On 29 July 2011, P&O communicated comments on the decision to initiate the procedure, which supplement its complaint.

The arguments put forward in the complaint and P&O’s comments are as follows:

On 29 July 2011, the Eurotunnel SA group (hereinafter: ‘Eurotunnel’) forwarded its comments to the Commission on the decision to initiate the procedure.

Finally, Eurotunnel considers that it is not relevant to compare the load factors of ro-pax and the railway shuttles using the Channel Tunnel, as the latter are not passenger/freight and they allow real-time adjustment to traffic demand.

With regard to taking into account the fuel surcharge, Eurotunnel asserts that SeaFrance only invoices part of this surcharge to its customers, i.e. EUR 8,11 per crossing, compared to EUR 11,62 for P&O and EUR 14,73 for DFDS. The lost earnings for SeaFrance would amount to EUR 1,2 million since the beginning of 2011.

With regard to the nearly 50 % redundancies, this loss of staff should be seen in relative terms, according to Eurotunnel, as some of the employees have the possibility of being reintegrated into the SNCF group, which will only have a minimal impact on the net balance of employment in the region.

Finally, Eurotunnel concludes that the restructuring plan is not only inadequate, but also fails to meet the specifications of prudent investments.

DFDS communicated its comments to the Commission by letter dated 29 July 2011.

DFDS remains sceptical about the ability of SeaFrance to recover long-term economic viability on account of the inadequacy of the restructuring measures in relation to its present financial situation. DFDS is concerned about the effects of these new aid measures on competition in the market concerned.

DFDS sent the Commission comments on the SeaFrance restructuring plan by e-mail dated 23 September 2011.

On 29 July 2011, the CLdN group (hereinafter: ‘CLdN’) communicated its comments to the Commission.

CLdN is a Luxembourg-based transport company which is involved in particular in the transport of freight by freight vessel (roll-on/roll-off or ‘ro-ro’) or by ro-pax, in the Channel and the North Sea between Belgium and the Netherlands, on the one hand, and the United Kingdom, Ireland, Sweden and Denmark, on the other.

CLdN regards itself as a competitor to SeaFrance which would suffer considerably from the adverse consequences of the measures implemented by the SNCF in favour of its subsidiary SeaFrance on account of the geographical proximity of the routes operated by CLdN, i.e. Ipswich-Rotterdam and Purfleet-Zeebrugge.

CLdN considers in fact that the measures implemented are very likely to have anti-competitive consequences on freight not only on the Calais-Dover route, but also on the neighbouring routes between the United Kingdom and Belgium. It considers that the negative effects of these measures are not sufficiently offset by the compensatory measures and the own contribution proposed in the restructuring plan. On the contrary, these measures would merely maintain a firm in difficulty, incapable of reducing its basic costs, on the market and would enable it to increase its capacities on a market with overcapacity.

According to CLdN, the measures in question will reduce the viability of the existing competitors by maintaining on the market transport capacity which should normally have disappeared. It would be unrealistic to rely on SeaFrance being able to achieve a load factor of 80 %, unless the aid is used to carry out aggressive price cuts and to take market shares from competitors. However, this strategy would be economically unsustainable in the medium or long term for SeaFrance and would be harmful for its direct competitors, i.e. P&O and Eurotunnel, which operate on the same Calais-Dover route, but also, in time, for CLdN.

Finally, CLdN emphasises the inadequacy of the workforce cuts provided for in the restructuring plan (which would be far from enabling SeaFrance to approach the staff costs/turnover ratio of its competitors) and the fact that the redundancy costs will be low compared to traditional restructuring, as a large number of SeaFrance employees will be taken on by the SNCF.

CLdN consequently wishes the European Commission to take a negative decision.

On 29 July 2011, the SNCF communicated comments to the Commission, which correspond to the comments made by the French authorities (see section VI).

On 30 July 2011, an economic operator wishing to remain anonymous communicated its comments to the Commission.

Firstly, it recalls the main characteristics of the cross-Channel market, concluding from this that the keener competition between the shipping companies and Eurotunnel, the inflation in fuel pries and the volatility of the sterling exchange rate have caused difficulties for SeaFrance, but also pose a threat to the long-term viability of P&O and DFDS.

The operator in question considers that the difficulties of SeaFrance are chiefly structural (employment coefficient too high and organisation too inflexible), but that recapitalisation combined with the restructuring of SeaFrance and a fleet maintained at 4 vessels can guarantee the long-term viability of the company.

It considers that the disappearance of SeaFrance would in fact result in a duopoly between Eurotunnel and P&O. However, many road hauliers work with at least 2 shipping companies to guarantee timetable flexibility and the profitability of their lorries.

According to the operator in question, if SeaFrance were to disappear, the capacity of the other two shipping companies would be insufficient to cope with the traffic in the Channel. According to the operator wishing to remain anonymous, Eurotunnel has almost achieved maximum capacity and therefore could absorb only a small proportion of the SeaFrance traffic. ‘The overcapacity in the Channel today is […] very relative and should not constitute a serious problem’ since as soon as a problem arises at one shipping company or in the ports, this leads to congestion in the ports of Calais, Dover and Dunkerque.

Moreover, a single freighter in the Channel operated by P&O would not guarantee the necessary transport capacity and would distort the market in favour of P&O, which would in this way hold a monopoly for the transport of hazardous goods.

According to the operator in question, P&O is at the origin of the price undercutting; this operator believes in the viability of SeaFrance on account of the quality of management of the company (quality of cooperation with its agents), its modern fleet capable of functioning for at least 10 years and the high motivation of its staff.

By letters dated 26, 27 and 28 July 2011, five road haulage companies and representative associations (LKW Walter Internationale Transportorganisation AG, Youngs Transportation & Logistics Ltd, Laser Transport International Limited, Carna Transport Ltd and Road Haulage association international group) communicated their comments to the Commission.

These five companies and associations express their concerns in the event of the disappearance of SeaFrance. In their opinion, the disappearance of SeaFrance would result, on the one hand, in an oligopoly on the cross-Channel transport market leading to a decline in the quality of services and an increase in prices and, on the other hand, a risk regarding the capacity of the operators remaining on the market to be able to cope with the volume of freight, especially in cases where one of them is unable to provide services.

If SeaFrance were to dispose of its freight vessel, the Nord Pas-de Calais, they are also worried about the emergence of a de facto P&O monopoly for the transport of hazardous goods which cannot be undertaken through the Tunnel or by a multi-purpose ferry.

In their opinion, the disappearance of SeaFrance would lead, on the one hand, to the emergence of an oligopoly on the cross-Channel transport market, with the consequence of a decline in the quality of the services and a rise in prices and, on the other hand, a risk regarding the capacity of the operators remaining on the market to cope with the passenger volume, especially in cases where one of them is unable to provide services.

By letter dated 29 July 2011, the Côte d’Opale Chamber of Commerce and Industry (hereinafter: ‘CCI’) communicated its comments to the Commission. The CCI specifies that it is a public institution responsible for contributing to economic development, attractiveness and support of businesses in the Nord Pas-de-Calais region. The CCI is also the concessionaire of the Port of Calais and, in this capacity, runs the port.

Firstly, the CCI recalls the key role played by SeaFrance in the development of the Port of Calais. At the end of 2008, the SeaFrance workforce comprised 1 600 employees, most of whom lived in the Nord Pas-de-Calais region. It also contributes to the revenue received by the Port of Calais in respect of services to ships and goods services. In 2008, SeaFrance was also the largest purchaser of non-port goods and services, representing EUR 130 million per year in supplies, services, consumables, repairs and maintenance, about 36 % of which were in the Nord Pas-de-Calais region. The CCI adds that the Port of Calais plays a leading role in the economic development of Pas-de-Calais.

According to the CCI, the disappearance of SeaFrance would have a significant impact on the development of the Port of Calais on account of the loss of jobs and of direct and indirect revenue generated by the company. The Nord Pas-de-Calais region has also approved the implementation of the ‘Port 2015’ project which provides for the extension of the port, the construction of a new sea dock and the improvement of the existing structures. This project is based on operational forecasts which risk being seriously affected in the event of the disappearance of SeaFrance.

Furthermore, the CCI is worried about the emergence of a Eurotunnel-P&O duopoly which would have a negative impact on prices and services, if SeaFrance were to disappear.

The CCI concludes from this that keeping SeaFrance in operation is necessary in the present competitive context, particularly as the traffic forecasts are upwards, especially for freight transport.

By letter dated 29 July 2011, the Syndicat Maritime Nord (hereinafter: ‘the SMN’), which belongs to the CFDT, communicated its comments to the Commission.

The SMN firstly stresses that since its creation in 1996, SeaFrance has never been recapitalised by its sole shareholder, the SNCF. SeaFrance has therefore had to pay for the renewal of its fleet from its equity, which has had a considerable impact on the cash position of the company.

The SMN also points out the disparities existing between British and French social legislation (longer working hours in the United Kingdom not entirely offset by smaller crews in France). On account of the staff costs/turnover ratio, the SMN emphasises the fact that SeaFrance is not inclined to practise a low price policy and compensates for this by the quality of the services offered. It also points out that in view of the market shares of SeaFrance, which are well below those of the market leaders, both in freight and in passenger transport, SeaFrance has little impact on prices.

The SMN considers that the adverse impacts of the fall in sterling continue to decrease as expenses, and especially technical expenses, are as often as possible denominated in sterling.

The SMN considers that SeaFrance has already made significant cuts in the number of crossings and the transport capacities since 2009 (– 30 % in frequency and – 25 % in volume) and with the 4 vessels currently operating, SeaFrance has reached the minimum size allowing it a sufficient rotation frequency to remain credible.

Finally, the SMN points out that the employees of SeaFrance would not understand the Commission not taking account of the consequences of the successive restructuring implemented, in terms of both working conditions and employment at SeaFrance, but also in the Calais employment area, which is one of the most stricken in France.

The French authorities justify the fact that the load factors forecasted for the coming years are higher than those observed in the past on the basis of the introduction from 2006 of a new information system allowing optimisation and rationalisation of the loading of these vessels. In their opinion, this system in particular has allowed low profitability crossings to be identified and withdrawn from the SeaFrance schedule. Furthermore, the French authorities emphasise the fact that between 2000 and 2007, the period taken into account by the Commission, SeaFrance’s operating activities were organised in the form of shuttles, irrespective of the intensity of demand.

The French authorities also justify the lower load factors of SeaFrance’s competitors by the operating method chosen by the competitors. In their opinion, P&O had a large number of vessels and a ‘shuttle’ type service exerting a downwards influence on the load factor. As regards DFDS, the specialised nature of its vessels would preclude the optimisation of its loads according to their individual profitability. Moreover, on account of the length of its crossings, DFDS would be forced to offer a shuttle service over long periods. Finally, the high capacity of its vessels would automatically lower the average load factors of DFDS through crossings with low demand.

Furthermore, the French authorities reacted to the Commission’s doubts and to the comments of third parties concerning taking into account the risks (fuel costs, depreciation of sterling), which is necessary to evaluate the credibility of the restructuring plan. They emphasise firstly that the financial hedging policy in the form of foreign exchange contracts will be resumed by SeaFrance as soon as the judicial reorganisation is over. They then explain that the company applies a ‘bunker adjustment factor’ (hereinafter: ‘BAF’) which covers about 40 % of the additional cost associated with the increase in the price of fuel above EUR 285 per tonne and that after 2015, the BAF will be supplemented by a new surcharge taking account of the obligation to consume fuel with 0,1 % sulphur content.

As regards the depreciation of sterling, the French authorities specify firstly that the policy of hedging part of the monthly balances in sterling by forward sales based on the budgetary rate, interrupted on account of the judicial reorganisation procedure, will be applied once more as soon as this procedure is over. […]

Concerning the other measures mentioned in recital 96 of the decision to initiate the procedure, the French authorities specify that their effects were not taken into account in the business plan as they are difficult to quantify. However, these measures would be likely to generate savings.

Finally, the French authorities point out that the staff costs/turnover ratio should change from [20-25]% in 2012 to [20-25]% in 2019. It would approach the ratios of SeaFrance’s competitors.

As regards the prevention of any excessive distortion of competition, the French authorities wish to confirm that the sale of the two vessels, the Renoir and the Cézanne, did indeed occur on 7 July 2011 at the price of USD [0-10] million (EUR [0-10] million).

According to the French authorities, a first part of SeaFrance’s own contribution to the restructuring plan consists of the proceeds from the sale of the vessels Renoir and Cézanne, as well as the expected income from the sale of the vessel Nord Pas de Calais.

The French authorities themselves consider in their notification that the capital increase in favour of SeaFrance constitutes State aid. By their notification, the French authorities admit that the recapitalisation measure is imputable to the State and that it confers a selective advantage on SeaFrance alone.

As regards the existence of an advantage, the Commission considers that, for the reasons to be explained in section 7.2.1, SeaFrance constitutes a firm in difficulty. In view of the very difficult situation of SeaFrance and the fact that it has been placed under the judicial reorganisation procedure, the company would be unable to cope with the implementation of its restructuring plan and its cash requirements. In such circumstances, a private operator would not have contributed capital. In addition, the French authorities did not even try to demonstrate that the expected return corresponds to that which a private investor would have required. The measure therefore constitutes a selective advantage since only SeaFrance benefits from it. It is granted through public resources, since the SNCF is a public undertaking. It is imputable to the State.

The Commission concludes from this that the recapitalisation is likely to strengthen the position of the company in relation to its competitors in trade between the Member States of the Union. The measure therefore affects trade between Member States and is liable to cause distortions of competition.

In the light of the above, the Commission considers that the measure in question constitutes State aid within the meaning of Article 107(1) TFEU.

France considers that the two loans described in recitals 28 to 33 are granted under market conditions and therefore respect the principle of the private market economy investor (see recital 116).

The Commission does not agree with this analysis. In fact, in the present case, the SNCF has already granted aid to SeaFrance, notably rescue aid, and is planning to grant new aid, i.e. the recapitalisation. The loans pursue the same purpose as the other aid measures, i.e. the rescue and restructuring of SeaFrance. They will be granted at a time when SeaFrance is a firm in difficulty and at the same time as the restructuring aid. This is self-evident as regards the loan of EUR 99,7 million, which is intended – just like the recapitalisation – to enable SeaFrance to meet its current capital requirements. However, it is also true of the loan of EUR [40-70] million, which serves to refinance and exercise the purchase option under the leasing contract for the vessel Molière earlier than provided for. In fact, the financing of means of production, here the vessel, is closely linked to the day-to-day activities of SeaFrance. Through the refinancing and early purchase under the leasing contract, SeaFrance aims to reduce its operating costs, which comes under the restructuring of the company. Consequently, the loan of EUR [40-70] million also comes under the logic of restructuring SeaFrance.

According to the judgment of the Court of First Instance, it is true that the mere fact that a public undertaking has already made capital injections into a subsidiary which are classed as ‘aid’ does not, in principle, mean that a further capital injection cannot be classed as an operation which satisfies the private market economy investor test. However, the Court considers that, in a case which concerned three capital injections made by the same investor over a period of two years, the first two of which brought no return, it was for the Commission to determine whether the third injection could reasonably be dissociated from the first two and classed, for the purposes of the private investor test, as an independent investment.

The Court considers that the considerations relevant to determining whether the subsequent measure could reasonably be dissociated from the first two and classed, for the purposes of the private investor test, as an independent investment, include in particular the timing of the capital injections in question, their purpose and the subsidiary’s situation at the time when each decision to make an injection was made.

France does not dispute the fact that the recapitalisation constitutes aid, as it has no prospect of obtaining a return corresponding to that which a private investor would have demanded. This also emerges from the table in recital 35, which indicates the financing need for the period 2011-2017. In fact the company would be unable to distribute dividends during this period. In view of the considerable costs entailed in the payment of the interest and principal on the loans described in recitals 28 to 33 and the low profit margin provided for in the restructuring plan, this situation would be very likely to continue beyond 2017 until the repayment of the loans in full in 2023. However, a private investor in a traditional industry such as maritime transport would not accept the entire absence of return on an investment amounting to EUR 166,3 million for a 12-year period. Since the two loans have the same purpose as the recapitalisation, i.e. the financing of the restructuring costs, and since the economic situation of the company is unchanged (it is in difficulty) and the loans are granted at the same time as the recapitalisation, these loans cannot reasonably be dissociated from the rescue aid and the recapitalisation.

Taken as a whole, the return on the rescue aid and on the recapitalisation and the two loans is below the return that a private market economy investor would require. In fact, as explained, the SNCF cannot expect any return on the recapitalisation before 2023. Even if, considered individually, the return on the two loans corresponded to market conditions – which is not the case –, this would not be sufficient for the measures as a whole to be regarded as satisfying the private market economy investor principle. The following developments are therefore set out for the sake of completeness.

The French authorities cite the Reference Rates Communication to justify the absence of aid as regards the two loans. They consider that, in view of the company rating (CCC) and the collateral offered (normal), the rate must amount to 8,55 %, i.e. EURIBOR 12 months plus 650 basis points. The French authorities consider that this is a conservative application of the Reference Rates Communication.

Even if the two loans were to be assessed in isolation – which is not the case –, the French authorities would not have demonstrated that they were granted at a market rate.

In this case, since the provider of the aid is also supplying the loan, in order to ensure that the proposed remuneration does in fact correspond to market remuneration, the Commission must take operators external to the SNCF as a basis. The Commission asked the French authorities on several occasions to produce an example of an offer from an independent financial institution. This offer was never produced.

Finally, the arguments put forward by the French authorities under recital 116 that the Commission applied the Reference Rates Communication in two recent procedures could not be accepted. In fact, as regards these two procedures, one of which is still in progress, the issues were different. As regards Péti Nitrogénmüvek, all the measures under examination constituted State aid. As for Osinek, the Commission has not yet taken a final decision and at the time when the loan was granted, no aid measure had been notified.

The Commission concludes that the loans used to finance the own contribution and the early exercise of the purchase option for the vessel Molière also confer an advantage on SeaFrance. For the reasons set out in recitals 121 to 126, the other three conditions for the existence of aid (selective advantage granted through public resources, effect on competition and effect on intra-Community trade) are also satisfied. These loans therefore constitute State aid.

For the reasons set out in recitals 30 to 47 of the Commission decision of 18 August 2010, the loan granted by the SNCF to SeaFrance as rescue aid constitutes aid within the meaning of Article 107(1) TFEU.

To be able to qualify for restructuring aid, a firm must be regarded as a firm in difficulty within the meaning of Section 2.1 of the Guidelines.

In this respect, the Commission considers that SeaFrance is a firm in difficulty within the meaning of point 10(a) of the Guidelines, since more than half of its registered capital has disappeared, falling from EUR 81,7 million in 2007 to EUR 57,7 million in 2008 and to EUR – 0,69 million in 2009 (i.e. a reduction of more than 100 %, by EUR 82,4 million between 2007 and 2009), and more than one quarter of that capital has been lost over the preceding 12 months, since it fell from EUR 57,7 million in 2008 to EUR – 0,69 million in 2009.

In addition, SeaFrance can also be considered as being in difficulty within the meaning of point 10(c) of the Guidelines on the grounds that it fulfils the criteria for being the subject of collective insolvency proceedings. In fact, as indicated in recital 10, SeaFrance was placed under a judicial reorganisation procedure on 30 June 2010 by the Paris Commercial Court.

Furthermore, the conditions set out under point 13 of the Guidelines are also satisfied as, although belonging to the SNCF group, SeaFrance’s difficulties relate specifically to itself and are not the result of an arbitrary allocation of costs within the group.

In the decision to initiate the formal investigation procedure, the Commission considered that SeaFrance’s own contribution to the restructuring effort was uncertain and insufficient according to the provisions of the Guidelines.

• a loan of EUR 99,7 million at 8,55 % to finance the restructuring of SeaFrance;

• the planned sale of the freight vessel Nord-Pas-de-Calais (market value estimated at EUR [0-10] million by two independent experts); and

• the sale of the vessels Renoir and Cézanne in July 2011 for an amount of USD [0-10] million, or approximately EUR [0-10] million.

The French authorities informed the Commission that the sale of the two vessels, i.e. the Renoir and the Cézanne, took place on 7 July 2011, for an amount of EUR 3,1 million.

As a preliminary point, the French authorities specified that the loan for EUR [40-70] million intended to finance the exercise of the purchase option on the vessel Molière does not constitute an additional own contribution. In fact, it replaces an off-balance sheet contribution already existing under the leasing contract relating to the vessel Molière. It was not therefore taken into account in the calculation of the total own contribution. Nevertheless, in so far as this financing replaces existing financing, the Commission must ensure that it too meets the criteria of compatibility of the own contribution, especially that of the absence of aid.

In so far as the loans are granted by the SNCF in accordance with point 43 of the Guidelines, the Commission must ensure that this financing is free of aid and it ‘is a sign that the markets believe in the feasibility of the return to viability’. Such is not the case for the following three reasons, each of which would suffice to support this conclusion.

Firstly, as indicated by the Commission in section 7.1.2, recitals 129 to 142 above, the conditions to which the loans were subject do not correspond to market conditions.

Secondly, as shown in section 7.1.2., recitals 129 to 142, the loans in question themselves constitute State aid. They could not therefore be taken into consideration as an own contribution which must be free of aid, in accordance with the title preceding point 43 of the Guidelines.

As indicated in recital 141, the Commission considers that the reference made by France in its comments to the decisions relating respectively to the aid granted by the publicly owned company Osinek in favour of ČSA – Czech Airlines and the loans granted by the Hungarian Development Bank in favour of Hungarian fertiliser producer Péti Nitrogénmüvek (see recital 116) is not relevant as, in the first of these cases, the Commission has not yet taken a final decision and, in the second, this is not a case of restructuring.

In addition, as indicated previously and independently of the question of a possible aid element in the loans, the own contribution must indicate that the markets believe in the feasibility of the return to viability.

In this case, the financing by the SNCF could not demonstrate this. In fact, the SNCF is both the grantor of aid and the provider of the own contribution. The French authorities did not provide any information showing that a prudent independent investor would be prepared to enter into a firm commitment to provide an own contribution and a loan to exercise the option under the same conditions as those proposed by the SNCF.

SeaFrance’s own contribution meeting the requirements of point 43 of the Guidelines, i.e. free of aid and expressing the belief of the markets in the feasibility of a return to viability, consequently amounts to only EUR [10-20] million, i.e. to less than [< 10] % of the restructuring costs. The 50 % threshold provided for in point 44 of the Guidelines is therefore not reached. The Commission therefore considers that SeaFrance’s own contribution to the restructuring effort remains very inadequate in terms of the provisions of the Guidelines.

The Commission also observes that France has not invoked the exceptional circumstances clause provided for in point 44 of the Guidelines or provided any evidence of the existence of an exceptional situation of this kind.

The Commission therefore concludes that the requirement of a ‘real contribution, free of aid’, provided for by the Guidelines, is not satisfied.

In so far as SeaFrance’s own contribution to the restructuring effort remains very inadequate in the light of the provisions of the Guidelines, the Commission considers that there is no need to assess the condition of return to long-term viability.

Supplementary compensatory measures were indeed proposed under the restructuring plan communicated on 12 September 2011, and especially the forthcoming sale of the freight vessel Nord Pas-de-Calais. The French authorities also mention the already completed sale of the vessels Renoir and Cézanne, the reduction in the number of crossings (reduction by 5 830 crossings, i.e. – 37,6 % compared to the 2007 crossings schedule) and the reduction in market shares of SeaFrance ([10-15]% of the car transport market for 2012-2019, compared to [15-20]% in 2008).

In so far as SeaFrance’s own contribution to the restructuring effort remains very inadequate in the light of the provisions of the Guidelines, the Commission considers that there is no need to analyse the compensatory measures proposed.

Following the notification of the restructuring plan by France on 18 February 2011, in accordance with point 26 of the Guidelines, the 6-month period within which the loan must be reimbursed was extended until the Commission reaches its decision on the restructuring plan. Since the Commission considers that the measures notified as restructuring aid do not satisfy the compatibility conditions provided for by the Guidelines, the consequences of this incompatibility must be drawn. The loan cannot therefore be extended any longer beyond the date of this decision and must therefore be reimbursed without delay.