1. www.lovells.comLovells LLP The Commission's State aid policy and the current financial crisis GCLC lunch talk - 20 February 2009 Jacques Derenne Partner Lovells LLP

2. www.lovells.comLovells Selected issues Procedure Commission's communication Cases –legal basis (Article 87 (3) b) EC) –selective comments on the Fortis case 'Real economy' - Review phase

3. www.lovells.comLovells LLP Procedure

4. www.lovells.comLovells Procedure v Substance Substance –October communication (general rules) –December communication (recapitalisation) –December Temporary Framework (real economy) –Handbook on Community State aid rules for SMEs –+ 50 cases since June 2008 2 'Phase II' 10 on going cases (excl. cases 'under discussion') 8 real economy cases Procedure –§ 53 October communication –Commissioner Kroes empowered by College –24h/WE decisions –ECB (confirmation of urgency) –Language –Economic Crisis Team (real economy) –New simplified procedure?

5. www.lovells.comLovells Procedure – And Article 88 (3) EC? No specific initiative on notification obligation No public reminder –Article 10 EC No sanction - No national court (except Fortis) Is the Commission in the driver's seat? –car industry –EC initiative v MS initiatives (see Article 100 EC- Community financial assistance) For a systematic and close involvement of the Commission

6. www.lovells.comLovells LLP Commission's communication

7. www.lovells.comLovells Commission's visibility Unfortunate communication –29 September 12:00 am (Spokesman) "Justice must not only be done but should manifestly and undoubtedly be seen to be done" (ex parte McCarthy [1924] KB 256,259) –Mrs Kroes v MS and Ministers of Finance reaction v proactivity –work of State aid teams at Commission (Legal Service, DG COMP) Pedagogical efforts –competition v protectionism (Mrs Kroes, 17.2 + 19.2)

8. www.lovells.comLovells LLP Cases legal basis some selective comments on the Fortis case

9. www.lovells.comLovells Legal basis – Article 87(3) b) EC (b) aid (...) to remedy a serious disturbance in the economy of a Member State –Precedents 1974 crisis 1987 Greek economy (OJ (1987) L 76/18) 1991 Greek privatisation programme (XXI Competition Report, 1991, § 251) –Rejected Crédit Lyonnais (OJ (1995) L 308/92), GAN (OJ (1997) L 78/1) Northern Rock (NN70/07), WestLB (NN25/08), Sachsen LB (C9/08) –Case law region not sufficient –Cases T-132/92 & T-143/96, Freistaat Sachsen v Commission, point 167 –Case C-301/96, Germany v Commission, points 105-108

10. www.lovells.comLovells Relevant test Art. 87(3) b) EC well-targeted (remedying serious disturbance) proportionate (not going beyond what is required) designed in such a way as to minimize negative spill-over effects (§15 October communication) Art. 87(3) c) EC (R&R) long-term viability minimum necessary avoiding excessive distortions (compensatory measures)

11. www.lovells.comLovells Comp. Article 87(3) c) EC (c) aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest R & R Guidelines Decisional practice in financial crisis cases –serious disturbance –equivalent conditions? Convergence? in Fortis – NN42/08-, the Commission renders the criteria equivalent: see section 6.3

12. www.lovells.comLovells Fortis case Commercial Court/Court of Appeal President Brussels Commercial Court – 18.11.08 –no State aid debate –what about public policy plea (proprio motu)? Brussels Court of Appeal – 12.12.08 –plea on 88(3)EC 'BNP Paribas Agreement': no suspension since not executed yet 'Benelux plan': no suspension since already executed violation of 88(3) 'does not necessarily lead to the annulment of the disputed conventions' (only annulment of the acts implementing the State aid measures) –refusal to re-open the oral hearing

13. www.lovells.comLovells Fortis case Commission Decision (3 Dec. 2008, NN 42/2008; NN46/2008; NN53/A/2008) (NB: guarantee case 19.11.08, N 574/2008) aid to Fortis Banque (B measures) –acquisition by SFPI of 49,9% of Fortis Banque (§35) €1,5-€2 (ING-BNP Paribas) v €5.2 (State) –liquidity assistance by BNB (§46) €51bn in a few days; 15% GDP; 50% tax revenue of 2007! –acquisition of 50% of Fortis Banque (§62-63) –sale of 75% of Fortis Banque to BNP Paribas (§65-67) buy Fortis in cash and BNP buys Fortis from the State in shares no aid to BNP Paribas –privatisation of Fortis Banque to BNP Paribas (§58-61) –open and unconditional tender? (§58) compatible: Article 87(3) b) EC

14. www.lovells.comLovells Fortis case Commission (3 Dec. 2008) - issues § 65: privatisation linked to nationalisation §§ 80-81: LT viability depends on BNP Paribas § 90: nationalisation should be short in order to minimize the aid § 95: sale to BNP Paribas is a compensatory measure  if no BNP Paribas, is the aid still compatible?

15. www.lovells.comLovells LLP To be cont'd... - 'Real economy' - Review phase...

16. www.lovells.comLovells LLP Thank you for your attention!

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