European Court of Justice
(LUXEMBOURG) – The EU Court of Justice rejected Wednesday an appeal by France Télécom against a European Commission decision over the company’s financing of reform of pensions for its civil servants.
A 1996 conversion of France Télécom into a public limited company changed the system governing pensions financing for civil servants working for France Télécom, reducing its employer contributions to the same level as those of competitors in the telecoms sector.
However, because that equalisation took only risks common to ordinary employees and civil servants into account, excluding non-common risks such as unemployment and employee claims in cases of winding-up by court order, and because France Télécom made an exceptional flat-rate contribution of EUR 5.7 billion in order to meet future retirement costs, the Commission in 2011 declared that the financing measure compatible with the internal market, subject to certain conditions.
First, it said the measure constituted State aid, as it reduced the contribution paid to the French State by France Télécom for the purposes of financing the pensions of civil servants until France Télécom’s conversion.
Second, the Commission said the state aid did not comply with the principle of ‘proportionality’, as France Télécom’s contribution to the French State was not equal to social security charges payable by the company’s competitors.
The Commission then asked France to amend the 1996 Law in order to take the risks not common to ordinary employees and civil servants into account.
In 2012, the French Republic and France Télécom (now Orange) asked the General Court to annul the Commission’s decision, saying the financing reform did not constitute State aid.
The General Court rejected that application in 2015, confirming the Commission decision. France Télécom then lodged an appeal. But the Court has now dismissed that appeal against the General Court’s decision, rejecting France Tèlécom’s argument that the General Court was mistaken in its conclusion that, as it had the effect of reducing social security costs, the 1996 Law conferred an economic advantage on France Télécom.
The Court also considers that the General Court was correct in holding that the economic advantage conferred on France Télécom was selective, in so far as the 1996 Law concerned only one undertaking and was intended to modify certain competitive constraints which were specific to it.
Moreover, the Court found that the General Court was entitled to endorse the Commission’s assessment that the economic advantage which it found to exist was liable to distort competition.
The Court observed that it is sufficient in that regard that the 1996 Law made available to France Télécom greater financial resources to operate on telecommunications markets, that the markets for those services were gradually opened up to competition and that those two factors enabled it to develop more easily on the markets of other Member States newly opened up to competition.
Finally, the Court found that the General Court distorted neither the Commission’s decision nor the 1996 Law in concluding that the exceptional flat-rate contribution was not designed to equalise France Télécom’s contributions and the social security costs paid by its competitors.
