KEY DEVELOPMENTS

Finance – State Aid:  German and Irish Rescue Schemes Examined

Laura Zadunayski

The European Commission has examined recent rescue schemes issued by Germany and Ireland in response to the financial crisis.  Both countries had established plans involving bank guarantees in favour of national banks facing serious instability.  The two inquiries resulted in quite different opinions from the Commission.

Hypo Real Estate Holding AG, Germany’s second largest property lender, has a balance sheet of EUR 400 billion and is composed mainly of three German banks.  By the end of September, the group faced a liquidity crisis due to its short-term refinancing strategy as the crisis of confidence among banks worsened.  The rescue aid package issued by the German Federal Government together with a group of German financial institutions involves loan guarantees totalling EUR 35 billion and is intended to provide for Hypo Real Estate’s refinancing needs until April 2009.  This guarantee should attract liquidity from a private consortium of German financial institutions as well as from the German Bundesbank emergency liquidity lines.

Although the Commission considered that these measures constitute aid, they can be authorised as they are in line with the EU Guidelines on State aid for rescuing and restructuring or liquidating firms in difficulty.  According to these Guidelines, rescue aid must be given in the form of loans or guarantees lasting no longer than six months.

In contrast, the first draft of the Irish rescue plans raised serious concerns over discrimination against foreign-owned banks operating in Ireland, as well as the extensive scope of the aid.  Discussions are ongoing.

Furthermore, the Commission has announced that it will issue guidance to permit rapid assessment both of the State aid compatibility of national recapitalisation or guarantee schemes and of individual cases in which such schemes are applied.  The aim is to preserve financial stability as well as a level playing field for other banks and EU Member States. 

Transport – Competition:  Commission to Amend Block Exemption for Liner Shipping Consortia

Philip Torbøl

The European Commission has proposed amendments to Regulation 823/2000, which is the last existing block exemption (from general EC competition rules) in the transport sector.  The Regulation allows shipping companies to form consortia and coordinate their activities to improve productivity and the quality of liner shipping services.  The Commission considers that amendments to the current regime are necessary to give effect to last year's abolition of another block exemption regulation ((EEC) 4056/86) that allowed price fixing between shipping companies.  The revision of Regulation 823/2000 is also ultimately designed to facilitate a transition to the general competition rules applied to all other economic sectors.  The Commission suggests that the new block exemption should apply for a period of five years.  Stakeholders are invited to submit their comments and supporting data.   Several shipping companies have already expressed their concern with the Commission proposal, claiming that it would disrupt the entire industry and that no economic evaluation of the proposal's effects has been carried out by the Commission.

Sports & Media – Regulatory:  Commission Launches Consultation on Pay TV Services 

Benoît Keane

The European Commission has launched consultations on the application of the Conditional Access Directive to Pay TV services.  The Conditional Access Directive, which was adopted in 1998, enables Pay TV broadcasters to provide their services throughout the European Union.  An important element of this is the rule that the copyright rules in the country of reception of the Pay TV channel will not be infringed as long as the broadcaster has satisfied the copyright rules in the country from which it is broadcasting.  The Conditional Access Directive also prohibits the sale of “illicit” (or pirate) decoders that facilitate the reception of Pay TV channels for free. 

However, the Commission has become concerned that the Conditional Access Directive does not adequately address the issue of parallel imports of decoders whereby a consumer buys a decoder in one EU Member State (often using false details) to watch channels in another Member State.  This issue is currently the subject of a case before the European Court of Justice.  The English Football Premier League is suing a number of UK pub owners for broadcasting matches using decoders bought from a Greek broadcaster which held the rights for the Greek market and provided the matches at a much cheaper rate than the UK broadcaster.  The Premier League considers that this infringes its rights in the United Kingdom as the rights had been granted exclusively to BSkyB for the UK market.

The consultation document requests views on the subject of parallel imports as well as other issues.  Responses should be sent to the Commission before 4 April 2009.   

Energy – State Aid:  French Hydrogen Energy Project Cleared

Leigh Smith

On 8 October 2008, the European Commission approved under the EC Treaty State aid rules EUR 67.6 million in State aid granted by France for research and development.  Air Liquide, along with its subsidiary Axane and 17 other public and private partners, will receive the funding from the French Industrial Innovation Agency to promote and develop the “H2E” programme.  The aim of the programme is to develop an integrated hydrogen energy market. 

The Commission concluded that the proposed State aid was proportionate and would provide environmental and technological benefits without distorting competition.  The decision demonstrates the Commission’s willingness to allow State aid for research and development where companies would otherwise be reluctant to invest due to the high risks associated with an undeveloped market.  H2E complements other hydrogen fuel research programmes in the European Union.

Postal Services – Competition:  Slovakia Requested to Reopen Hybrid Mail Sector to Competition

Laura Zadunayski

Following proceedings initiated against Slovakia in June 2008, the European Commission has decided that the amendments made to its Postal Law infringe EC Treaty rules requiring EU Member States to ensure that measures relating to public undertakings or undertakings to which they give special or exclusive rights conform to all Treaty rules, including rules on competition.

Amendments made to the Slovakian Postal Law extend the monopoly of the incumbent operator, Slovenská Pošta, to the delivery of hybrid mail services (namely a written message sent electronically to the post office, which then prints, dispatches and distributes the message in a physical form).  It is an important service for the postal sector, as it is widely used by banks, insurance companies and telecommunications businesses that have to send large amounts of mail, such as invoices.

As the delivery of hybrid mail was previously open to competitors, the market was occupied by several private companies.  However, when the amendments for re-monopolisation entered into force in April 2008, all competitors had to stop all activity related to hybrid mail in favour of Slovenská Pošta.  The Commission found that the act amounted to a re-monopolisation of this business that could not be justified under the Universal Service Exception, which enables former State monopolies to provide profitable and unprofitable services to the community.