The Commission s State aid policy and the current

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

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

Procedure Lovells LLP www. lovells. com

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 – – – – Lovells § 53 October communication Commissioner Kroes empowered by College 24 h/WE decisions ECB (confirmation of urgency) Language Economic Crisis Team (real economy) New simplified procedure? www. lovells. com

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 Lovells www. lovells. com

Commission's communication Lovells LLP www. lovells. com

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 Mc. Carthy [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) Lovells www. lovells. com

Cases • legal basis • some selective comments on the Fortis case Lovells LLP www. lovells. com

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 (NN 70/07), West. LB (NN 25/08), Sachsen LB (C 9/08) – Case law • region not sufficient – – Lovells Cases T-132/92 & T-143/96, Freistaat Sachsen v Commission, point 167 Case C-301/96, Germany v Commission, points 105 -108 www. lovells. com

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

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? • Lovells in Fortis – NN 42/08 - , the Commission renders the criteria equivalent: see section 6. 3 www. lovells. com

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. 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 Lovells www. lovells. com

Fortis case Commission Decision (3 Dec. 2008, NN 42/2008; NN 46/2008; NN 53/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) • € 51 bn 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 Lovells www. lovells. com

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 Ø if no BNP Paribas, is the aid still compatible? Lovells www. lovells. com

To be cont'd. . . - 'Real economy' - Review phase. . . Lovells LLP www. lovells. com

Thank you for your attention! Lovells LLP www. lovells. com

www. lovells. com Lovells LLP and its affiliated businesses have offices in: Alicante Amsterdam Beijing Brussels Budapest* Chicago Dubai Dusseldorf Frankfurt Hamburg Hanoi Ho Chi Minh City Hong Kong London Madrid Milan Moscow Munich New York Paris Prague Rome Shanghai Singapore Tokyo Warsaw Zagreb* Lovells is an international legal practice comprising Lovells LLP and its affiliated businesses. Lovells LLP is a limited liability partnership registered in England Wales with registered number OC 323639. Registered office and principal place of business: Atlantic House, Holborn Viaduct, London EC 1 A 2 FG. The word "partner" is used to refer to a member of Lovells LLP, or an employee or consultant with equivalent standing and qualifications, and to a partner, member, employee or consultant in any of the affiliated businesses who has equivalent standing. © Copyright Lovells LLP 2009. All rights reserved. LWDLIB 02/2319870 Lovells *Associated offices www. lovells. com