EU Court: EUR9 Billion French Loan Offer to France Telecom in 2002 Wasn't Illegal Aid

   By Tom Fairless 
 

BRUSSELS--France didn't violate European Union rules by offering a EUR9 billion loan to France Telecom SA in 2002 when the company was going through "a major crisis," the bloc's second highest court ruled on Thursday.

The ruling is the latest twist in a lengthy legal battle over Paris' efforts to support France Telecom in 2002, fought out between the former French telecom monopoly, its competitor Bouygues SA (EN.FR) and the EU's Brussels-based executive arm.

At issue is whether the French government breached EU rules that forbid governments from providing aid to selected companies.

The government in Paris issued a series of statements in 2002 in which it pledged to support France Telecom, in which it had a majority shareholding, if the company encountered difficulties. The statements were followed later that year by a proposal for a EUR9 billion shareholder loan.

The European Commission, which polices the bloc's state-aid rules, ruled in 2004 that France's actions had violated EU law.

That decision was appealed at the General Court of the EU, the bloc's second-highest, which annulled it in 2010, arguing that the statements of the French authorities hadn't committed state resources.

But the EU's top court, the Court of Justice, overturned the General Court's decision in 2013, ruling that the loan had still conferred an illegal advantage to France Telecom. Nevertheless, the case was referred back to the General Court for a ruling on arguments that it hadn't previously considered.

In Thursday's ruling, the General Court again sided with France, arguing that the EU's executive arm hadn't correctly assessed whether a "prudent private investor" would have acted in the same way as the French state in offering the loan.

"Capital made available to a business by the state in circumstances which correspond to normal market conditions cannot be classified as state aid," the court said.

The ruling also said that the French government's statements in 2002 "did not in themselves anticipate the specific financial support which was ultimately put in place" later that year.

Write to Tom Fairless at [e-mail]

Subscribe to WSJ: http://online.wsj.com?mod=djnwires