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CJEU: Reform of pension finance for France Télécom constituted state aid

The way that France Télécom's pension arrangements were reformed when it was privatised constituted state aid, the Court of Justice of the European Union (CJEU) has said.28 Oct 2016

When France Télécom (now Orange) was converted into a public limited company in 1996, its pension scheme financing was altered as part of the law allowing the change. The company was now required to pay the French state a flat-rate contribution to fund its pension scheme, and this was calculated so as to be equivalent to the social security and taxes paid by its competitors.

However, the European Commission said in 2011 that the 'competitively fair rate' calculated did not take all risks into account and therefore was not equal to the costs faced by France Télécom's competitors. The measure also constituted state aid as it reduced the contribution paid to the French state before the company became public, the Commission said.

The Commission therefore asked France to amend the law to take all risks into account in the calculation of the payment.

When, in 2012, the General Court upheld the Commission's decision, France Télécom turned to the CJEU, asking it to annul the ruling.

The CJEU upheld the Commission's decision and dismissed the appeal in its entirety. The General Court was correct in its conclusion that the 1996 law conferred an economic advantage on France Télécom, and was correct in holding that the economic advantage conferred on France Télécom was selective in that the law referred to only one undertaking, the CJEU said.

The General Court was also entitled to endorse the Commission's assessment that the economic advantage to France Télécom was liable to distort competition, the CJEU said.

The CJEU said 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.