Article 4
This Decision is addressed to the French Republic. Done at Brussels, 8 May 2001. For the Commission Loyola De Palacio Vice-President (1) OJ L 83, 27.3.1999, p. 1. (2) OJ C 244, 4.8.1998, p. 9 (initiation of the procedure); OJ C 61, 3.3.1999, p. 11 (extension of the procedure). (3) Letter dated 25.9.1998. (4) Mazars & Guérard, (hereinafter "M & G") "Diagnostic sur la situation financière et les perspectives du groupe BAI" ("Diagnosis of the BAI group's financial situation and prospects"), April 1998; study commissioned by the French authorities. (5) Dynamar Consultancy BV: "Review - Restructuring Plan - Ferry Company", Alkmaar, the Netherlands, December 1998. Study commissioned by the Commission, DG "Energy and Transport". In particular, the consultant was asked to determine whether the information submitted to the Commission by the French authorities demonstrated adequately that: - the public subsidies granted to Brittany Ferries in the recent past by the State or through State resources had been granted in accordance with criteria acceptable to a private investor, - the planned restructuring measures (taking account of the earlier subsidies) would restore Brittany Ferries to long-term economic viability within a reasonable period of time, in accordance with the criteria laid down in the Community guidelines on State aid for rescuing and restructuring firms in difficulty (OJ C 368, 23.12.1994). The Dynamar report was already finalised when the Commission received the 1996 to 1998 restructuring plan and the study by the NERA consultancy (see below). Accordingly, the NERA study was not examined by Dynamar. (6) NERA: National Economic Research Associates, "An assessment of Brittany Ferries' viability plan" 29 March 1999, London. Study commissioned by Brittany Ferries. The French authorities made use of this study. The NERA study was submitted as additional information for the dossier, and provided a certain amount of explanatory material which Dynamar had considered was lacking. (7) A majority of Brittany Ferries' capital (64,81 %) is held by Soparfi (Economic Committee of Agricultural Cooperatives). Another significant share (12,35 %) is held by the Chambers of Commerce and Industry. The remainder is held by Divers Groupe SDR (8,52 %), Sofipar (5,37 %), the Caisse régionale d'assurances mutuelles agricoles (CRAMA) of Brittany (4,73 %) and other shareholders (4,21 %). (See correspondence from the French authorities dated 30 March 1999 and 16 February 1998 and "Comments from Brittany Ferries" dated 31 March 1999). These figures show BAI's capital to be mainly private (80 %), with the remainder held by Divers Groupe SDR (8 %) (some shareholders quoted on the stock exchange) and by the CCIs (12 %). (8) Code général des collectivités territoriales. (9) In October 1996, 55,21 % of Sabemen's capital was held by various regional and local authorities and 44,8 % by BAI. (See 1997 to 1999 three-year plan, pp. 3 and 4). Currently, the regional and local authorities as a whole hold 69,07 % and Brittany Ferries 30,93 % of Sabemen's capital (see correspondence from french authorities dated 16.2.1998 and comments from Brittany Ferries dated 31.3.1999). (10) In October 1996, 50,21 % of Senacal's capital was held by various regional and local authorities, 46,67 % by BAI, 2,35 % by the Caen Chamber of Commerce and Industry, 0,71 % by Crédit Agricole and 0,05 % by various shareholders (see 1997 to 1999 three-year plan, pp. 3 and 4). Senacal's share ownership is currently as follows: 65,83 % regional and local authorities, 32,03 % Brittany Ferries, 1,61 % Caen CCI, 0,49 % Crédit Agricole and 0,03 % various (see correspondence from French authorities dated 16.2.1998 and comments from Brittany Ferries dated 31.3.1999). (11) In October 1996, 50,00 % of Senamanche's capital was held by various regional and local authorities, 49,98 % by BAI and 0,02 % by various shareholders (see 1997 to 1999 three-year plan, pp. 3 and 4). Currently, regional and local authorities hold 68,75 %, Brittany Ferries 31,24 % and various shareholders 0,01 % of Senamanche's shares (see correspondence from French authorities dated 16.2.1998 MABL/dm No 233 and comments from Brittany Ferries dated 31.3.1999). (12) Letter from the French authorities dated 25 June 1999, p. 2. (13) Applicable across the board irrespective of sector. (14) See in particular the letter from the French authorities dated 25 June 1999, registered at the Commission on 28 June 1999. (15) In its letter to the Commission dated 29.1.2001, Brax Shipping argues that it is unrealistic to estimate charter rates for Brittany Ferries' ships over the last 10 years, given the difficulty of obtaining meaningful results over such a period. (16) See document sent by the complainant on 9.2.2000. (17) See document submitted by BAI's representatives, registered at the Commission on 25.1.2001. (18) Letter from the French authorities dated 25 June 1999, p. 2. (19) The table also shows the purchase price and the capital made available by the group for each ship acquired. (20) See copies of contracts submitted by Brittany Ferries at the meeting on 18 January 2001; see M & G, p. 8. (21) Annual return for the duration of use is calculated from the original capital sum provided by the SPC shareholders and the capital gains realised on the sale of the ship (SPC's capital after disposal of the ship in question). (22) According to information from Shippax, as submitted by BAI at the meeting held on 18 January 2001, the life expectancy of a ferry is around 40 years, i.e. around twice the depreciation period. (23) Institute for Shipping Analysis working in collaboration with Shippax. (24) Taken from Stena annual report, Annex 11 to the document submitted by BAI and registered on 25 January 2001. (25) To maintain the borrower's liquidity, it is also common for loans taken out to finance ships to involve payments of large sums at the end of the loan ("balloon payments"). The normal depreciation period for ships is 20 to 25 years (sometimes up to 30) and payback arrangements are usually linear, based on interest rate development (e.g. LIBOR: London interbank offered rate). (26) Brax Shipping was consulted by BAI. Brax then wrote to DG "Energy and Transport" on 29 January 2001. (27) Shipping Finance Annual 2000/2001, a Euromoney publication, places Crédit Agricole Indosuez among the top 20 shipping financiers. (28) As a practical example, BAI indicates that the resale value of the Duc de Normandie, as shown in Table 2, is the result of a real estimate provided by an expert in 1999. (29) See copy of M & G, p. 8. (30) Correspondence of 16 July 1998. (31) Commission decision of 26 January 1999 (OJ L 163, 29.6.1999, p. 61). (32) Comments from Brittany Ferries, p. 11. (33) NERA, pp. 14 and 15. (34) M & G, p. 6, states that BAI's relevant market for cross-Channel traffic is the western/central Channel. (35) Brittany Ferries operates west of the Dieppe/Newhaven line. (36) The Dieppe/Newhaven line, operated by P & O-Stena until the beginning of 1999, is now operated on a very reduced basis by Hoverspeed. (37) An analysis extending geographically beyond the strait towards the North Sea is not required in the context of this case, since BAI does not operate in the strait or in the North Sea. (38) See also Commission decision of 30 October 1996 (OJ L 26, 29.1.1997, p. 23). (39) Comments from Brittany Ferries, p. 13. (40) NERA, p. 16. (41) In terms of substitutability, the Dieppe/Newhaven route acts as a vector for prices charged in the strait and those charged in the central/western Channel. (42) Comments from Brittany Ferries, p. 10. (43) See M & G, p. 12 of the summary. (44) Passages between square brackets indicate business secrets or confidential information deleted. (45) Agreement of 26 May 1997 between the French Republic and BAI. (46) See M & G, p. 6 of the summary. (47) ACOMO payment, see Table 4. (48) Requested by France. (49) Requested by DG "Energy and Transport". (50) Commissioned and submitted by Brittany Ferries. The French authorities based their arguments on this report. (51) Market conditions had altered substantially during the intervening period, particularly the parity between the pound sterling and the French franc. (52) See comments from Brittany Ferries of 31 March 1999, p. 19, and letter from Brittany Ferries dated 9 July 1999, registered in DG "Energy and Transport" as No 62620. (53) See BAI correspondence of 9 July 1999, p. 2. (54) Plan for a return to competitiveness, October 1996, p. 15. (55) Sold to the Trovil Shipping company and leased back by BAI. The rent paid under the leaseback comprises capital repayment and payment of interest. As a result of the leaseback, the rent paid is considered high by M & G (M & G, Annex 4). Nonetheless, the operation was carried out with the general aim of financing the company. (56) See M & G, Annex 4. (57) See information sheet on the impact of the restructuring measures on Brittany Ferries, submitted by the company's representatives at a meeting and registered under No 60243. (58) See information sheet on the impact of the restructuring measures on Brittany Ferries, submitted by the company's representatives at a meeting and registered under No 60243. See also M & G, p. 16 and Annex 7. (59) Of which Sabemen granted FRF 150 million, Senacal FRF 64 million and Senamanche FRF 36 million. (60) NB: Around 1,49 % of the sum of FRF 250 million came not from the regional and local authorities but from the Chambers of Commerce and Industry, Crédit Agricole and other shareholders. (61) See NERA, p. 31. (62) See NERA, pp. 26 and 31. (63) See in particular the letter from the French authorities dated 16 July 1998. (64) See letter from the French authorities dated 15 October 1998. Involved were two pre-retirements and two shifts to part-time working. (65) Letter to France dated 9 July 1990. (66) Registered at the Commission on 8.9.1998. (67) Letter to France dated 11 November 1998. (68) Brittany Ferries' 1999 to 2003 plan, September 1998, Annex 3, p. 6. (69) Apart from the ECA scheme (applied in the context of the redundancy programme), this parallel aid is not linked to the restructuring plan, but results from the application of schemes approved prior to restructuring. (70) In its decisions of 1987, 1990 and 1995 on investment aid, the Commission raised no objections to investment aid up to and including 1997, or regarding its application prior to 1987. (71) The submitted documents which led to notification of the scheme to reimburse business tax as part of the public programme for the French commercial fleet mentioned that the scheme was applied (partial reimbursement) for the 1980, 1981, 1987 and 1988 financial years. Partial application was also planned for 1989 and 100 % application was planned for the financial years 1990 onwards. In 1990 the Commission approved the scheme for the years 1989 to 1994. The scheme was then renewed up to 1997, and no objections were raised regarding its application prior to 1989. (72) Commission Decision addressed to France by letter dated 9 July 1990. (73) Commission Decision addressed to France by letter dated 10 June 1997. (74) See communication from the Commission to the Member States published in OJ C 307, 13.11.1993, concerning the principle of an investor in a free market economy. (75) Past investments not relating to the restructuring. (76) Letter from the French authorities dated 15 October 1998. (77) OJ C 205, 5.7.1997, p. 5. (78) OJ C 368, 23.12.1994, p. 12. (79) OJ C 307, 13.11.1993, p. 3. (80) Judgment of 14 November 1984 SA Intermills v Commission, aid for the conversion of a paper-manufacturing undertaking, Case 323/82, ECR 1984, p. 3809. (81) Commission communication to the Member States on the application of Articles 92 and 93 of the EEC Treaty and of Article 5 of Commission Directive 80/723/EEC to public undertakings in the manufacturing sector (OJ C 307, 13.11.1993, p. 3). (82) EC Bulletin 9-1984. (83) See letter from the French authorities dated 25 June 1999. (84) This means that if the group were to be sold, its public and private shareholders would obtain a return from the value of the group as a whole, including not only its assets, but also other elements of value such as the market and clientele which have been built up and the group's excellent image, which is recognised on the market. (85) See Tables 1 and 2. (86) See the aforementioned Commission position on public authorities' holdings. (87) OJ C 71, 11.3.2000. (88) With regard to this, Crédit Agricole has indicated, by way of illustration, that in view of BAI's financial situation in 1992, a FRF 10 million bank guarantee should normally have carried an interest rate of 1 % per year. (89) Document registered at the Commission on 30.1.2001 under number A/51686. (90) OJ C 205, 5.7.1997. (91) With regard to this, Crédit Agricole has indicated, by way of illustration, that in view of BAI's financial situation in 1992, a FRF 10 million bank guarantee should normally have carried an interest rate of 1 % per year. (92) Judgment of the Court of Justice, RSV, Case 223/85, ECR 1987, p. 4617. (93) See M & G report, especially pp. 5 and 12 of the summary. (94) In its business strategy analysis, Dynamar defines Brittany Ferries as being the "strongest brand". (95) Dynamar report, p. 10. (96) See letter from the French authorities dated 12 May 1999, which included NERA's comments. Regarding Dynamar's comments on this point referring to a comparison between BAI and a reference company, NERA stresses three factors in particular: - Brittany Ferries has to carry out all its management operations by itself, while the reference company may enjoy certain (synergetic) advantages by having a management which, at least in part, fits into that of a larger group, - Brittany Ferries is responsible for operations in a larger number of ports than the reference company, - Brittany Ferries has a larger turnover than the reference company. (97) Revenue: Ticket sales, revenue from restaurants, bars, duty-free and other sales, and entertainment activities (films, videos, etc.). Costs: Travel agency commissions, port taxes, insurance, costs of preparing cabins, cleaning, food, drinks and other purchases, staff working in restaurants, bars and shops, loading of lorries, cost of fuel and oil, pilotage, seamen's wages, accommodating and feeding the crew, ships' rent, maintenance and amortisation of on-board equipment. See NERA, pp. 28-30. (98) The routes are: Roscoff/Plymouth, St. Malo/Portsmouth, Caen/Portsmouth, Cherbourg/Poole, Plymouth/Santander and Roscoff/Cork, NERA, p. 33. (99) Particularly section 5, pp. 27-41. (100) Judgment of 25 June 1998, Air France, Joint Cases T-371/94 and T-394/94, point 102. (101) Letter from the French authorities dated 4 December 2000. (102) The Normandie 2 is due to be acquired in 2002. (103) As indicated above, and further to M & G's work, NERA produced a financial model which pointed to the group's long-term financial viability. The positive development from the short-term viability suggested by M & G in April 1998 to the long-term viability suggested by NERA in March 1999 is due, inter alia, to the rise and stabilisation of French franc/pound sterling parity at over 9 francs to the pound in 1998 and 1999, NERA's analysis of the economic group as a whole and the different perspective offered by the passage of time. While M & G's analysis focused mainly on the period 1996-98, NERA produced a complementary study analysing the group's requirements and future options for the period 1998 to 2006, which led it to conclude that the group would be viable in the long term. (104) Regarding the item "return on equity": The 1998 figure includes a provision of FRF 150 million for possible repayment of aid. The figure would otherwise be 14,7 %. The provision is cancelled in 1999. (105) Letter from the French authorities dated 4 December 2000. (106) The guidelines state that "where on an objective assessment of the demand and supply situation there is a structural excess of production capacity in a relevant market in the European Community served by the recipient, the restructuring plan must make a contribution, proportionate to the amount of aid received, to the restructuring of the industry serving the relevant market in the European Community by irreversibly reducing or closing capacity ...". Where, on the other hand, there is no structural excess of production in the relevant market, the Commission will not normally require a reduction in capacity in return for the aid. However, it must be satisfied that the aid will be used only for the purpose of restoring the firm's viability and that it will not allow production capacity to be expanded, except in so far as is essential for restoring viability, without thereby unduly distorting competition. To ensure that the aid does not distort competition to an extent contrary to the common interest, the Commission may impose any conditions and obligations as may be necessary. (107) That is, the western/central Channel and the strait, but not including the North Sea sector, which has no bearing on this dossier. (108) Dynamar, p. 13. (109) NERA, p. 15. (110) According to the "Comments from Brittany Ferries" dated 31 March 1999, p. 12, this rapid ferry can carry 900 passengers and 175 cars. (111) "Comments from Brittany Ferries" dated 31 March 1999, p. 14. (112) Dynamar, pp. 11-12. (113) NERA, pp. 22-23. (114) See correspondence from BAI dated 9.7.1999, p. 2. (115) According to Dynamar, Condor Ferries, which also operates in the Channel via the Channel Islands, does not affect this balance in any substantial manner, given that operator's capacity and frequency. (116) BAI's lawyers have also indicated (letter dated ... that the sum of FRF 80 million was no longer necessary for the return to viability (see descriptive section above). (117) Nor does this intensity seem in any way disproportionate in the light of other cases in which the Commission approved aid of far higher intensity (notably 81 % in Case C 70/97). (118) See in particular the "1999 to 2003 plan", p. 3. (119) OJ C 71, 11.3.2000.