (b)
However, as the Commission pointed out in recital 67 of the opening decision, neither in its present wording nor in the amended wording proposed by the French authorities does the legislation prevent an increase in resources from being made possible by a subsidy or injection of public funds.
- (a)The Commission notes more specifically that the ECHR rejected the arguments of the French authorities which attempted to base their case94 on the absence of, firstly, an operative event imputable to the State and, secondly, a guarantee on the part of the State to public authorities possessing legal personality, and accepted the contrary arguments of the applicants95.
- (b)The ECHR found that there had been a breach of Article 6-1 of the European Convention on Human Rights (‘the Convention’), and added that the judgments had to be implemented and that a State authority could not use lack of resources as a pretext for not honouring a debt based on a judicial decision. The ECHR also found that there had been a breach of Article 1 of Protocol No 1 to the Convention, the applicants having suffered interference with their property rights on account of a huge and special burden due to the non-payment of the sums which they should have received96. In the light of the above, the ECHR charged the whole of the debtor communes’ debt to the State97.
- (c)
The Commission considers that this judgment has three important implications:
- Subject to the applicants obtaining a court judgment recognising their claim, the liability of the State functions as an implied guarantee98, in so far as the French State is required to pay the whole of the debt of the public body99 and no distinction is made between debt conceivably due to the public authority’s insolvency and possible defaults imputable to the State (the ECHR did not at any time seek to identify an act or omission imputable to the State, and looked no further than the debtor’s insolvent status).
This liability covers the debts of public authorities possessed, however, of legal personality. The existence of legal personality and of assets specific to the authority was expressly invoked by the French Government in its opposition to holding the French State liable, but this argument was rejected by the ECHR.
The scope of the State guarantee extends to include public authorities dependent on the State. The guarantee is therefore intrinsically connected with the debtor’s public-law legal form.
- (d)
For the reasons already set out in recitals 212 to 220 of decision C 56/2007, to which it refers mutatis mutandis, the Commission considers that the observations made by the French authorities are not of a nature to invalidate this reasoning. As it argued in the postal case, in recital 222 of decision C 56/2007, and in the opening decision, the Commission concludes that, as French law currently stands, a creditor of IFP who has not obtained the payment of his claim by recourse to the procedures introduced by the Law of 16 July 1980 may receive all of the sums corresponding to the unmet claim by invoking the State’s last-resort liability. This is the opposite of what happens within the framework of winding-up proceedings under ordinary law, where the reimbursement of the creditor is limited by the value of the available assets. In consequence of the above, the Commission considers that the State’s liability is treated as a guarantee, it is not the subject of any limitation by French legislation, and is intrinsically linked to the public-law legal form possessed by the debtor body.
Fourthly, even if he were to fail obtain satisfaction, the creditor of a publicly owned establishment could invoke legal effects arising from a legitimate mistake he made at the time the claim arose, when he believed that the claim would always be honoured.
In the present case, the Commission wishes to add that prior to 7 July 2006, any creditors of the publicly owned establishment IFP were in a contractual relationship with a trade body within the meaning of Law No 43-612 of 17 November 1943 on the management of trade interests, a body which was a legal person governed by private law, and which they had no reason to think could be covered by a State guarantee of any kind. Consequently, the theory of appearance can in any event be applied only with regard to claims arising after the change of status of the publicly owned establishment IFP.
Following the conclusions of its expert in the postal case, the Commission has arrived at the view that, as regards claims arising after 7 July 2006, even if, in the scenario championed by the French authorities, it was in error that a creditor came to consider that the State was required to guarantee the debts of publicly owned establishments and of IFP in particular, his error would be legitimate given the above-mentioned factors, and the law could impart effects to it. If, exceptionally, the creditor did not succeed in obtaining the payment of his claim, he could nevertheless rest assured that there was no likelihood of the claim being cancelled.
For the reasons already set out in recitals 230 to 250 of decision C 56/2007, to which it refers mutatis mutandis, the Commission considers that even if, within a reasonable period and after the use of the procedures described in the previous section, the creditor of an EPIC does not succeed in obtaining the payment of his claim, he will be secure in the knowledge that the claim will not be cancelled, in contrast to the situation of a creditor of a company constituted under private law in liquidation, who has no guarantee that his claim will have to be met.
The Commission stresses that there is no public authority-motivated winding up/closing down of publicly owned establishments in which the rights and obligations of the establishments are also cancelled: in the event of publicly owned establishments being closed down by decision of a public authority – and despite the fact that no legislation expressly provides for this – experience and certain basic principles of administrative law tend to show that the rights and obligations of publicly owned establishments that are closed down as such are always taken over by another body and, failing that, by the State. In other words, the debts of publicly owned establishments are always transferred to another legal person, which cannot refuse them, so that each creditor can therefore be certain that the right arising from his claim may be invoked against another body and that his claim will not, therefore, be cancelled.
- (a)On the basis of this expert report, it can be considered firstly that although there is no overall judicial scheme for organising the closing down of publicly owned establishments, experience shows that the legislation always provides for transferring the rights and obligations of the establishment that is to be closed either to the State or to the body that is to take over its task106.
- (b)Secondly, there is generally a transfer of ‘rights and obligations’ (with the term ‘obligations’ undoubtedly referring to debts), sometimes a transfer of ‘assets’107 (a formulation that would also include debts). The only example found of the pure and simple closing down of a publicly owned establishment involved, in any case, the transfer of the ‘debts’ themselves to other entities governed by public law108.
- (c)
Thirdly, even when the task disappears, the publicly owned establishment’s rights and obligations are, in practice, taken over by another body.
- (d)Fourthly and finally, the practice described in the study is in accordance with codifying instruction No 02-060-M95 of 18 July 2002 and the guide to the financial organisation of the creation, conversion and abolition of national publicly owned establishments, cited above109, namely that the rights and obligations of a wound-up EPIC go either to the State or to the legal entity that will take over the establishment’s task.
Guided by its expert in the postal case, the Commission concludes that the debts of publicly owned establishments are in practice always transferred to another legal entity governed by public law in the event of the closing down of the publicly owned establishment that carried out the task concerned. The creditors of these publicly owned establishments, such as IFP, therefore have a guarantee that their unpaid claims will not be cancelled.
the creditors of IFP do not encounter the usual private and public law limitations on the payment of a claim in full;
in recovering the sums owed to them, the creditors of IFP may have recourse to specific procedures authorising the State to force the debtor body to settle the claim;
nowhere does French law give the creditors of IFP to understand that IFP could face, for good, a situation in which it had a shortage of funds;
the budgetary documents give the impression that, if there is a shortage of funds, the State could give an exceptional grant to public sector bodies, of which IFP is one;
if the procedures described above do not enable the creditor to obtain satisfaction, he can hold the State liable in order to obtain the payment of his claim in full;
if the actions envisaged above were to be spread out over time, the creditor can be certain that his claim will not be cancelled, even if IFP were to be subject to structural development.
These special factors are intrinsically linked to IFP’s legal form as a publicly owned establishment and imply that the State performs the role of guarantor of last resort. It may therefore be legitimately concluded that IFP benefits from an unlimited guarantee on the part of the French State by virtue of its legal form as an EPIC.
Finally, the State’s unlimited guarantee to IFP is imputable to the State, because it derives from the combination of IFP’s public-law legal form, principles of national law, and two legislative acts, namely the Law of 25 January 1985, now the Commercial Code, and Law No 80-539 of 16 July 1980 and the measures implementing it.
UOP did not express an opinion on this point in its comments. Its arguments are based on market operators’ perception of ‘IFP/Axens’ which, in its opinion, is liable to confer an advantage on the IFP group in relation to suppliers, customers or capital providers. This aspect will be examined in section 7.1.4 of this decision, which investigates the advantages which the IFP group derives from the measure.
On the other hand, as indicated in recital 47, the French authorities deny the existence of a State guarantee for IFP’s subsidiaries, in particular because they have the legal form of public limited companies governed by ordinary law.
In section 7.1.1.1, the Commission showed that the publicly owned establishment IFP enjoyed an unlimited guarantee; it will now consider whether the creditors of IFP’s private-law subsidiaries are covered by (A) a guarantee of payment of their individual claims or (B) a guarantee of the continued existence of their obligations in the event of insufficient assets.
Before examining whether the controlling shareholder, the publicly owned establishment IFP, might have a vicarious liability that could be invoked for its subsidiaries (b), an account must be given of the compulsory winding-up procedure under ordinary law to which these private-law subsidiaries would be subject in the event of cessation of payments (a).
In view of the fact that IFP and its subsidiaries belong to the same economic group for purposes of competition law, it has to be considered whether or not, in the event of default on the part of one of these private-law subsidiaries, the relationship of economic dependency of the subsidiaries on their parent may in French company law automatically trigger the liability of the publicly owned establishment IFP, and consequently mobilise public resources, since the State is responsible for the bulk of IFP’s financing and has implicitly guaranteed it as a publicly owned establishment.
At the end of the present detailed examination, the Commission concludes that in French civil and commercial law, in the event of default by one of the subsidiaries, (i) its controlling shareholder will not in principle be liable, except where the controlling shareholder can be shown to have committed a fault in the management of its subsidiary. The plans to reform the Civil Code, recently contemplated then abandoned, which aimed precisely to extend the principle of vicarious liability to the relationship between parent and subsidiaries of a group, confirm a contrario (ii) that such a principle does not exist at present in French law.
As a preliminary point, the parent of the IFP group is a legal person governed by public law, namely the publicly owned establishment IFP, which raises an additional difficulty: the question has first to be asked which court, an administrative court or an ordinary civil or criminal court, would have jurisdiction under the French system to establish whether when a legal person governed by private law is to be wound up compulsorily, and is controlled by a legal person governed by public law, there is any liability that rests on the controlling entity.
- (a)Where an administrative public service is involved, the old rule, based on de jure or de facto management, seems to have been abandoned by the Court of Conflicts of Jurisdiction129 in its Département de la Dordogne decision130, where the Court decided that the administrative courts had jurisdiction because the service involved was an administrative public service, regardless of whether the legal person governed by public law was the de jure or de facto manager of the person governed by private law that actually performed the public service task. The Court recalled that in line with its judgment in Blanco 131‘the liability which may lie with the State or with other legal persons governed by public law by reason of damage attributed to their administrative public services is governed by public law’ (emphasis added), and that the situation was otherwise only where the law expressly so provided; the Court went on to find that in Law of 25 January 1985 on compulsory administration and winding-up procedures, (now codified in Articles L. 624-3 et seq. of the Commercial Code) the legislature had not, ‘by way of exception to the principles governing the liability of public-law persons, intended to confer jurisdiction on the ordinary courts for determining the civil liability of the State or other legal persons governed by public law in the performance of a duty to provide an administrative public service’ (emphasis added).
- (b)Conversely, where an industrial or commercial activity is concerned, jurisdiction to determine the civil liability of a legal person governed by public law controlling a private person in liquidation clearly rests with the ordinary courts. In its judgment in Société d’Économie Mixte Olympique d’Alès en Cévennes 132, the Court of Conflicts of Jurisdiction held in particular that ‘although jurisdiction to determine the civil liability of the State or of other legal persons governed by public law in respect of the performance of a duty to provide an administrative public service rests with the administrative courts, such proceedings come under the jurisdiction of the ordinary courts where it is shown that the State or the legal person governed by public law is liable in respect of an industrial or commercial activity; there is no necessity to determine whether the public authority acted as manager de jure or de facto’ (emphasis added). In the case before it the Court of Conflicts of Jurisdiction ruled that the activities conducted by a public limited company with a board of directors and supervisory board (SEM Olympique d’Alès en Cévennes) were not of an administrative public service nature, on the basis of two considerations: the company’s object133 and its financing134.
It must therefore be considered in what circumstances the controlling shareholder may be held liable in the light of the case-law of the Court of Cassation. In order to extend compulsory winding-up proceedings initiated in respect of a specific person (the subsidiary) so as to include another legal person (the parent), the conditions laid down are very strict. Confronted by a defaulting subsidiary, the victims of its actions have to prove misconduct on the part of the parent in order to obtain redress; this may in particular take the form of (α) denial by the parent of the legal personality of its subsidiary, or (β) mismanagement of the controlled company.
- (a)
- (b)Axens is registered in the Nanterre RCS under number B 599 815 073 and its registered office is also located in Rueil-Malmaison, but at a different address from its parent153. Its operating centres are also located in different sites from those of its parent, mostly outside France: in the United States, in Houston, Texas; Princeton, New Jersey; Savannah, Georgia; and Calvert City, Kentucky; in Canada, in Brockville, Ontario: in China, in Beijing; in Japan, in Tokyo; in India, in New Delhi; in Bahrain; and in Russia, in Moscow.
- (c)Beicip-Franlab is registered in the Nanterre RCS under number B 679 804 047, and its registered office is also located in Rueil-Malmaison, but at a different address from its parent and Axens154. It has subsidiaries and offices in a large number of countries in the world, in particular in Bahrain; in Abu Dhabi; in Tripoli in Libya; in Kuala Lumpur in Malaysia; in Houston, Texas, in the United States; in Villahermosa in Mexico; in Rio de Janeiro in Brazil; and in Moscow in Russia.
- (d)Prosernat is registered in the Nanterre RCS under number B 315 251 330 and its registered office is located in Puteaux155. The company states156 that it is present in some twenty countries throughout the world, including in South America (Argentina, Brazil, and Venezuela), Europe (United Kingdom, Italy, and Norway), North Africa (Algeria and Egypt), the Gulf countries (Saudi Arabia, United Arab Emirates, Kuwait, Oman, and Qatar), Iran, Russia, the Commonwealth of Independent States and South-East Asia.
- (a)
Axens, set up in 2001, engages in an economic activity in the market for catalysts and technologies for the refining and petrochemicals industries, for which it employs more than 600 people and through which it achieves an annual turnover of approximately EUR 300 million.
- (b)
Beicip-Franlab, set up in 1967, engages in a real activity in the publication and distribution of exploration-deposits software and in consultancy and advisory services. This activity involves over 100 employees and provides an annual turnover of approximately EUR 40 million.
- (c)
Prosernat, acquired in 2001, provides consultancy and other services and supplies gas treatment and sulphur recovery plants. The company employs about 70 people to carry out this activity and has a turnover of approximately EUR 50 million.
Leaving aside the question of mismanagement, which will be examined in recitals 161 to 164, it is clear from the above that the extremely limited cases in which the case-law gives a parent company vicarious liability for its subsidiaries – the subsidiary is a fictitious legal entity or the assets of the subsidiary and the parent company are inseparable – are clearly not fulfilled in this case. Consequently, the Commission considers that if IFP’s subsidiaries Axens, Beicip-Franlab and Prosernat were to be wound up the conditions for automatically holding IFP liable would not be met.
In any event, it is clear from the above that legal actions of this case are never actions seeking the enforcement of a guarantee, since they are always based on a fault committed by the parent company. Therefore such actions do not demonstrate the existence of a general principle of vicarious liability of a parent company for its subsidiaries, a principle which would be contrary to the principle of the limitation of a shareholder’s liability to the initial contribution made to the company, apart from cases where the company is a fictitious entity or where its assets are inseparable form those of its parent company, which can be ruled out here.
To sum up, it is clear from the case-law of the Court of Cassation that the principle of liability of a parent company for mismanagement of a subsidiary does not in any way provide a mechanism equivalent to a guarantee.
‘Article 1355A person shall be liable automatically for the damage caused by those whose way of life he regulates, or whose activity he organises, directs or controls in his own interest …’
‘Article 1360… Likewise, a person shall also be liable where he controls the economic activity or assets of a professional person who is in a situation of dependence even though acting for his own account, if the victim shows that the act giving rise to the damage is related to the exercise of control. This shall apply in particular to parent companies in respect of damage caused by their subsidiaries, and to licensors for damage caused by their licensees’ (emphasis added.)
It is clear from the above, a contrario, that in the present state of French law, vicarious liability of the parent company for its subsidiary requires proof that the parent committed a fault affecting the subsidiary.
In conclusion, whereas the State is liable in the event of default of a publicly owned establishment, by a mechanism which, especially in view of its automatic character, has all the features of a guarantee, there is in the current state of French law no implicit and automatic liability of parent companies for the actions of subsidiaries governed by private law under compulsory winding up.
However, that would be a strategic choice on the part of the publicly owned establishment and not a legal obligation automatically imposed on it. Moreover, such a choice would be subject to the strict framework of State aid law: if the capital injection was not the behaviour of a private investor operating under normal market economy conditions, it would have to be notified to the Commission by the French authorities and await the Commission’s prior vetting (and approval).
The Commission therefore concludes that in the event of winding up, the creditors of IFP’s subsidiaries have no certainty regarding the settlement of their claims.
remain subject to the ordinary-law procedures regarding the administration and winding up of undertakings;
are unable, in the current state of French law, to rely on an automatic liability of the controlling shareholder of the subsidiaries, the publicly owned establishment IFP, and hence of the French State, for the actions of IFP’s subsidiaries: they must first show that there has been a fault on the part of the publicly owned establishment, which means that any liability is not automatic and cannot be likened to a guarantee mechanism.
research and development in the fields of oil and gas prospecting and refining and petrochemicals technologies,
the training of engineers and technicians,
the provision of sector information and documentation.
As explained in recital 31, the French authorities consider that the publicly owned establishment IFP is a research organisation assigned a three-fold task in the general interest (research, training and documentation).
education for more and better skilled human resources;
the conduct of independent R&D for more knowledge and better understanding, including collaborative R&D;
the dissemination of research results.
In the case under examination, the unlimited guarantee conferred on IFP by virtue of its EPIC status covers both its non-economic activities (which in itself does not give rise to any problem under the law governing State aid) and its economic activities, which are of two types.
Regarding the first type of economic activity, although, as indicated in recital 31, the majority of IFP’s activities are non-economic, the French authorities acknowledged in their letters dated 13 January and 16 July 2010 that outside the exclusive field of activity of its subsidiaries IFP provided services consisting essentially in renting out infrastructures and premises, providing staff and supplying legal services to its the subsidiaries, and contract research services for third parties and its subsidiaries. As pointed out in recital 185, such activities are economic activities as generally defined by the Commission.
It is clear from section 7.1.1 that only the activities carried out directly by the publicly owned establishment IFP are covered by the State guarantee; the activities carried out by its subsidiaries, which are governed by private law, are not covered by the guarantee.
Moreover, among the activities carried out directly by IFP, there can be a State aid element only in the guarantee cover given to activities of an economic character, and always provided the other conditions laid down in Article 107(1) TFEU are also met.
Finally, it is clear from section 7.1.2 that these economic activities are confined on the one hand to contract research activities carried out by the publicly owned establishment IFP, and on the other hand to the transfer of technologies in the exclusive fields of activity of the subsidiaries Axens, Prosernat and Beicip-Franlab and the renting out of infrastructure, provision of staff and provision of legal services.
To analyse any advantages that the IFP group may derive from the unlimited guarantee conferred on the parent, IFP, by virtue of its EPIC status, the Commission will proceed in two stages: it will first examine any advantages to the parent (7.1.4.1), and then examine those potentially transferred to its subsidiaries (7.1.4.2).
At the end of the detailed examination of the measure, therefore, the Commission considers that it is appropriate to analyse the existence of any advantage to the publicly owned establishment IFP in its relations with (A) banks and financial institutions, (B) its suppliers and (C) its customers.
Entity: | IFP | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 |
|---|---|---|---|---|---|---|---|
EUR thousand | EUR thousand | EUR thousand | EUR thousand | EUR thousand | EUR thousand | ||
Loans and debts with credit institutions197 | Amounts payable within one year (1) | […]197 | […]197 | […]197 | […]197 | […]197 | […]197 |
Amounts payable at over one year | […]197 | […]197 | […]197 | […]197 | […]197 | […]197 | |
(1) of which bank loans and overdrafts and bank credit balances | […]197 | […]197 | […]197 | […]197 | […]197 | […]197 | |
Interest rate on loans and debts contracted with credit institutions: | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | |
|---|---|---|---|---|---|---|---|
Interest rate + margin | Interest rate + margin | Interest rate + margin | Interest rate + margin | Interest rate + margin | Interest rate + margin | ||
Medium and long-term loans | […]197 | […]197 | […]197 | […]197 | […]197 | […]197 | […]197 |
Bank loans and overdrafts and short-term credit facilities | [Bank No 1]198 | EONIA + […]197 | EONIA + […]197 | ||||
[Bank No 2]198 | EONIA + […]197 | EONIA + […]197 | |||||
[Bank No 3]198 | EONIA + […]197 | ||||||
[Bank No 4]198 | EONIA + […]197 | ||||||
This information shows that as regards the amounts payable at more than one year, IFP has not had recourse to borrowing from credit institutions since its change of legal form, i.e. over the period between 2006 and 2009 for which the data are available. Over the same period, following the change of status, IFP has had recourse to borrowing at less than one year only once, in 2009, for a negligible sum of EUR […] (*). Moreover, the rate applied at the time by [Bank No 3] (**) (EONIA + […] (*) %) was […] (*) base points higher (all other things being equal) than the rate negotiated by IFP in 2005 with [Bank No 1] (**) (EONIA + […] (*) %), when IFP it was still a legal person governed by private law, and therefore not yet covered by the State guarantee that it now derives from its status as a publicly owned establishment.
As regards 2010 specifically, the French authorities specified that the publicly owned establishment IFP had received four proposals for credit facilities amounting to EUR […] (*), at a one-year rate varying between EONIA + […] (*) % with [Bank No 4] (**) (plus commitment fee of […] (*) %, i.e. EUR […] (*)) or [Bank No 5] (**) (plus commitment fee of […] (*) %, i.e. EUR […] (*)) and EONIA + […] (*) % with [Bank No 3] (**) (plus commitment fee of […] (*) %, i.e. EUR […] (*)) or [Bank No 1] (**) (plus commitment fee of […] (*) %, i.e. EUR […] (*)). IFP also received another spot offer from [Bank No 3] (**) (depending on the term of drawdown chosen), for a rate equal to EURIBOR + […] (*) %. The Commission notes the fact that these rates are equivalent to those negotiated by IFP before its change of status in 2006, when it was still a legal person governed by private law not covered by a State guarantee.
In view of the above, the Commission acknowledges that, over the period between its change of legal form and 2010, IFP did not derive any actual economic advantage from its EPIC status in its relations with banks and financial institutions. In other words, it appears that the potential advantage that the undertaking might have derived from the unlimited guarantee, in the form of interest rates on borrowings more favourable than what was available on the market, did not materialise during the period under review.
This conclusion naturally applies only for the past, since the Commission cannot make assumptions concerning future conduct by market operators or about their perception of the impact of the State guarantee on the risk of default of the publicly owned establishment IFP. Therefore, in the context of the annual reports that the French authorities will be called upon to send the Commission in the future, they should furnish information relating to the levels and terms of IFP’s debt, providing proof that these loans are in line with market conditions, or adding the gross equivalent of the aid component to the estimate of the maximum impact of the guarantee using a methodology similar to that described in Table 6 appearing in recital 300.
‘The issue/programme/loan does not enjoy any form of direct or indirect State guarantee. In the event of insolvency, the State would not be obliged to act as financial substitute for IFP for payment of the claim.’
While this commitment will not by itself suffice to resolve the question of the existence of the guarantee, in the particular context, combined with all the other obligations imposed on France, it will allow the plea of accepted risk to be relied upon where appropriate, and any negative repercussions of the guarantee to be limited considerably.
As regards suppliers, contrary to the view expressed by the French authorities (see recital 65), in order to prevent IFP from drawing any advantage from its EPIC status it is not sufficient that it should be subject, under European Union law or national law, to a competitive procurement obligation: when IFP issues a public call for tenders, every potential supplier drawing up a tender can anticipate the impossibility of a bankruptcy of IFP. When considering public procurement, therefore, a distinction has to be drawn between the fall in price resulting from the efficiency gains secured by competition between bidders – which, as the Commission found in the report cited by the French authorities, represent a genuine ‘social benefit’ – and the fall in price resulting from the more favourable assessment by contractors of the risk of default on the part of an entity which they know is protected from the risk of compulsory winding up by its status as a publicly owned establishment. Both of these factors tend to cause the prices of public procurement to fall, but they are of an intrinsically different nature, which means that there can be no question for the Commission of imputing the effects of the second factor to the first.
- (a)
a financing fee (or debit interest) calculated in proportion to the time involved, to cover the funding of the advance granted to the supplier, which depends in particular on the interest rate in force at the time the claims are transferred;
- (b)a factoring fee proper, varying between 0,7 % and 2,5 % of the turnover assigned, with an average rate of 1,5 %200, calculated on the value of the claims transferred, to pay for the accounting management, collection and performance bond services.
Year | Number of suppliers concerned | Payments to factors(in euros) | Number of invoices concerned |
|---|---|---|---|
2004 | […] (*) | […] (*) | […] (*) |
2005 | […] (*) | […] (*) | […] (*) |
2006 | […] (*) | […] (*) | […] (*) |
2007 | […] (*) | […] (*) | […] (*) |
2008 | […] (*) | […] (*) | […] (*) |
2009 | […] (*) | […] (*) | […] (*) |
2010203 | […] (*) | […] (*) | […] (*) |
Period as a whole (2004-2010) | […] (*) | […] (*) |
The French authorities observe that since its change of legal form in 2006, the payments made by IFP to factors have increased. They say that this trend invalidates the Commission’s argument concerning the perception of third parties of the risk of default of EPICs. They consider that if IFP had benefited from cover of its risk of default by the State from 2006, recourse to the services of factors should have become less frequent from that date, if it did not stop altogether.
But as the French authorities themselves indicate (see recital 206), recourse to factoring is increasingly associated with a need for cash advances (increase in the delegated management service) and less and less with a need to transfer the risk of non-payment (decline in the collection, financing and guarantee service), and in IFP’s accounts it is not possible to break down the use made of factoring by its suppliers by type of service; in the Commission’s view, therefore, the trend established by IFP does not invalidate the Commission’s arguments, still less does it show that IFP’s suppliers have concluded that since IFP’s change of legal form the risk of a default on its part has increased.
The Commission acknowledges that it is unable to provide a precise estimate of the amount of the premium which would be necessary to cover IFP’s suppliers against the risk of default if IFP did not already enjoy a State guarantee. The Commission points out, however, that since the factoring fee referred to in recital 205.b in fact covers three separate services (collection, financing and guarantee against the risk of unpaid invoices), the maximum amount of 2,5 % of the guaranteed turnover which is mentioned there must in any event be an upper bound to the premium which would be required to cover the risk of default only.
In any event, the French authorities are still free to notify a more precise methodology for estimating the advantage conferred by the guarantee on IFP in its dealings with suppliers. Such a methodology could be based on an economic report by an expert, which would be debated by the two sides in the context of the appraisal, and if found appropriate could be the subject of a positive decision by the Commission and could be used by France to meet the information requirements laid down in the operative part of this decision.
Finally, the Commission points out that such an advantage in dealings between IFP and its suppliers is selective, because its competitors, which remain subject to compulsory administration and winding-up procedures under ordinary law, do not enjoy a comparable guarantee conferred by the State, which is intrinsically linked to IFP’s status as a publicly owned establishment.
As regards the research services provided by the publicly owned establishment IFP, the Commission notes the comments made by UOP, which indicates that in technology transfer, a field which is risky by nature, acquirers are particularly sensitive to the guarantees that their providers are able to give them in terms of cover of both contractual and non-contractual liability.
It appears from the above that IFP has not shifted its non-contractual liability to the State by taking the risk that in the event of a claim it would be able to rely on the guarantee it derives from its EPIC status, but that, on the contrary, it has covered the risk by entering into the necessary insurance contracts on the market.
The fact remains that, in view of the State guarantee granted to IFP, its customers are assured that IFP will never be subjected to compulsory winding up and therefore will always be able to fulfil its contractual obligations, or failing that that they will be compensated for any such breach.
By analogy with the arguments it set out in recitals 204 et seq. with regard to dealings with suppliers, the Commission considers that in the absence of a State guarantee, a customer wishing to enjoy the same level of protection would take out a performance bond from a financial intermediary (a bank or insurance company, for example) to ensure the completion of the contract between it and IFP. The purpose of such protection would be to guarantee financial compensation for the customer for loss caused by (total or partial) breach of contract.
France acknowledges, not without certain reservations, as set out in recital 66, that ‘the only supposed effect on IFP that might be identified would be a reduction in charges as a result of the absence of subscription to performance bonds’. The French authorities conclude, without elaborating further, that, on the basis of ‘the sums usually charged by banks and insurance companies to provide this type of service, it is clear that the sum involved in such a reduction would be negligible’.
The calculation of premiums by specialised intermediaries uses statistical techniques, which may be refined by type of risk, and it is not possible to establish a priori a standard rate for a performance bond. The final price of the guarantee depends ultimately on the estimated value of potential losses and the probability that they may occur. Consequently, whereas a guarantee of full performance without defects is proposed in certain sectors (for example in civil engineering and building and public works or in international trade), it does not seem feasible in the case of contract research services to cover more than best efforts, since R&D is by nature a high-risk field in which the purchaser of research work has no certainty that it will lead to results that can be exploited. In this respect, the Commission notes that the amount contractually guaranteed to IFP’s customers, including its subsidiaries, is limited to 100 % of the price of the research work carried out.
The Commission acknowledges that it is unable to provide an exact estimate of the premium which would be required to guarantee to customers (including subsidiaries) that IFP will use its best efforts in carrying out the research work. Questioned on this point, the French authorities indicated in their letter dated 26 November 2010 that they did not have any information on the premiums charged on the market to cover the specific risks in the field of R&D. The Commission considers, however, that the premium which would be required by the market to cover such a risk (limited to best efforts in research, and therefore less than the risk attached to full performance without defects) should logically be lower than the maximum estimates mentioned in recital 223. Therefore the Commission considers that a maximum rate of 5 % of the turnover generated by the service covered is in any case an upper bound to the premium which would be necessary to cover such a risk.
Regarding activities of the first type carried out by IFP for third parties and its own subsidiaries, the French authorities in their letter dated 26 November 2010 provided figures for the volume of economic activities carried by IFP between 2006 and 2009. It emerges from this information that the average annual value of research services during this period is in the order of EUR […] (*), including EUR […] (*) on behalf of third parties and EUR […] (*) on behalf of the subsidiaries.
- (a)
in the exclusive field of Axens, IFP carried out economic activities comprising technical feasibility studies prior to industrial research amounting to EUR […] (*) and industrial research work amounting to EUR […] (*), i.e. in total EUR […] (*).
- (b)
in the exclusive field of Prosernat, IFP carried out economic activities comprising technical feasibility studies amounting to EUR […] (*) and industrial research work amounting to EUR […] (*), i.e. in total EUR […] (*).
- (c)In total, IFP carried out research work in the exclusive fields of its subsidiaries amounting to EUR 56,4 million (EUR 7,4 million for technical feasibility studies and EUR 49,0 million for industrial research work), whereas the volume of its own resources was only EUR […] (*), and the Commission accordingly considered that these research activities had been subsidised by public funds to the amount of EUR 11,3 million (an aid intensity of 20 %)214.
As regards the following years, in accordance with Article 5(1) of decision C 51/2005, until the expiry date of the exclusive agreements, France is required to ‘submit to the Commission a detailed annual report on the projects carried out by IFP in the exclusive fields of activity of Axens and Prosernat’. The information contained in these annual reports allows a precise calculation to be made of the annual volume of the research services carried out by IFP on behalf of and in the exclusive fields of its subsidiaries.
So far, France has sent the Commission the annual reports for 2007, 2008 and 2009. In view of the time needed to process the accounting data, the 2010 report is to be forwarded in the course of 2011.
(EUR thousand) | |||
Total | Total charges | Total own resources | Public resources (+) or benefit (–) |
|---|---|---|---|
2007 | […] (*) | […] (*) | […] (*) |
2008 | […] (*) | […] (*) | […] (*) |
2009 | […] (*) | […] (*) | […] (*) |
The research services provided by IFP in the exclusive field of Axens therefore generated economic activity amounting to EUR […] (*) in 2007, EUR […] (*) in 2008, and EUR […] (*) in 2009, which is comparable to that established by the Commission for 2006 in decision C 51/2005 (EUR […] (*)).
(EUR thousand) | |||
Total | Total charges | Total own resources | Public resources (+) or benefit (–) |
|---|---|---|---|
2007 | […] (*) | […] (*) | […] (*) |
2008 | […] (*) | […] (*) | […] (*) |
2009 | […] (*) | […] (*) | […] (*) |
The research services provided by IFP in the exclusive field of Prosernat therefore generated economic activity amounting to EUR […] (*) in 2007, EUR […] (*) in 2008, and EUR […] (*) in 2009, comparable to that established by the Commission for 2006 in decision C 51/2005 (EUR […] (*)).
2006 | 2007 | 2008 | 2009 | |||||
|---|---|---|---|---|---|---|---|---|
Research services (outside the exclusive fields of the subsidiaries) | Turnover(EUR million) | Upper bound215(insurance premium) | Turnover(EUR million) | Upper bound(insurance premium) | Turnover(EUR million) | Upper bound(insurance premium) | Turnover(EUR million) | Upper bound(insurance premium) |
On behalf of subsidiaries | […] (*) | EUR […] (*) | […] (*) | EUR […] (*) | […] (*) | EUR […] (*) | […] (*) | EUR […] (*) |
On behalf of third parties | […] (*) | EUR […] (*) | […] (*) | EUR […] (*) | […] (*) | EUR […] (*) | […] (*) | EUR […] (*) |
Administrative services provided | ||||||||
Invoicing of staff provided | […] (*) | EUR […] (*) | […] (*) | EUR […] (*) | […] (*) | EUR […] (*) | […] (*) | EUR […] (*) |
Invoicing of premises and ancillary services | […] (*) | EUR […] (*) | […] (*) | EUR […] (*) | […] (*) | EUR […] (*) | […] (*) | EUR […] (*) |
Services in the exclusive field of Axens | […] (*) | EUR […] (*) million | […] (*) | EUR […] (*) million | […] (*) | EUR […] (*) million | […] (*) | EUR […] (*) million |
Services in the exclusive field of Prosernat | […] (*) | EUR […] (*) | […] (*) | EUR […] (*) | […] (*) | EUR […] (*) | […] (*) | EUR […] (*) |
Total for the subsidiaries | […] (*) | EUR […] (*) million | […] (*) | EUR […] (*) million | […] (*) | EUR […] (*) million | […] (*) | EUR […] (*) million |
Total for third parties | […] (*) | EUR […] (*) | […] (*) | EUR […] (*) | […] (*) | EUR […] (*) | […] (*) | EUR […] (*) |
In any event, the French authorities are still free to notify a more precise methodology for estimating the advantage conferred by the guarantee on IFP in its dealings with customers. Such a methodology could be based on an economic report by an expert, which would be debated by the two sides in the context of the appraisal, and if found appropriate could be the subject of a positive decision by the Commission and could be used by France to meet the information requirements laid down in the operative part of this decision.
Finally, the Commission points out that such an advantage in dealings between IFP and its suppliers is selective, because its competitors, which remain subject to compulsory administration and winding-up procedures under ordinary law, do not enjoy a comparable guarantee conferred by the State, which is intrinsically linked to IFP’s status as a publicly owned establishment.
At the end of the present detailed examination, for the reasons listed in section 7.1.1.2, given that in French law a shareholder in a group of companies does not bear general vicarious liability for its subsidiaries, there is no reason to take the view that the publicly owned establishment IFP, and consequently the French State, can be liable for the payment of claims held by third parties in respect of the economic activities of Axens and Prosernat, in particular if those subsidiaries were to be subjected to compulsory winding up.
In the present case, the French authorities have given a commitment, with regard to the borrowing terms of the IFP subsidiaries (Axens, Beicip-Franlab and Prosernat), to state in writing in the financing contract for each transaction (for any instrument covered by a contract) that ‘Pursuant to French law (in particular the need for express statutory authority for each guarantee), the present financing transaction shall not enjoy any form of direct or indirect State guarantee’.
Consequently, it must be held that the economic advantage conferred on the publicly owned establishment by the guarantee it enjoys by virtue of its legal form was transferred in this way to its private-law subsidiaries Axens and Prosernat.
The French authorities have confirmed the existence of the contracts jointly concluded by IFP and its subsidiaries Axens, Prosernat and Beicip-Franlab with common suppliers, which the Commission mentioned in its opening decision and which UOP also referred to in its comments, as indicated in recital 73; but the French authorities have pointed out that that essentially they concerned the transport sector (air and rail) for business travel of the staff of the various entities. The Commission considers that if the subsidiaries were able to benefit from more favourable purchasing conditions granted to the IFP group — which has not necessarily been established with regard to the supplies in question — this was the result of a volume discount policy applied by these suppliers for bulk purchasing, rather than for any impact of the guarantee. In any case, even supposing that the analysis presented in section 7.1.4.1 B with regard to the publicly owned establishment can be transposed to the subsidiaries for the supplies obtained jointly with it, and that by such a mechanism these subsidiaries benefit from a transfer of the advantage enjoyed by the publicly owned establishment IFP on account of the guarantee, thus enabling them to obtain these services more cheaply, the sums in question would be so negligible that the Commission doubts whether they can be described as a real economic advantage.
In the Commission’s view, such an economic advantage transferred by the publicly owned establishment IFP to its private-law subsidiaries Axens and Prosernat is selective, because the subsidiaries’ competitors do not have access to the technologies and human and material resources of IFP on such favourable terms.
The measure examined may lead to a reduction in the operating costs of IFP for the services it supplies to third parties (contract research) and in those of Axens and Prosernat for the services they obtain from their parent (research in their exclusive field, contract research, provision of staff and infrastructures, and provision of administrative services), which has the effect of favouring the IFP group and therefore of distorting competition within the meaning of Article 107(1) TFEU.
The markets on which the IFP group operates, in particular that of contract research in the case of the publicly owned establishment IFP itself, those of catalysts and technologies for the refining and petrochemicals industries in the case of its subsidiary Axens, and consultancy, other services, and infrastructures in the field of gas treatment and sulphur recovery in the case of its subsidiary Prosernat, are wide open to trade within the European Union, so that the measure is liable to have an unfavourable impact on competing undertakings which have, or wish to develop, similar economic activities in the markets concerned.
The existence of an unlimited State guarantee for the publicly owned establishment IFP is consequently liable to distort competition and to affect trade within the meaning of Article 107(1) TFEU.
The guarantee given by the State to IFP by virtue of its legal form therefore results in a transfer of State resources imputable to the State, and distorts or threatens to distort competition and trade between Member States by favouring the IFP group.
The Commission concludes that this guarantee constitutes State aid within the meaning of Article 107(1) TFEU.
Before its change of legal form, IFP was a legal person governed by private law, in the form of a trade body within the meaning of Law No 43-612 of 17 November 1943 on the management of trade interests. In this capacity, IFP was subject to the compulsory administration and winding-up procedures provided for under ordinary law and did not benefit from the State guarantee conferred by EPIC status.
IFP became an EPIC on 7 July 2006, by Decree of 6 July 2006, adopted under Law No 2005-781 of 13 July 2005. This change of legal form is the basis of an unlimited State guarantee granted to the publicly owned establishment IFP. The measure in question must therefore be categorised as new aid within the meaning of Article 1(c) of the Procedural Regulation.
In accordance with Article 2(1) of the Procedural Regulation, Member States are required to notify in sufficient time ‘any plans to grant new aid’. The change of IFP’s legal form was not formally notified by France, but only pointed out incidentally in the context of other proceedings, and the measure was implemented without the prior approval of the Commission, so that the State aid in question was put into effect by the French Government in breach of Article 108(3) TFEU.
Consequently, the Commission considers that this measure constitutes unlawful aid within the meaning of Article 1(f) of the Procedural Regulation.
The services provided consist in the renting out of research infrastructure, providing staff or providing legal services (to the subsidiaries).
- (a)services linked to specific infrastructures with very few if any equivalents in the world225;
- (b)interpretation of cases using software developed by IFP which is not yet marketed or which in the particular context can be used only with specific expertise and IFP skills226;
- (c)use of special IFP expertise227;
- (d)use of expertise under development to validate the competency, technologies and methodologies developed228.
This description shows that the contract research activities conducted by IFP on behalf of third parties concern technical feasibility studies prior to research activities, or aim at the acquisition of new knowledge and skills in IFP’s fields of competence or at the application of knowledge and technologies developed by IFP to develop new products, processes or services.
The French authorities have supplied costings of the contract research activities and the provision of services on behalf of third parties by IFP for the period 2004-2009. The information sent shows that these research services represent annually about [0-5] (**) % of IFP’s total budget (i.e. EUR […] (*) in services for about EUR 300 million in budget), which means that this economic activity can be regarded as only residual within the activities of the publicly owned establishment.
In accordance with point 3.1.2 of the R&D&I Framework, where a not-for-profit research organisation performs economic activities, such as renting out infrastructures, supplying services to business undertakings or performing contract research, any public funding of these economic activities will generally entail State aid. However, if it is possible to prove that the totality of the State funding has been passed on to the final recipient, and that there is no advantage granted to the intermediary, the intermediary organisation may not be a recipient of State aid.
In the present case the research organisation, which is the publicly owned establishment IFP, performs contract research activities whilst being covered by an unlimited public guarantee, and it must be held that it receives State aid unless it can be proved that the selling price of these services has allowed the totality of the State aid to be transferred to its customers.
- (a)
in the former case, the compatibility of the aid is examined in this section;
- (b)
in the latter case, the Commission refers to the analysis of compatibility presented in section 7.3.2, which, as a precaution, will include the amounts at stake in the estimate of the advantage potentially transferred to the subsidiaries.
However, it cannot be concluded that the margin applied by IFP has always allowed the totality of the State aid to be passed on to the customer for contract research services. In such a case, the absence of a guarantee premium paid to the State to cover contract research contracts performed for third parties would constitute additional public funding made available to the publicly owned establishment by the State.
- (a)
to finance non-economic activities of the publicly owned establishment, which would not entail State aid;
- (b)
or to finance other contract research activities on behalf of third parties or subsidiaries: this case is analysed in detail in section 7.3.1.2;
- (c)
or to finance research carried out by the publicly owned establishment in the exclusive field of activity of its subsidiaries, which could consequently be added to the amounts of State aid already transferred to the subsidiaries: this hypothesis is analysed in detail in section 7.3.2.
In the first two cases, however, although in the present case the State guarantee is a priori unlimited, it is possible, exceptionally, to make an a posteriori estimate, for the years 2006 to 2009, of an upper bound to the gross grant equivalent of the effects of the guarantee (the risk premium not paid to the State), which (provided that it has been retained by IFP) comes in addition to the public funds already paid by the State to IFP to cover the net costs of its independent public research and contract research activity or provision of services.
- (a)
do not prejudice the normal operation, the independence or the neutrality of the research organisation;
- (b)
are performed on normal market terms, and in particular at a market price or, in the absence of a market price, at a price that reflects all the organisation’s costs (net of the impact of the guarantee) plus a reasonable margin;
- (c)
are the subject of accounting separate from that of the independent public research activities, especially as regards their respective costs and funding;
- (d)
are intrinsically linked to the principal activity of independent public research, so that it is not technically possible to separate them, by reason in particular of the use of the same infrastructures, equipment, materials or technologies, or the use of the same researchers, scientists, engineers, designers or technicians.
These services also permit the dissemination of scientific knowledge between public research and the industrial sector, offering customer undertakings the possibility to access IFP’s experimental resources, technologies and staff knowhow, and allowing IFP to accumulate feedback on the use made of its original work, which is a source of future improvements in its independent public research activities. These reciprocal impacts in the field of scientific knowledge are mutually beneficial for the various operators involved and for the European Union as a whole.
As indicated in recital 266, contract research and services activities represented only [0-5] (**) % of IFP’s total budget over the period between 2004 and 2009, which is an extremely small proportion.
Moreover, for any one customer, the services invoiced are usually for an amount below EUR […] (*) in turnover, which means that the estimated maximum amount of aid usually remains negligible, in the order of EUR […] (*) per contract. Consequently, in the Commission’s view, the aid at issue is proportionate to the objective in the general interest which is the dissemination of scientific knowledge in the European Union.
Provided that these ancillary activities continue to represent a very limited fraction of the budgets devoted by IFP to its principal task of independent public research, and taking account of the positive impact of these ancillary activities in terms of objectives in the common interest, the Commission is of the opinion that the fact that they are covered by the State guarantee cannot under any circumstances adversely affect trading conditions to an extent contrary to the interest of the Union within the meaning of Article 107(3)(c) TFEU.
In the annual reports relating to the measure at issue, it will be for the French authorities to provide proof that this condition is still being met. In case of doubt about the ancillary nature of contract research activities or provision of services, they should of course notify the Commission accordingly without delay, and where appropriate notify any State aid taking account of the impact of the State guarantee.
The Commission also takes note of the proposal of the French authorities to include a clause stating that the State bears no liability in any contract specifically falling within IFP’s economic activity, and therefore its contract research activities and its provision of services, so as to allow a plea of accepted risk to be relied upon where appropriate, thus strictly limiting any negative repercussions of the guarantee.
Since this is a State aid measure designed to support the R&D work carried out by IFP, the rules applicable to the examination of compatibility are those relating to State aid for research and development.
However, in view of the fact that IFP’s economic activities are to be covered by the unlimited guarantee conferred by its EPIC status over an unlimited period of time, and in view of the fact that, as explained in recital 277, it is possible, exceptionally, to make a quantified estimate of the maximum impact of the guarantee in this particular case, the Commission will also make an assessment of whether the cover provided by the unlimited guarantee for IFP’s activities in the exclusive fields of activity of Axens and Prosernat is compatible with the internal market on the basis of the R&D&I Framework, from 1 January 2007, the date on which the Framework entered into force. In any event, the conclusions of the analysis of compatibility remain the same whichever framework is applied.
Moreover, in the reports forwarded in accordance with decision C 51/2005, the French authorities have classified the projects carried out in the exclusive fields of activity of Axens and Prosernat for the years 2007, 2008 and 2009 into the two abovementioned categories defined in the 1996 R&D Framework, or alternatively into industrial research activities within the meaning of point 2.2(f) of the 2006 R&D&I Framework and technical feasibility studies preparatory to industrial research within the meaning of point 5.2 of that Framework. The work consisted in studying new synthesis routes or the improvement of synthesis routes, on a scale far from the industrial level. It was aimed at validating concepts, and constituted industrial research within the meaning of the 1996 R&D framework and the R&D&I Framework. Annual summaries of each project were forwarded to the Commission with the annual reports communicated under decision C 51/2005.
For the following years, the Commission points out that decision C 51/2005 requires France to submit a report to the Commission each year setting out the details of the projects carried out by IFP classified by category of research.
The costs of research activities carried out by IFP invoiced to Axens and Prosernat include the costs directly chargeable to projects relating to sub-contracting, travel, insurance and documentation, and supplies and small equipment. They also include the other costs chargeable to projects such as expenditure on research personnel, the amortisation of fixed tangible and intangible assets and other overheads. These costs are incurred directly as a result of the research activities and are broken down between the different research projects in proportion to the time spent by the research personnel on each project. The costs of cross-cutting R&D projects relating to the methods and equipment used in other R&D projects are allocated in proportion to the costs of each R&D project.
These costs fall into the following categories: costs of consultancy and equivalent services, personnel costs, costs of instruments, equipment, and land and premises, and additional overheads and other operating expenses, which are in line with the categories of eligible costs in the 1996 Framework and the R&D&I Framework.
In succeeding years this information too should be included in the annual reports submitted by the French authorities.
According to the 1996 R&D Framework, the maximum permissible aid intensity is 75 % for technical feasibility studies preparatory to industrial research projects (point 5.4) and 50 % for industrial research projects (point 5.3).
According to the R&D&I Framework, the aid intensity, as calculated on the basis of the eligible costs of the project, may not exceed 50 % for industrial research (point 5.1.2(b)) and 65 % for studies preparatory to industrial research activities carried out in large undertakings (point 5.2(b)). To recap, the activities covered by the State guarantee relate only to industrial research and technical feasibility studies carried out by IFP, since precompetitive development activity within the meaning of the 1996 R&D Framework (or experimental development within the meaning of the R&D&I Framework) is financed entirely by Axens and Prosernat from their own resources out of income obtained on the markets.
The Commission has drawn up Table 6 appearing in recital 300 on the basis of the lists of projects detailing the annual costs by project and by research stage and on the basis of the statement of IFP’s resources.
(EUR million) | ||||
2006 | 2007 | 2008 | 2009 | |
|---|---|---|---|---|
Annual cost of technical feasibility studies (EUR million) | ||||
Area of activity IFP/Axens | […] (*) | […] (*) | […] (*) | […] (*) |
Area of activity IFP/Prosernat | […] (*) | […] (*) | […] (*) | […] (*) |
Total | 7,4 | 3,5 | 0,9 | 0,9 |
Annual cost of industrial research work (EUR million) | ||||
Area of activity IFP/Axens | […] (*) | […] (*) | […] (*) | […] (*) |
Area of activity IFP/Prosernat | […] (*) | […] (*) | […] (*) | […] (*) |
Total | 49,0 | 45,5 | 52,8 | 55,2 |
Own resources (EUR million) | ||||
Amount | […] (*) | […] (*) | […] (*) | […] (*) |
Annual State aid (EUR million) | ||||
Amount of public funding249 | 11,3 | 6,4 | 7,7 | 11,1 |
Upper bound to the impact of the guarantee in dealings between IFP and its suppliers | […] (*) | […] (*) | […] (*) | […] (*) |
Upper bound to the impact of the guarantee in dealings between IFP and its customers250 | […] (*) | […] (*) | […] (*) | […] (*) |
— in the exclusive field of the subsidiaries | […] (*) | […] (*) | […] (*) | […] (*) |
— outside the exclusive field of the subsidiaries | […] (*) | […] (*) | […] (*) | […] (*) |
Maximum amount of public funding(including the upper bound to the impact of the guarantee) | 13,1 | 9,8 | 11,3 | 14,7 |
Intensity of the aid(net of upper bound to the impact of the guarantee) | 20,0 % | 13,0 % | 14,3 % | 19,8 % |
Upper bound to the intensity of the aid(including upper bound to the impact of the guarantee) | 23,2 % | 20,0 % | 21,0 % | 26,2 % |
Maximum permissible intensity251 | ||||
— 1996 R&D Framework | 53 % | 51,8 % | 50,4 % | 50,4 % |
— R&D&I Framework | — | 51,1 % | 50,3 % | 50,2 % |
The Commission has checked on compliance with the permissible intensities by research stage on the basis of the annual lists of projects carried out between 2006 and 2009, taking account of the maximum possible impact of the unlimited guarantee deriving from IFP’s status as a publicly owned establishment, and incorporating as an additional aid component the estimated upper bound to the insurance premiums for the various risks. In all cases, even incorporating all the possible effects of the guarantee in dealings with customers and suppliers, the upper bound to the intensity of the aid remains well within the maximum permissible. In conclusion, the Commission considers that the aid intensities permitted by the 1996 R&D Framework and the R&D&I Framework are complied with.
With regard to succeeding years, the Commission points out that decision C 51/2005 requires France to submit an annual report to the Commission so that the latter may satisfy itself that the aid intensities by research stage and by project are being complied with. From 2010, the report will have to cover all projects carried out in the fields of activity of Axens and Prosernat, classified according to research categories, stating not only their costs by research stage and the amounts of public financing and of own resources allocated by IFP and its subsidiaries, but also the upper bound to the amount of the guarantee premium, estimated according to the method described in this decision, including any effects on the terms of IFP’s debt financing in line with the reasoning in recital 200.
The rules on overlapping aid measures, whether in point 5.12 of the 1996 R&D Framework or in point 8 of the R&D&I Framework, are complied with. The Commission has considered the total amount of public funding, irrespective of its origin, including the maximum impact of the unlimited guarantee for the years 2006 to 2009.
From 2010, the French authorities are to apply the same method in the annual reports sent to the Commission.
The Commission would refer to the analysis in recitals 196 to 198 of decision C 51/2005 concerning the strategic interest, monitored and validated by technical committees, of the research conducted by IFP and its subsidiaries in the field of the long-term security of energy supplies, with special reference to renewing and increasing production of oil and gas (increasing the success rate in exploration and deposit recovery rates, exploitation of unconventional resources, etc.), designing refining processes, developing conversion technologies, developing innovative fuels and efficient engine technologies, and diversifying the energy sources used in fuel production; a large number of these objectives are among the European Union’s priorities for research, energy policy and environmental policy.
With regard to the year 2006, the Commission reiterates the analysis it presented in recital 199 of decision C 51/2005, according to which, thanks to State support, of which the unlimited guarantee forms an integral part, IFP and its subsidiaries were able to conduct additional research activities which would not have been pursued otherwise, owing to the technological risk or the highly uncertain return on investment.
On the basis of the annual reports submitted by the French authorities, the Commission finds that this approach continued in 2007, 2008 and 2009. In these reports, the French authorities indicate, for each project, the incentive effect obtained as a result of the aid, notably in terms of scope of the project, its speed and the increase in the total amount allocated to R&D.
In 2009, in the exclusive field of Axens, the project […] (*) on the processes […] (*) can be mentioned as an example. Its aim was to develop […] (*) and to improve certain processes […] (*). Thanks to the public funding, […] (*) could be studied, which allowed a significant improvement to the […] (*). The project […] (*) was able, thanks to the public financing, to explore solutions breaking with the existing technologies, […] (*). Likewise, the project […] (*) was continued on catalysts which, after extrapolation, allowed diversification of the supply on the growth market […] (*). Without the State aid, the development of the catalysts would have been far more sequential and the improvement in performances slower. As regards […] (*), the project […] (*), which related to innovative catalysts […] (*) allowed new pathways to be explored thanks to the State aid, whilst the project […] (*), which aimed to explore the limits of the technology (variation in loads in particular) in order to […] (*), succeeded in enlarging its spectrum beyond the existing performances.
In the exclusive field of Prosernat, the State aid permitted, for example, the relaunch and continuation of R&D work with respect to […] (*) which had been undertaken but gradually sidelined. The State support also meant that it was possible to avoid losing the earlier technological achievements and to maintain a range of processes […] (*) on the market. Likewise, the public aid allowed the continuation of the project […] (*) on the capture of CO2 […] (*).
Progression of the indicators | IFP/Axens | IFP/Prosernat | ||||
|---|---|---|---|---|---|---|
2007/2003 | 2008/2003 | 2009/2003 | 2007/2003 | 2008/2003 | 2009/2003 | |
Expenditure allocated to R&D in the exclusive field | […] (*) | […] (*) | […] (*) | […] (*) | […] (*) | […] (*) |
Staff allocated to R&D in the exclusive field | […] (*) | […] (*) | […] (*) | […] (*) | […] (*) | […] (*) |
In addition, the Commission reiterates the findings it summarised in recitals 201 to 203 of decision C 51/2005: the proportion of the IFP groups’ turnover accounted for by R&D expenditure is particularly high, even though it works in a context subject to a large number of constantly evolving national regulations, especially with regard to environmental standards and intellectual property protection regimes.
In conclusion, the Commission considers that the State aid for the IFP group in the exclusive field of its subsidiaries Axens and Prosernat had an incentive effect in 2006, 2007, 2008 and 2009.
From 2010, the annual reports that are to be submitted by France to the Commission, until the exclusive agreements between the publicly owned establishment IFP and its subsidiaries Axens and Prosernat expire, will have to show that the aid still has an incentive effect.
In the light of all the above considerations, the Commission concludes that the State aid granted to the IFP group for activities in the exclusive fields of its subsidiaries Axens and Prosernat, including the aid component deriving from the effects of the unlimited guarantee enjoyed by the publicly owned establishment IFP, is in keeping with the provisions of the 1996 R&D Framework and those of the R&D&I Framework, subject to compliance with the conditions set forth therein.
In conclusion, the Commission considers that the measure at issue is compatible with the internal market, subject to compliance with the conditions set forth in sections 7.3.1 and 7.3.2.
The Commission wishes to emphasis that it is in no way disputing the State’s ownership of IFP, nor is it challenging its status as a legal entity governed by public law as such.
Under Article 345 TFEU the Union is neutral with regard to the rules governing the system of property ownership in the Member States, and no provision of the Treaty prevents a State from owning enterprises (whether wholly or partly). That being so, the rules of competition must be applied equally to private and public enterprises. Neither of these two types of enterprise may be placed at an advantage or disadvantage by the application of those rules.
HAS ADOPTED THIS DECISION:
Article 1
1.
The status of publicly owned industrial and commercial establishment granted by France to IFP conferred on IFP, from 7 July 2006 onward, an unlimited public guarantee (‘the State guarantee’) covering the totality of its activities.
2.
The cover provided by the State guarantee for the non-economic activities of the publicly owned establishment IFP, in particular its training activities with a view to increased, better qualified human resources, its independent R&D activities with a view to more extensive knowledge and better understanding, and its activities for the dissemination of research results, does not constitute State aid within the meaning of Article 107(1) TFEU.
3.
The cover provided by the State guarantee for the technology transfer activities carried out by the publicly owned establishment IFP in the fields provided for by the exclusive development, marketing and use agreement concluded with its subsidiary Beicip-Franlab does not constitute State aid within the meaning of Article 107(1) TFEU.
4.
The cover provided by the State guarantee for the technology transfer activities carried out by the publicly owned establishment IFP in the fields provided for by the exclusive agreements concluded with its subsidiaries Axens and Prosernat referred to in Article 3(1) of the Commission decision of 16 July 2008 on the aid measure implemented by France for the IFP group (‘decision C 51/2005’) constitutes State aid within the meaning of Article 107(1) TFEU.
5.
The cover provided by the State guarantee for the contract research and other services performed by the publicly owned establishment IFP, on behalf of both third parties and the subsidiaries, constitutes State aid within the meaning of Article 107(1) TFEU.
Article 2
In the event of any amendment of the agreement between the publicly owned establishment IFP and its subsidiary Beicip-Franlab referred to in Article 1(3), France shall notify the agreement to the Commission, taking account of any impact of the State guarantee in order to assess the total amount of any public funding, unless the new contractual terms allow the presence of State aid to be ruled out.
Article 3
In the period between 7 July 2006 and 31 December 2009, the cover provided by the State guarantee for the economic activities referred to in Article 1(4) and (5) constituted aid compatible with the internal market.
Article 4
From 1 January 2010 onward, and until the date of expiry of the exclusive agreements between the publicly owned establishment IFP and its subsidiaries Axens and Prosernat referred to in Article 3(1) of decision C 51/2005, the cover provided by the State guarantee for the economic activities referred to in Article 1(4) of this decision constitutes aid compatible with the internal market, subject to compliance with the conditions in Articles 5 and 6 of this decision.
Article 5
1.
The annual financial report referred to in Article 4(2) of decision C 51/2005 shall include, in addition to the information already mentioned in Article 5(1) of that decision, the information listed in paragraphs 2, 3 and 4 of this Article.
2.
The annual financial report shall include the value, interest rate and contractual terms of the loans subscribed to by the publicly owned establishment IFP during the year under review, and an estimate of the gross grant equivalent of any interest rate subsidy deriving from the State guarantee, unless proof is supplied that these loan contracts are in accordance with normal market conditions, either by comparing their terms with those obtained by the publicly owned establishment IFP before its change of legal form, or on the basis of a more precise methodology approved in advance by the Commission.
3.
The annual financial report shall include the value of goods and services obtained by the publicly owned establishment IFP from suppliers to carry out the economic activities referred to in Article 1(4) and (5), during the year under review, and a maximum estimate of the gross grant equivalent of the aid resulting from a more favourable assessment by suppliers of the risk of default of the establishment. This estimate shall be made either by applying a flat rate of 2,5 % to the value of acquisitions made, or on the basis of a more precise methodology approved in advance by the Commission.
4.
The annual financial report shall include the value of the economic activities referred to in Article 1(4) and (5) carried out by the publicly owned establishment IFP during the year under review, and a maximum estimate of the gross grant equivalent of the aid resulting from the lack of payment of a premium corresponding to a performance bond or, at the very least a best efforts guarantee, offered to the beneficiaries of the above-mentioned economic services. This estimate shall be made either by applying a flat rate of 5 % to the value of the services provided or on the basis of a more precise methodology approved in advance by the Commission.
Article 6
1.
The total amount of public funding allocated to the activities of the publicly owned establishment IFP in the exclusive fields of activity of Axens and Prosernat, including the maximum impact of the State guarantee as estimated in Article 5(2), (3) and (4), must be lower than the maximum intensity permitted by the Community framework for State aid for research and development and innovation.
2.
If the threshold referred to in paragraph 1 is exceeded, the surplus aid shall, where appropriate, be refunded by the subsidiary concerned, Axens or Prosernat, to the publicly owned establishment IFP.
Article 7
From 1 January 2010, the cover provided by the State guarantee for the economic activities referred to in Article 1(5) constitutes State aid which is compatible with the internal market, subject to compliance with the conditions in Article 8.
Article 8
1.
The contract research activities and the provision of services carried out by the publicly owned establishment IFP referred to in Article 1(5) shall remain ancillary to its principal activity of independent public research.
2.
To be considered ancillary, the contract research activities and the provision of services by the publicly owned establishment IFP must:
not prejudice the normal functioning, independence and neutrality of the publicly owned establishment IFP;
be charged for at a market price, or in the absence of a market price, at a price which reflects the totality of the costs, plus a reasonable margin, net of the potential impact of the State guarantee;
be the subject of accounting separate from that of the independent public research activities (accounting separation of their respective costs and funding), and the profits they generate must be reinvested in full in the principal activity of independent public research;
be intrinsically linked to the principal activity of independent public research of the publicly owned establishment IFP by reason in particular of the use of the same infrastructures, equipment, materials or technologies, or the use of the same researchers, scientists, engineers, designers or technicians;
be outside the scope of the exclusive agreements concluded between the publicly owned establishment IFP and its subsidiaries Axens and Prosernat referred to in Article 3(1) of decision C 51/2005, where appropriate extended or amended in accordance with Article 3(2) of decision C 51/2005 and Article 12(2) of the present decision;
represent only a residual proportion of the budget devoted by the publicly owned establishment IFP to its independent public research activities.
3.
France shall submit each year to the Commission a report on the contract research activities and provision of services carried out by the publicly owned establishment IFP which specifies the ratio of their value to the budget devoted by the publicly owned establishment IFP to its independent public research activities.
Article 9
1.
The French authorities and the publicly owned establishment IFP shall include the following written statement in the financing contract for each transaction (for all instruments covered by a contract):
‘The issue/programme/loan does not enjoy any form of direct or indirect State guarantee. In the event of insolvency, the State would not be obliged to act as financial substitute for the publicly owned establishment IFP for payment of the claim.’
2.
The French authorities shall have a similar clause, ruling out State liability, included in any contract relating to contract research services or other services referred to in Article 1(5).
3.
The French authorities shall have a similar clause, ruling out liability of the publicly owned establishment IFP and the State, included in any contract involving a claim concluded by the public limited companies Axens, Beicip-Franlab and Prosernat.
4.
The publicly owned establishment IFP shall refrain from issuing any form of suretyship, endorsement, guarantee, or letter of intent or comfort in favour of the public limited companies Axens, Beicip-Franlab and Prosernat which does not comply with normal market terms.
Article 10
France shall notify individually to the Commission any aid of an amount in excess of the thresholds laid down in the Community framework for State aid for research and development and innovation, taking account of any impact of the State guarantee.
Article 11
France shall inform the Commission, within two months from the date of notification of this decision, of the measures it has taken to comply herewith.
Article 12
1.
Articles 4, 5 and 6 of the present decision shall apply until the date of expiry of the exclusive agreements referred to in Article 3(1) of decision C 51/2005 between the publicly owned establishment IFP and its subsidiaries Axens and Prosernat.
2.
Where they notify the Commission of an extension of, or amendment to, the above-mentioned exclusive agreements, in accordance with Article 3(2) of decision C 51/2005, the French authorities shall take account of the impact of the State guarantee in order to assess the total amount of public funding.
Article 13
This decision is addressed to the French Republic.
Done at Brussels, 29 June 2011.
For the Commission
Joaquín Almunia
Vice-President