The Court of First Instance (CFI) has annulled the European Commission’s La Poste decision which held that neither the assistance (both logistical and commercial) provided by La Poste to SFMI-Chronopost nor the transfer of Postadex constituted state aid.
This decision relates to a long-running saga which begun with a complaint made by SFEI (now Ufex) to the European Commission in 1990 in which it alleged that La Poste had given state aid, in the form of logistical and commercial support, to SFMI.
Separately, in 1993, Ufex and others raised a private action against SFMI, Chronopost and La Poste. The court requested a preliminary ruling from the European Court of Justice (ECJ) and the ECJ held that logistical and commercial assistance could amount to state aid if the remuneration was less than that which would have been demanded under normal market conditions.
In 1997 the European Commission published a decision which concluded that the logistical and commercial assistance did not amount to state aid. It took into account the fact that La Poste and SFMI-Chronopost belonged to the same group and that La Poste was a state monopoly. However, it assessed whether the terms were comparable to those of an equivalent transaction between a private parent company and its subsidiary. As a result, it found that as the internal rate of return was above internal costs this satisfied the market investor principle.
Ufex and others challenged this decision. The CFI found that the European Commission had erred in its approach in that it should have looked at the question from the point of view of an undertaking operating in normal market conditions. It therefore annulled the Commission decision. An appeal was lodged.
In 2003, the European Court of Justice ruled that the CFI had erred in law. It concluded that the comparison should not be made with a private undertaking as this would be a purely hypothetical situation given La Poste's state monopoly (which involved performing services of general economic interest). Instead, the assistance would not be state aid if there was objective and verifiable information that showed that the price paid covered all additional variable costs and made an appropriate contribution to fixed costs and provided an adequate return on capital.
The ECJ therefore set aside the CFI’s judgement and referred it back to the CFI for judgment on the outstanding issue of the extent to which the payment by SFMI covered La Poste’s full costs.
The CFI therefore reconsidered the following three main pleas brought by Ufex and others:
· Breach of obligations to state reasons – the CFI found that the European Commission’s decision did not contain an adequate statement of reasons. This meant that the Commission’s decision did not allow the CFI to review the illegality of the Commission’s assessment. It found therefore that the decision must be annulled.
· Error in applying the concept of state aid – the CFI ruled that Ufex had failed to demonstrate (i) which objective criteria the Commission should have used as an alternative means of applying the concept of normal market conditions or (ii) that the backward projection used would have led to a different result if a different basis had been used. It also found that the transfer of Postadex amounted to state aid as it had an economic value and constituted an advantage to the beneficiary. However, interestingly it held that the use of La Poste’s brand image was ancillary to the logistical and commercial assistance and therefore did not represent state aid.
· Manifest errors of assessment and errors of fact – the CFI found that the only remaining issue was in relation to an exemption from VAT and liability to a reduced rate of payroll tax. The CFI held that the ECJ only required costs to be reimbursed by its subsidiary and did not make any distinction as to whether those costs were less than those of any undertaking acting under normal market conditions. It held that it followed that, even if part of La Poste’s costs were susidised by tax measures, the examination of the existence of state aid in the case would be unaffected.