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EU tells Romania to recover EUR 570m 'incompatible aid' from rail freight operator CFR Marfa

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 EU tells Romania to recover EUR 570m 'incompatible aid' from rail freight operator CFR Marfa

CFR Marfa Class 47 - Photo by Mihai Stefanescu

(BRUSSELS) - Rail freight operator CFR Marfa received at least EUR 570m 'incompatible state aid' from Romania through debt write-off and failure to collect debts from the company, the EU Commission said Monday.

"Certain public support measures in favour of the state-owned incumbent CFR Marfa have given them an unfair economic advantage vis-à-vis other operators," said EC vice-president Margrethe Vestager: "They consist of the cancellation of public debts and the failure of public creditors to collect debts from the company. This is in breach of EU State aid rules. Romania will now have to recover the incompatible aid."

CFR Marfa is the incumbent rail freight transport services provider in Romania. The company, which is fully state-owned, has been in economic difficulties for a number of years. It has a high level of debt, mainly towards the Romanian rail infrastructure manager CFR Infrastructura, which is also fully state-owned, and had high debts towards the national social security and tax administration agencies for several years.

Unlike passenger rail transport, the rail freight transport market in Romania is highly competitive, with numerous private operators, some having gained considerable market share following liberalisation of the market in 2007. In March 2017, the Association of Romanian Private Rail Freight Operators filed a formal complaint with the Commission alleging that CFR Marfa had received State aid in breach of EU rules.

On 18 December 2017, the Commission opened an in-depth investigation to establish whether several Romanian measures in favour of CFR Marfa were in line with EU State aid rules, specifically:

  • a debt-to-equity swap amounting to around €363 million (RON 1,669 million ) in 2013; and
  • the failure to collect social security debts and outstanding taxes of CFR Marfa, as well as debts towards CFR Infrastructura, since at least 2010.

The Commission found that actions by the State enforcing CFR Marfa's social security debts and outstanding taxes towards the State budget as of June 2013 were market conform.

However, with respect to the remaining identified measures, the Commission found that, in the present case, the State acted in its capacity as a public authority rather than a shareholder of the company. Furthermore, even if the State had acted in its capacity as shareholder, and therefore the private market economy operator test was applicable, no private operator would have written-off its debt or abstained from actively enforcing the repayment of debts for years without a sufficient monetary compensation. As a result, the Commission concluded that the public support from Romania gave CFR Marfa an unfair economic advantage over its competitors. Therefore, it says these measures constitute State aid within the meaning of EU rules.

At least €570 million plus interest, is incompatible with EU State aid rules and needs to be recovered by Romania, says the Commission. It adds, however, that it is "well aware" of the sensitive sector in which CFR Marfa operates and therefore the decision provides six months for the implementation of the recovery decision instead of the usual four months period.

A non-confidential version of the decision will be made available under case number SA.43549 in the State Aid Register on the competition website once any confidentiality issues will have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly E-News.

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