EN Official Journal of the European Union L 274/1

COMMISSION DECISION

of 26 January 2010

on State aid C 56/07 (ex E 15/05) granted by France to La Poste

(notified under document C(2010) 133)

(Only the French text is authentic)

(Text with EEA relevance)

(2010/605/EU)

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union (‘TFEU’) (1), and in particular the first subparagraph of Article 108(2) thereof,

Having regard to the Agreement on the European Economic Area, and in particular Article 62(1)(a) thereof,

Having called on interested parties to submit their comments pursuant to the provisions cited above (2),

Whereas:

1. PROCEDURE

(1) On 21 December 2005 the Commission approved the transfer of the banking and financial business of the French Post Office (La Poste) to its subsidiary La Banque Postale (3). In its Decision the Commission stated that the question of the unlimited state guarantee in favour of La Poste would be the subject of a separate proceeding.

(2) On 21 February 2006, in accordance with Article 17 of Council Regulation (EC) No 659/1999 (4) laying down detailed rules for the application of Article 108 of the Treaty on the Functioning of the European Union (‘the Procedural Regulation’), the Commission informed the French authorities of its preliminary finding as to the existence of an unlimited state guarantee which resulted from the legal form of La Poste and which constituted State aid within the meaning of Article 107(1) TFEU, and it invited them to submit their comments. Inasmuch as this presumed unlimited state guarantee was in force before 1 January 1958, the Commission applied the rules of procedure concerning existing aid in accordance with Article 1(b) of the Procedural Regulation (5).

(3) The Commission received the French authorities’ reply on 24 April 2006.

(4) On 4 October 2006, in accordance with Article 18 of the Procedural Regulation, the Commission called on France to withdraw, by 31 December 2008, the guarantee given, on all its liabilities, to La Poste by virtue of its legal form.

(5) On 6 December 2006 the Commission received a memorandum from the French authorities challenging the findings presented by the Commission in its letter of 4 October 2006.

(6) Following a meeting with the Commission department in charge of competition questions (‘DG Competition’), by letter dated 16 January 2007 the French authorities submitted to the Commission a draft amendment to the Decree implementing Law No 80-539 of 16 July 1980 on the penalties imposed in administrative matters and on the execution of judgments by legal entities governed by public law (6) (‘the Law of 16 July 1980’), namely Decree No 81-501 of 12 May 1981 adopted for the implementation of the Law of 16 July 1980 on the penalties imposed in administrative matters and on the execution of judgments by legal entities governed by public law (7) (‘the Decree of 12 May 1981’).

(7) Following a request from the Commission for clarification, the French authorities sent a memorandum, which was received on 1 February 2007, explaining the situation of creditors of La Poste should the latter find itself in financial difficulties.

(8) By memorandum dated 19 March 2007 the French authorities made an additional proposal consisting in undertaking, together with La Poste, to mention in any financing agreement or issuing prospectus of La Poste the fact that no guarantee was being provided.

(9) By letter dated 29 November 2007 the Commission informed France of its decision to open the procedure provided for in Article 108(2) TFEU in respect of the measure (‘the opening decision’).

(10) The opening decision was published in the Official Journal of the European Union (8). The Commission called on interested parties to submit their comments on the measure.

(11) The Commission received no comments from interested parties.

(12) By letter dated 23 January 2008 the Commission received comments from France.

(13) The Commission published on DG Competition’s website an invitation to tender for carrying out a study into the unlimited guarantee given by the French Republic to La Poste. Four bids were received before the deadline of 21 April 2008. The study was entrusted to Ms Sophie Nicinski, professeur des universités, agrégée de droit public, Doctor of Laws and author of publications on the subject of state guarantees for publicly owned establishments of an industrial and commercial character. The expert (‘the Commission’s expert’) submitted her report on 17 November 2008.

(14) Following the appearance in the French press of information about the adoption by the French Government of a draft law approving the change of La Poste’s legal form, on 20 July 2009 the Commission asked France whether it would agree to undertake to convert La Poste into a public limited company subject to the compulsory administration and winding-up procedures provided for under ordinary law. Under cover of its letter, the Commission forwarded its expert’s report to the French authorities.

(15) By memorandum transmitted on 31 July 2009, France informed the Commission that on 29 July 2009 the Council of Ministers had adopted a draft law on La Poste and postal activities, scheduling La Poste’s conversion into a public limited company for 1 January 2010. The French authorities also indicated that they would be sending their comments on the Commission’s expert’s report.

(16) After two reminder letters from the Commission dated 9 September and 6 October 2009, France made known, by memorandum transmitted on 27 October 2009, its comments on the Commission’s expert’s report and forwarded an opinion by Mr Guy Carcassonne, professeur des universités and agrégé des facultés de droit (‘the French authorities’ expert’).

(17) An amendment to the draft law on La Poste and postal activities was tabled on 11 December 2009, postponing La Poste’s conversion into a public limited company until March 2010.

2. DESCRIPTION OF THE MEASURE

(18) Law No 90-568 of 2 July 1990 on the organisation of public postal and telecommunication services (9) (‘the Law of 2 July 1990’) converted the former Directorate-General for Posts and Telecommunications into two legal entities governed by public law: La Poste and France Telecom.

(19) Some legal entities governed by public law are not, legally speaking, publicly owned establishments of an administrative character (établissements publics à caractère administratif — EPAs) or publicly owned establishments of an industrial and commercial character (établissements publics à caractère industriel et commercial — EPICs) (10). Such is the case with La Poste. In its judgment of 18 January 2001 (2nd Civil Division) (11), the Court of Cassation nevertheless held that La Poste is to be deemed equivalent to an EPIC (12). The legal consequences of La Poste’s legal form are as follows:

2.1. INAPPLICABILITY OF INSOLVENCY AND BANKRUPTCY PROCEDURES TO LA POSTE

(20) Article 1 of the Law of 2 July 1990 states that La Poste is a legal entity governed by public law. Now, in France, legal entities governed by public law are not subject to ordinary law as regards the compulsory administration and winding up of firms in difficulty.

(21) The inapplicability of insolvency and bankruptcy procedures to legal entities governed by public law apparently derives from the general principle of the immunity from seizure of the assets of legal entities governed by public law, which has been recognised by the French courts, including the Court of Cassation, since the late 19th century (13).

(22) Moreover, Article 2 of Law No 85-98 of 25 January 1985 on the compulsory administration and winding up of undertakings (14) (‘the Law of 25 January 1985’), which defines the scope of the ordinary-law procedures of compulsory administration and winding up of undertakings in France, and which has become Article L 620-2 of the Commercial Code, provides that ‘administration and winding-up procedures shall apply to traders, persons registered with the craftsmen’s register, farmers and private-law entities’. It follows from the wording of that article and from the interpretation of it by the French courts (15) that ordinary-law collective procedures do not apply to legal entities governed by public law.

2.2. APPLICABILITY TO LA POSTE OF THE LAW OF 16 JULY 1980 AND OF THE PRINCIPLE OF LAST-RESORT STATE LIABILITY FOR THE DEBTS OF LEGAL ENTITIES GOVERNED BY PUBLIC LAW

(23) The Law of 16 July 1980 is applicable to La Poste, which is categorised by the Law of 2 July 1990 as a legal entity governed by public law.

(24) Article 1, Section II, of the Law of 16 July 1980 provides that ‘Where a judicial decision which has become final orders a local authority or a publicly owned establishment to pay a sum of money the amount of which is fixed in the decision itself, payment of the sum must be ordered within two months of notification of the decision. If payment is not ordered within that period, the representative of the State in the département or the supervisory authority shall issue a mandatory payment order. If insufficient funds are available, the representative of the State in the département or the supervisory authority shall give the authority or establishment formal notice to create the necessary resources; if the decision-making body of the authority or establishment has not released or created the resources, the representative of the State in the département or the supervisory authority shall do so, and if necessary shall issue a mandatory payment order’.

(25) The fourth subparagraph of Article 3-1 of the Decree of 12 May 1981 provides that ‘If the notice given has had no effect by the time these deadlines expire (16), the representative of the State or the authority responsible for supervision shall enter the expenditure in the budget of the defaulting authority or publicly owned establishment. The representative of the State or the authority responsible for supervision shall, as appropriate, release the necessary resources either by reducing the appropriations allocated to other expenditures and still available or by increasing resources.’ Lastly, the fifth subparagraph of Article 3-1 of the same Decree provides that ‘If within eight days following notification of entry of the appropriation the local authority or publicly owned establishment has not ordered payment of the sum due, the representative of the State or the authority responsible for supervision shall within one month issue a mandatory payment order’.

(26) The Decree of 12 May 1981 was repealed and replaced by Decree No 2008-479 of 20 May 2008 on the enforcement of financial penalties imposed on public entities. Nevertheless, Article 10 of the new Decree reproduces the wording of the fourth and fifth subparagraphs of Article 3-1 of the Decree of 12 May 1981 (17). It is therefore substantively the same.

(27) The circular of 16 October 1989 (18) states that ‘Where there are no or insufficient appropriations, which situation is referred to in the second subparagraph of Section II of Article 1 of the Law of 16 July 1980, the authorising officer shall also, before the expiry of the four-month period, inform the creditor of that fact by registered letter with acknowledgement of receipt, specifying the amount the payment of which will subsequently be ordered. Such payment order will cover either the whole amount due where there are no appropriations or the balance where there are insufficient appropriations’.

(28) It is clear from all these provisions that the Law of 16 July 1980 and its implementing rules are intended only to ensure the enforcement of final judicial decisions ordering either the State, a local authority or a publicly owned establishment to pay a sum of money. They do not prescribe any compulsory administration or winding-up procedure.

(29) The Law of 16 July 1980 and its implementing rules expressly identify the State as the authority responsible for covering the debts of publicly owned establishments. The State has important prerogatives: first, the issuing of a mandatory payment order, and second, the creation of sufficient resources. This calls for an examination of the extent to which the possibilities for creditors to obtain compensation through the liability of the State in the event of La Poste defaulting can be likened to a form of guarantee.

(30) In addition to noting the above-mentioned two elements (inapplicability of insolvency procedures and applicability of the Law of 16 July 1980), the Commission observed in its opening decision that rules applicable to certain EPICs might apply also to La Poste:

2.3. TRANSFER OF THE LIABILITIES OF AN EPIC THAT HAS BEEN WOUND UP TO ANOTHER PUBLICLY OWNED ESTABLISHMENT OR TO THE STATE

(31) Codifying instruction No 02-060-M95 of 18 July 2002 on the financial and accounting regulation of national publicly owned establishments of an industrial and commercial character (19) (‘the codifying instruction’) provides that two situations may arise in the event of the closure of an EPIC with a public accountant: — either a new publicly owned establishment replaces the former EPIC and takes over its property, rights and obligations, — or the publicly owned establishment is declared wound up, in which case ‘the instrument winding up the establishment may already designate the beneficiary of the balance of the liquidation, which will generally be the State’ (20).

(32) The guide to the financial organisation of the creation, conversion and abolition of national publicly owned establishments and of public interest groups of 14 November 2006 (‘the guide to financial organisation’), which is available on the website of the Ministry of Finance, states (21): ‘The instrument abolishing the establishment must explicitly provide for the transfer of the rights, property and obligations of the abolished establishment to the structure which is to take over its activity or its assets (i.e. either a publicly owned establishment or the State) […] More generally, it must be provided that the new establishment will replace the entities whose activities it is taking over in respect of the rights and obligations resulting from the contracts concluded for the purpose of performing the tasks assigned to it’.

(33) Although the provisions of the codifying instruction and of the guide to financial organisation are applicable only to EPICs which have a public accountant, there is evidence to suggest that EPICs which do not have a public accountant would also, in the event of their being closed down, have their debts transferred to the State or to another publicly owned establishment.

(34) Thus, Charbonnages de France stated in the notes to its accounts of 31 December 2000 that all the rights and obligations of an EPIC must, in the event of closure, be transferred either to another legal entity governed by public law or to the French Government itself, and that the terms and conditions of such a transfer must be specified in the law adopted with a view to closing down the EPIC in question. This statement does not apply only to EPICs with a public accountant, Charbonnages de France being in fact an EPIC without a public accountant.

(35) According to some rating agencies, if ERAP (22) were to be wound up, although it is also an EPIC without a public accountant, the balance of its debt and of its assets would also be transferred to the State. According to Fitch (23), as an EPIC, ERAP is not subject to winding-up procedures. It can be wound up only by a legislative procedure and, in that event, the balance of its debt and of its assets will revert to the State. According to Moody’s (24), ERAP cannot be the subject of restructuring measures imposed by the compulsory winding-up procedures court. Hence, in the event of the company being wound up, its assets/liabilities would be transferred to the authority responsible for creating it, i.e. the State itself.

(36) In the light of the foregoing, and despite the fact that La Poste does not have a public accountant (25), it should be examined whether, in the event of a winding up, the principle of the transfer of the debts to the State or to another legal entity governed by public law is applicable to La Poste given that it is treated as equivalent to an EPIC. If that were the case, creditors would be assured of not losing the money they are owed and could make do with a lower rate of interest or grant more favourable payment terms and conditions than they would if there were no such assurance. Such a transfer would therefore have the same effects as a guarantee.

2.4. DIRECT ACCESS TO TREASURY ACCOUNTS

(37) Again according to Fitch (26), ERAP’s liquidity is guaranteed by its instant access to Treasury imprest accounts. As ERAP is an EPIC, the access which La Poste might also have to Treasury imprest accounts should be examined.

3. OBSERVATIONS AND PROPOSALS BY THE FRENCH AUTHORITIES

(38) Following the opening decision, the French authorities submitted their observations and proposals to the Commission by letter dated 23 January 2008. That letter supplemented the observations and proposals set out in the previous letters from the French authorities (27) that were summarised in the opening decision.

3.1. OBSERVATIONS BY THE FRENCH AUTHORITIES

(39) The French authorities dispute the existence of both a guarantee and an advantage for La Poste.

3.1.1. ABSENCE OF GUARANTEE

(40) First, according to the French authorities, publicly owned establishments do not enjoy an automatic guarantee because of their legal form (A) and, second, the Commission’s argument in the opening decision is flawed (B).

A. Publicly owned establishments do not enjoy an automatic guarantee because of their legal form (28).

(41) First, no legislation or decision lays down the principle that the State would, out of principle, indefinitely guarantee the debts of EPICs.

(42) Second, the courts have found against the existence of guarantees. In particular, in its judgment in Société de l’hôtel d’Albe (29), the Council of State held that ‘the national tourism office, which has civil personality and financial independence […] was a publicly owned establishment, so that the State cannot be liable for satisfying the debts contracted by the establishment; the Minister for Public Works therefore correctly refused to accede to the [creditor’s] demand’. The same reasoning was followed with regard to local authorities in the two decisions by the Council of State in the Campoloro case (30).

(43) Third, the Organic Law of 1 August 2001 governing the Finance Act (31) (‘LOLF’) lays down that only a provision of a finance act can create a guarantee (32). Accordingly, according to the French authorities’ expert (33), it has been legally possible to give an implied guarantee since the full entry into force of the LOLF on 1 January 2005. Debts contracted by La Poste since 1 January 2005 are not, therefore, covered by an implied guarantee. As for debts incurred before 1 January 2005, the French authorities’ expert takes the view that, in the absence of a court judgment, it is impossible to determine whether the lapsing of the implied guarantees given before 1 January 2005, the giving of which was not expressly authorised by a finance act, could be rejected on the basis of respect for constitutionally protected creditors’ rights.

(44) Fourth, if EPICs enjoyed a state guarantee, the change in their legal form would require the introduction of new measures to protect creditors’ rights. Such a mechanism has never been introduced. On the contrary, when the Administration of Posts and Telecommunications was converted into an independent legal entity (La Poste) on 1 January 1991, the State, by order (arrêté) of 31 December 1990, granted an express guarantee for debts incurred before 31 December 1990 and transferred to La Poste. That would not have been necessary if La Poste, as an establishment equivalent to an EPIC, had enjoyed a statutory state guarantee. Legislative and regulatory provisions granting a state guarantee to certain activities of ERAP and of the French Development Agency (Agence française du développement), both of which are EPICs, have also been adopted.

(45) Finally, the French authorities refer to an article (34) by Mr Labetoulle, the former President of the litigation division of the Council of State. According to Mr Labetoulle, ‘in law, there is nothing automatic about the granting, enjoyment and scope of this guarantee [a state guarantee that applies ipso jure to state-owned public establishments]’.

B. The Commission’s argument concerning the existence of a guarantee is flawed (35)

(a) The reimbursement of individual claims is not guaranteed

1. The Law of 16 July 1980 cannot form the basis of a guarantee

(46) According to the French authorities (36), the Law of 16 July 1980 grants the supervisory authority power of substitution for the executive of the person whom it replaces. Therefore, the supervisory authority may exercise only the powers of that executive, which do not include the possibility of having access to the state budget. The Law of 16 July 1980 does not, therefore, provide an obligation for the State to commit its own resources.

(47) In support of this interpretation, the French authorities cite the preparatory debates for the Law of 16 July 1980. During the debates, the Government opposed the amendments seeking to make it compulsory for the State to pay an exceptional subsidy to a regional or local authority whose resources were insufficient to implement a court judgment.

(48) The French authorities also refer to academic articles (37). These articles point out that the expression ‘y pourvoit’ in Article 1 of the Law of 16 July 1980 refers to a power of ‘substitution’ in which ‘it is a matter of principle that the substitute has the same powers as the substitutee’, the granting of an exceptional subsidy being, moreover, ‘outside the scope of the power of substitution’ and therefore not provided for by the Law of 16 July 1980.

(49) Finally, the French authorities cite the decisions of the Council of State of 10 November 1999 (38) and 18 November 2005 (39) in the Campoloro case. The Council of State took the view that the financial substitution by the State of the defaulting local authority does not feature on the list of obligations imposed by the Law of 16 July 1980. Moreover, by investigating whether there were grounds for incurring the State’s liability in the limited area of fault — gross negligence at that — the Council of State excluded out of principle all forms of ipso jure liability and therefore any form of guarantee.

2. It is not possible to incur the strict liability of the State solely on the ground of lack of assets

(50) Moreover, the French authorities assert that the possibilities of compensation opened by incurring liability, under restrictive conditions, to creditors of legal entities governed by public law cannot be considered equivalent to a form of guarantee. A guarantee requires the guarantor to accept the fact of the guarantee. If it is a matter of incurring liability for a fault or, in the case of strict liability, the consequences of one’s own action, there can be no question of a guarantee.

(51) Then the French authorities maintain that, in any event, the liability of the State cannot be incurred on the sole ground that the Prefect or supervisory authority was unable to take any measures that could allow the claim to be repaid because of the financial and asset situation of the regional or local authority or publicly owned establishment.

(52) First of all, in the field of fault — gross negligence at that — the failure by the Prefect or the supervisory authority to exercise their powers where no measure can enable the claim to be repaid by the regional or local authority or the publicly owned establishment cannot in itself constitute a fault.

(53) With regard to strict liability, at least two aspects suggest the idea be dismissed: — first, the liability of the person from whom compensation is sought can be incurred only if the fact (including an omission) of which he is accused was the direct cause of the injury. Now, in the case of lack of assets, the action or omission by the administrative authority would not be the cause of the injury suffered by the creditor, rather the insolvency of the regional or local authority or the publicly owned establishment, — second, strict liability stems from the principle of equality before public burdens. Now, according to the French authorities, in the case in point it is hard to see how the injury suffered by the creditor could lead to a breach of the principle of equality before public burdens. Unlike the case that gave rise to the Couitéas case law (40), in the present case, no state authority decided not to execute the judgment for imperative reasons of public interest. The case in question is one where the public authority is faced with the practical impossibility of taking measures that would enable the court judgment to be executed and the creditors to be reimbursed, and not an impossibility determined on the grounds of requirements of the public interest. According to the French authorities, liability for a breach of equality before public burdens cannot, therefore, be incurred simply because of insolvency. With regard to the Commission’s argument, set out in recital 59 of its opening decision, that ‘if the representative of the State gave preference to maintaining the continuity of the public service over the right of the creditor to have his debt repaid, it cannot be excluded that the strict liability of the State could be incurred’, the French authorities recognise that the requirement of continuity of the public service is imposed on the representative of the State when implementing the procedure laid down by the Law of 16 July 1980. Nonetheless, according to the French authorities, even if the judge were to order the creditor to be compensated, such compensation would have the effect of reinstating the creditor to the situation in which he would have been under ordinary law because, in this latter case, the good in question would have been sold and the body of creditors would have received the corresponding amount. There would therefore be no advantage to the creditor.

(b) […] (41)

1. The inapplicability to legal entities governed by public law of administration and winding-up procedures under ordinary law does not exclude the possibility of the bankruptcy of an EPIC or of bankruptcy proceedings against it

(54) According to the French authorities, the Commission’s analysis is based on its 2000 Notice on State aid in the form of guarantees (‘the 2000 Guarantees Notice’) (42), and in particular point 2.1.3 thereof, which provides that ‘The Commission also regards as aid in the form of a guarantee, the more favourable funding terms obtained by enterprises whose legal form rules out bankruptcy or other insolvency procedures or provides an explicit State guarantee or coverage of losses by the State’.

(55) While noting that the rules of the Treaty take precedence over the 2000 Guarantees Notice, the French authorities identify two factors which, in their view, remove the case in question from the scope of Notice: — the 2000 Guarantees Notice stresses the fact that any aid would arise from ‘more favourable funding terms’ that would be imputed to the exclusion of the possibility of bankruptcy proceedings; but the Commission has not demonstrated the existence of ‘more favourable funding terms’, — the 2000 Guarantees Notice examines the case where the legal form excludes all bankruptcy or insolvency proceedings and not specific proceedings; but the Commission has not established that La Poste cannot go bankrupt, nor that insolvency proceedings are impossible.

(56) According to the French authorities, the Law of 25 January 1985 is merely a procedural law. The fact that EPICs lie outside its scope does not mean that an EPIC cannot be in default, nor that the law prohibits administration, winding-up or ad hoc bankruptcy proceedings being taken against it.

2. The application of the ‘procedure’ introduced by the Law of 16 July 1980, rather than the collective procedure under ordinary law, does not confer any advantage on the creditor

(57) The French authorities, having analysed recital 68 of the opening decision, conclude that the Commission uses two criteria to assess whether the application of a specific procedure in the event of insolvency confers an advantage on the entity subject to the procedure in relation to undertakings subject to commercial law: — a criterion relating to publicity: the procedure to be followed in the event of La Poste’s insolvency should be defined and made public, — a criterion relating to equivalence: this procedure should be either the private-law procedure or a procedure that gives the creditors of La Poste rights that are no better than those they would have under commercial law.

(58) Although the French authorities challenge the need to fulfil these two criteria (43), in so far as they are regarded as necessary and sufficient by the Commission, they have been used by the French authorities to analyse whether the application of the provisions of the Law of 16 July 1980 confers an advantage on the creditors of legal entities governed by public law compared with the creditors of undertakings subject to collective procedures under ordinary law.

(59) With regard to the criterion relating to publicity, the French authorities take the view that the procedure introduced by the Law of 16 July 1980 is correctly identified by the rating agencies as applicable in the event of the insolvency of an EPIC, as reported by the rating agencies referred to by the Commission in relation to ERAP.

(60) With regard to the criterion relating to equivalence, the French authorities draw a distinction between the case where a requirement for continuity of the public service would apply and where such a requirement would not apply.

(i) the ‘procedure’ introduced by the Law of 16 July 1980 analysed from the perspective of an equivalence test — leaving aside the requirement for continuity of the public service

(61) According to the French authorities, if La Poste were unable to repay its debts and if there were no requirement for continuity of the public service, the following procedure would apply: in the unlikely event of genuine financial difficulty and before reaching the stage of lack of assets, the undertaking would initially be required to open negotiations with its creditors in order to establish a plan for rescheduling liabilities. Next, if the plan was judged unsatisfactory or if it did not bring an end to the financial difficulties, and in the absence of a new agreement with creditors, they — or some of them — could refer the case to the competent court to obtain a judgment against the debtor and therefore have their claim recognised. The procedure introduced by the Law of 16 July 1980 would then be implemented. Where necessary, the procedure could result in the supervisory authority replacing the executive of La Poste to take the decisions needed for the payment of its debts using the establishment’s resources. If the procedure introduced by the Law of 16 July 1980 were to come up against La Poste’s lack of assets, and if the supervisory authority were therefore faced with financial impossibility, not having any more assets to sell in order to generate the resources needed to pay the amount due, the procedure provided for by the Law of 16 July 1980 would be terminated.

(62) Therefore, according to the French authorities, assuming that there is no requirement for continuity of the public service, the application of the ‘procedure’ introduced by the Law of 16 July 1980 could result in all La Poste’s assets being sold but, in the event of lack of assets, the procedure would not enable all La Poste’s creditors to be repaid. At the end of the procedure, the creditors of an entity subject to the Law of 16 July 1980, taken together, would have recovered the same amount as the creditors of an entity subject to commercial law, i.e. the proceeds from the sale of the assets.

(63) This procedure differs in only two respects from the procedure applicable under commercial law: — the absence of a single procedure for all creditors: unlike the procedure under private law, whereby claims are processed en masse and creditors are satisfied in decreasing order of priority and pro rata from the amounts available, the procedure introduced by the Law of 16 July 1980 is different in that only action by the creditor enables him to protect his rights. The logic of the Law of 16 July 1980 is ‘first come, first served’, — it is the representative of the State who, under the supervision of the administrative court (monitoring for gross negligence as established by the Council of State in the Campoloro judgment of November 2005 cited above), takes on the role equivalent to that of the court-appointed liquidator and administrator.

(64) The French authorities take the view that at the end of the procedure the creditors would no longer have any redress. According to the French authorities, the State cannot be held liable solely on the ground of lack of assets. Likewise, under the private-law procedure, the creditors ‘do not recover their right to take individual action’, save in exceptional circumstances, at the end of the compulsory winding-up procedure (44).

(ii) the ‘procedure’ introduced by the Law of 16 July 1980 analysed from the perspective of an equivalence test — taking into account the requirement for continuity of the public service

(65) In the event that the continuity of the public service would have to be guaranteed, the French authorities admit that the representative of the State, when exercising the powers conferred by the Law of 16 July 1980, could decide not to sell certain assets needed to perform a public service task. The failure to sell certain goods, for reasons relating to the requirement for continuity of the public service, would be reflected, if the State did not pay compensation, in lower proceeds from the assets and a corresponding reduction in the amounts recoverable by creditors. The procedure would not confer on La Poste’s creditors rights greater than those they would have had under commercial law. According to the French authorities, the criterion relating to equivalence set by the Commission would therefore be met a fortiori.

(66) Nonetheless, the French authorities admit that, in such an event, the State’s strict liability would then be likely to be incurred and reflected in compensation to creditors of the amount of the loss they have suffered, i.e. at most the market value of the assets that the State representative lawfully decided not to sell. According to the French authorities, any such compensation would nonetheless merely reinstate the creditor in the situation that would result from the application of ordinary law and could not, therefore, confer on him, with regard to the equivalence test, any rights greater than those he would have under ordinary law.

(67) The French authorities conclude that the procedure introduced by the Law of 16 July 1980 fulfils the equivalence and publicity criteria set by the Commission, which are sufficient to rule out the existence of an advantage. They take the view that there is therefore no justification for subjecting La Poste directly to the procedure under ordinary law, which is cumbersome and complex.

3. The instruments cited by the Commission on the future of the obligations once the establishment’s resources have been exhausted do not apply to La Poste

(68) According to the French authorities, the instruments referred to by the Commission in the opening decision, in particular in recital 69, are neither applicable nor transferable to La Poste.

3.1.2. ABSENCE OF ADVANTAGE

(69) According to the French authorities, the Commission’s analysis of the existence of a selective advantage follows two threads: — a circular argument that is based on the 2000 Guarantee Notice, — an analysis of the presumed influence of the alleged measure on the rating agencies.

A. The Commission’s 2000 Guarantees Notice cannot be used to conclude that there is an advantage in the case in question

(70) The French authorities take the view that the Commission, in recital 77 of the opening decision, wrongly interprets point 2.1.3 of the 2000 Guarantees Notice. According to the French authorities, point 2.1.3 implies that, in the case of an enterprise whose legal form rules out bankruptcy or other insolvency procedures, if the enterprise enjoys more favourable funding terms, those terms constitute State aid in the form of a guarantee. According to the French authorities, nothing in point 2.1.3 of the Commission’s 2000 Guarantees Notice indicates that the Commission considers that the fact that the legal form of an enterprise excludes the possibility of bankruptcy proceedings necessarily leads to the enterprise enjoying more favourable funding terms.

(71) Moreover, the French authorities take the view that La Poste falls outside the scope of point 2.1.3 of the Commission’s 2000 Guarantees Notice because the notice addresses the case where the legal form excludes all bankruptcy and insolvency proceedings, not a specific procedure. But, according to the French authorities, the Commission has not established that La Poste cannot go bankrupt, nor that all insolvency proceedings were inapplicable.

B. Absence of imputability and of state resources

(72) In recital 79 of the opening decision, the Commission points out the influence of the rating agencies on the funding terms obtained by undertakings.

(73) After highlighting the weaknesses of the rating agencies, the French authorities confirm that the position taken by a rating agency, where it is not underpinned by a precise analysis of the legal framework in force, cannot be used to create an advantage imputable to the State that may constitute State aid. In addition, even though this assessment would in practice provide an EPIC with advantageous access to funding, in law and in practice it would provide no access to state resources, which would be necessary to establish the existence of State aid.

(74) The French authorities add that the analyses by the rating agencies are based, not on an objective legal basis, but on a subjective assessment of state support in the event of the undertaking in question running into difficulty.

C. Circular argument

(75) According to the French authorities, the Commission’s argument is circular: — the Commission has based its argument on the statements by the rating agencies to highlight an economic advantage, — the market and the rating agencies have accepted the absence of a state guarantee for La Poste but continue to harbour a doubt that is generated only by the position expressed by the Commission.

D. Absence of effect on La Poste’s rating

(76) In any event, according to the French authorities, the opening decision does not establish that La Poste’s rating would be higher because of an alleged unlimited state guarantee.

(a) The doctrine of the rating agencies is not sufficient to identify any effect

(77) The French authorities make a number of comments on the study by Standard and Poor’s entitled ‘Influence of Government Support on Ratings’, cited by the Commission in recital 80 of the opening decision. In the study, Standard and Poor’s identifies a number of categories of government-supported postal companies; the classification determines the methodology applied by Standard and Poor’s to set the rating of the company in question.

(78) The French authorities point out that inclusion in Category 1 (45) depends on broad criteria, such as the nature of the activity and the economic and social environment, but does not refer to the legal form of the rated operator.

(79) The French authorities note that on 22 November 2004 the French and Italian Post Offices were classified in Category 2 (46). The French authorities conclude from the Standard and Poor’s document that the financial performance of Poste Italiane did not justify its rating. According to the French authorities, the Italian Post Office therefore benefited from a rating that was influenced by its owner’s rating, even though the Italian Post Office is an SpA under ordinary law.

(80) The French authorities point out that Standard and Poor’s eventually classified La Poste in Category 3 (47). According to the French authorities, the major reforms implemented since the end of 2004 gradually led Standard and Poor’s to classify La Poste in the third category. The French authorities conclude that it cannot be established that La Poste’s rating is imputable solely to its legal form or to any state guarantee mechanism, nor that the rating may constitute State aid.

(81) Nonetheless, the French authorities admit that the Standard and Poor’s 2004 study raised the question of La Poste’s legal form. However, they confirm that the discussions they have had since with Standard and Poor’s have clarified the question. The French authorities also informed Fitch about the absence of any state guarantee for La Poste, following which the agency undertook to reconsider the question.

(b) There are many cases in the private sector where the rating of a subsidiary is linked to the parent company’s rating

(82) According to the French authorities, the influence of the presence of a stable majority shareholder, which was identified by the rating agencies in the case of the Italian Post Office independently of any specific features relating to legal form, is also found in the case of private groups. The French authorities cite as examples a Standard and Poor’s press release on AGF dated 3 December 2003 (48), a press release on Volkswagen Bank GmbH (49) and a press release on VWFS (50). According to the French authorities, this type of approach is therefore in no way specific to the public sector.

(c) La Poste’s rating would not be adjusted if its legal form were changed

(83) Using the analysis for Standard and Poor’s rating of La Poste, the French authorities seek to demonstrate that the rating does not depend on La Poste’s legal form.

(84) First, the French authorities point out that when they made their observations, Standard and Poor’s rated La Poste AA– with a stable outlook. The rating downgrade was justified by Standard and Poor’s by the forthcoming deterioration in the group’s financial structure linked to the payment by La Poste of EUR 2 billion to reform the financing of civil servants’ pensions and by ‘La Poste’s greater autonomy in relation to its shareholder’. The French authorities take the view that the downgrade, which did not occur after a change in La Poste’s legal form, cannot be explained if La Poste’s rating were simply a consequence of its legal form.

(85) Second, despite the detail (51) provided by Standard and Poor’s in its note dated 3 April 2007, which was cited in recital 84 of the opening decision, the French authorities find it difficult to see how La Poste, if it enjoyed a state guarantee, could be rated 3 notches below the State. Likewise, if the Law of 16 July 1980 were interpreted by the rating agencies as establishing, for the benefit of the creditors of the legal persons concerned, a mechanism comparable to a state guarantee, the French authorities do not understand how regional and local authorities could be rated BBB+ while the sovereign rating is rated AAA.

(86) Third, the French authorities stress that the Standard and Poor’s note dated 3 April 2007 is based on a list of the strengths and weaknesses of the company that does not mention its legal form. The two factors mentioned by Standard and Poor’s in support of the rating, i.e. the economic importance of La Poste’s public service tasks and strong shareholder backing, are factors distinct from La Poste’s legal form. The French authorities maintain that strong shareholder backing does not mean financial support in breach of EU law but the interest shown in La Poste’s development by the State at arm’s length (52). The French authorities conclude that La Poste’s legal form is not an essential factor behind the rating.

(87) Fourth, the French authorities point out that in the same note dated 3 April 2007 the rating agency makes clear that it is continuing to use a top-down methodology, which allows an entity to be rated up to two categories below the sovereign State. According to the agency, this methodology is justified by the fact that the State will have to remain the 100 % shareholder in La Poste in the medium term. The French authorities conclude that this approach is in no way justified by La Poste’s legal form. Lastly, relying on a quotation from Standard and Poor’s (53), the French authorities argue that it is not the change in legal form but an opening-up of the capital that would lead Standard and Poor’s to adopt a bottom-up methodology for La Poste. They add that, given the expected improvement in La Poste’s fundamentals, such a change in methodology would not necessarily be reflected in a change in rating.

(88) Fifth, the French authorities point out that the outlook set by the rating agency is stable, despite the proceedings opened by the Commission against the unlimited state guarantee that La Poste is alleged to enjoy by virtue of its legal form. Now, if the legal form had an influence on the undertaking’s solvency, the prospect of changing it should be reflected in a negative and unstable outlook. Moreover, Standard and Poor’s justifies the stable outlook by the fact that the State is expected to remain 100 % shareholder in the undertaking for the next two years, despite a possible change to its legal form. Referring to another statement by Standard and Poor’s (54), the French authorities conclude that it is the undertaking’s own performance, and the possibility of a change of ownership, that are taken into account by Standard and Poor’s to determine movements in the rating and not a possible change in the legal form.

(89) Sixth, the French authorities, citing another extract from the Standard and Poor’s 2007 rating (55), stress that the rating agency does not reflect the Commission’s statement that the consequence of the legal form is to improve the financing conditions granted to La Poste. Based on the citation from Standard and Poor’s that: ‘The ratings on La Poste were unaffected by this recommendation since we consider that a change in La Poste’s status would not necessarily reflect a decrease in the strong state support that underpins LP’s ratings and that has been reaffirmed by recent government decisions’ (56), the French authorities conclude that La Poste’s legal form has no influence on its rating.

E. Absence of effect on La Poste’s financing conditions

(90) Lastly, the French authorities examine La Poste’s actual financing conditions to determine whether they are affected by an alleged state guarantee.

(91) According to the French authorities, neither the announcement by the Commission of the existence of the alleged guarantee, its alleged incompatibility with EU law and, consequently, its impending removal, nor the denials by the French authorities concerning the existence of the guarantee made to rating agencies and to the press, have had any influence on La Poste’s financing conditions. Accordingly, in October 2006 La Poste issued bonds to the value of EUR 1,8 billion with two maturities, 7 and 15 years, just after the Commission announced that it had recommended measures be taken. La Poste referred to the recommendation in the prospectus and made clear, during the meetings with investors, that it did not enjoy a state guarantee. Now, after the bond issue, La Poste’s cost of finance had not changed significantly (57). The two issues were widely subscribed by European investors with the usual investor profile for La Poste, i.e. investors who hold their bonds until maturity. The French authorities conclude that the Commission’s request to withdraw the alleged guarantee and the publicity surrounding the State’s position on this issue did not have any influence on La Poste’s financing conditions on the bond market. The markets took the view that La Poste’s financing conditions were not based on the de jure or de facto existence of any guarantee.

(92) The French authorities conclude that: — the analysis set out by the Commission in its opening decision is flawed: La Poste does not, in fact, enjoy any state guarantee, — the Commission has not demonstrated the existence of an advantage for La Poste deriving from its legal form, — the Commission has not, therefore, demonstrated the existence of State aid to La Poste.

3.2. PROPOSALS BY THE FRENCH AUTHORITIES

(93) Nonetheless, in order to dispel any doubts on the part of the Commission, the French authorities have indicated that they were willing to implement the following measures if the Commission agreed to close the procedure by a decision that no aid is involved, in accordance with Article 7(2) of the Procedural Regulation: — clarification of the Decree implementing the Law of 16 July 1980, — incorporation of a reference spelling out the absence of a guarantee in La Poste’s contracts involving a claim, — a mechanism for transferring from La Poste to the State any negative effect on the spread linked to the fact that La Poste is not subject to collective procedures under ordinary law.

3.2.1. CLARIFICATION OF THE DECREE IMPLEMENTING THE LAW OF 16 JULY 1980

(94) According to the French authorities, there is no need to amend the substance of the provisions in question, but simply to clarify how they are interpreted. They are therefore proposing to amend the Decree implementing the Law (58). The amendment would apply to the fourth subparagraph of Article 3(1) of the Decree, which organises the supervisory power conferred on the Prefect or on the supervisory authority. The amendment must dispel any misgivings harboured by the Commission concerning the scope of the expression ‘shall do so’ (‘y pourvoit’). It is therefore proposed to spell out that the representative of the State or the supervisory authority must release resources from the budget of the regional or local authority, or the establishment.

(95) Duly amended, the provision in the Decree would read: ‘If the notice given has had no effect by the time these deadlines expire, the representative of the State or the authority responsible for supervision shall enter the expenditure in the budget of the defaulting authority or publicly owned establishment. The representative of the State or the authority responsible for supervision shall, as appropriate, release the necessary resources from the budget of the defaulting authority or establishment, either by reducing the appropriations allocated to other expenditures and still available or by increasing resources’ (the amendment is shown in italic).

(96) According to the French authorities, this proposal, in association with the observations and the academic articles supplied during the previous discussions on the opening letter, prevents the Prefect or the representative of the State, under the procedure introduced by the Law of 16 July 1980, from increasing the resources of the local authority or establishment concerned by a subsidy from the State or an injection of public resources.

3.2.2. INCORPORATION OF A REFERENCE SPELLING OUT THE ABSENCE OF GUARANTEE IN LA POSTE’S CONTRACTS INVOLVING A CLAIM

A. The initial proposal by the French authorities

(97) In recital 59 of the opening decision, the Commission took the view that the proposal by the French authorities to amend the Decree implementing the Law of 16 July 1980‘does not exclude the possibility that, where the resources of La Poste are exhausted, the creditor who has not obtained repayment of his claim under application of the Law of 16 July 1980 could bring legal action to render the State liable on the basis of a breach of the principle of equality before public burdens’.

(98) Although the French authorities deny that the State can be held liable solely on the grounds of La Poste’s insolvency, in order to dispel any doubts in the Commission, the French authorities are making a proposal based on the exception of accepted risk. This exception, which applies both to the liability of the State with or without fault, is based on the principle that the injury resulting from a situation to which the victim knowingly exposed himself precludes the victim from having any right to compensation (see the judgments by the Council of State in Sille (59) and Meunier (60).

(99) Consequently, in order to ensure that this exception is applied, the French authorities propose to confirm officially to La Poste’s creditors that their claim does not enjoy a state guarantee and that, in the event of insolvency, the State would not be obliged to substitute itself for the undertaking financially to pay the claim. Such a notification is not against the law since the law in no way provides that in the event of La Poste’s insolvency, the State should replace the undertaking financially in order to pay its debts.

(100) Beyond the clarification of the Decree implementing the Law of 16 July 1980, the French authorities therefore undertake, jointly with La Poste, to include the following statement in the financing contract for each transaction (for all instruments covered by a contract): ‘The issue/programme/loan does not enjoy any form of direct or indirect state guarantee. In the event of insolvency, the State would not be obliged to act as financial substitute for La Poste for payment of the claim’.

B. The Commission’s misgivings set out in the opening decision

(101) In recital 61 of the opening decision, the Commission sets out the following misgivings concerning the above proposals by the French authorities: — the exception of accepted risk is a rule established by case law that could develop, — ‘this argument, which is derived from the fundamental principles of public law, through secondary law instruments, appears imperfect because those instruments would be likely to be annulled in the event of conflict’, — finally, La Poste’s debts are not only financial but also commercial or other; these scenarios are not addressed by the additional proposal by the French authorities.

C. Information provided by the French authorities to address these misgivings

(102) As pointed out above, according to the French authorities the State’s strict liability cannot be incurred solely on the grounds of La Poste’s lack of assets because making the State liable requires a decision by the State to act or not to act, and in this case there is a practical impossibility of acting. The French authorities’ proposal therefore has value only as an additional means of clarification for creditors since the proposal would incidentally remove any risk of the State’s strict liability being incurred thanks to the exception of accepted risk.

(103) According to the French authorities, the Commission’s first objection amounts to taking the view that, even if the national law of a Member State did not include a provision, the mere risk of a change in case law, i.e. a change in national law, is enough to constitute State aid. The French authorities challenge that reasoning. According to them, the exception of accepted risk is a general principle of public law that has been confirmed by case law on many occasions, never contradicted and widely commented. The Commission cannot argue that there is State aid because of a possible change in the law, which in this case is highly improbable.

(104) The Commission’s second objection relates to the fact that these secondary law instruments are easily annulled in case of conflict. It is true that the law and the regulation take precedence over the contract. However, for the Commission’s objection to have real weight, it would have to rely on a higher-ranking text. According to the French authorities, there is nothing to support the Commission’s objection on this point.

(105) However, the French authorities admit that the third objection, which is that bond issues are not the only instruments giving rise to claims, is pertinent, although of limited scope in the case of La Poste because financial debt is La Poste’s main form of debt and the vast majority is bond debt.

D. Extension of the proposal

(106) The French authorities have therefore indicated that they would be willing, if the Commission closed the formal investigation procedure by a decision to the effect that there is no aid within the meaning of Article 7(2) of the Procedural Regulation, to extend their proposal to include a statement concerning the absence of a guarantee to all contracts involving a claim. According to the French authorities, this extension would make it possible to avoid any risk of incurring the State’s strict liability based solely on La Poste’s insolvency. Moreover, incurring the State’s strict liability because of a decision by the supervisory authority not to sell the assets needed for the continuity of the public service would simply have the effect of placing La Poste’s creditors in the same situation they would have been in had they been creditors of a public limited company.

E. Assessment by the French authorities of the classification of the measures as aid following their proposals

(107) According to the French authorities, the two clarification measures proposed above would allow La Poste’s creditors to be made fully aware of their rights. Consequently, the French authorities cannot be considered as ‘responsible for the expectations created in the minds of La Poste’s creditors concerning the existence of a guarantee’ and as voluntarily maintaining ‘an opaque legal situation’ that could lead the State ‘to be obliged to repay La Poste’s debts if it were no longer able to meet its commitments’, as the Commission maintains in recital 74 of its opening decision.

(108) According to the French authorities, the fact that La Poste is subject not to collective procedures under ordinary law but to the provisions of the Law of 16 July 1980 does not mean that it is possible to conclude that there is a state guarantee; second, the proposed clarification measures make it possible to dismiss any State responsibility for the market’s alleged faith in such a guarantee.

(109) Under these conditions, it is not possible to hold the State responsible for any potential effect. The criterion of imputability is therefore not met, contrary to what the Commission states in recital 76 of the opening decision.

(110) Likewise, recital 75 of the opening decision, in which the Commission refers to the 2000 Guarantees Notice to justify the presence of state resources, is no longer valid because the facts do not support the existence of a state guarantee.

3.2.3. TRANSFER MECHANISM

(111) In order to supplement the proposed mechanism, the French authorities would be willing to consider with the Commission the following approach.

(112) The proposed approach results from the analysis of the Commission position in point 2.1.3 of its 2000 Guarantees Notice: ‘The Commission also regards as aid in the form of a guarantee the more favourable funding terms obtained by enterprises whose legal form rules out bankruptcy or other insolvency procedures or provides an explicit State guarantee or coverage of losses by the State’. Likewise, in recital 114 of its opening decision, the Commission points out that it regards as a problem the fact that ‘France is not taking all measures necessary to prevent this legal form producing economic effects to the benefit of an undertaking that operates on competitive markets’.

(113) The French authorities challenge the applicability to La Poste of point 2.1.3 of the Commission’s 2000 Guarantees Notice and maintain that the Commission has been unable to establish that the fact that La Poste is not subject to collective procedures under private law is reflected in more favourable financing conditions.

(114) Nonetheless, the French authorities have offered to examine with the Commission the setting up of a transfer mechanism by La Poste to the State, on a euro-for-euro basis, of any adverse effect on the spread that is linked to the fact that La Poste is not subject to collective procedures under private law, using a calculation method that would be validated by the Commission and could be audited. According to the French authorities, the introduction of such an approach would complement the clarification proposals set out above in order to extinguish the myth of a state guarantee, while definitively avoiding any risk of aid.

4. ASSESSMENT

4.1. CLASSIFICATION AS AID

(115) Article 107(1) TFEU reads: ‘Save as otherwise provided in this Treaty, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the common market’.

4.1.1. UNLIMITED STATE GUARANTEE: STATE RESOURCES

(116) As was pointed out in recital 56 of the opening decision, La Poste has the status of a publicly owned establishment of an industrial or commercial character, or ‘EPIC’, and consequently enjoys a special legal position with regard to the payment of its creditors and its continuation in business in the event of insolvency.

(117) By way of introduction, the Commission would point out that La Poste is not subject to the ordinary law rules governing the administration and winding up of firms in difficulty (61). The French authorities do not contest this point, but deny that there is any mechanism that might be equivalent to a state guarantee for La Poste. However, according to the Commission Notice on the application of Articles 107 and 108 of the TFEU to State aid in the form of guarantees (‘the 2008 Guarantees Notice’), point 1.2, second paragraph, fourth indent (62), the Commission considers that there is aid in the form of a guarantee where more favourable funding terms are obtained by enterprises ‘whose legal form rules out bankruptcy or other insolvency procedures or provides an explicit State guarantee or coverage of losses by the State’. Consideration must therefore be given to the arguments by which the French authorities seek to show that there is no state guarantee here.

A. Guarantee of payment of individual claims

(118) In order to establish whether there is a guarantee for individual claims, the Commission will first consider whether, as the French authorities contend, any such guarantee is ruled out by the legislation or the case law (a).

(119) The Commission will then examine the steps to be taken by creditors of La Poste in order to recover their claims in the event that La Poste should be in financial difficulty and should be unable to pay its debts (b). The Commission will seek to determine whether the procedure to be followed is such that the position of a creditor of La Poste is comparable to that of a creditor of a firm governed by commercial law.

(a) Contrary to the French authorities’ affirmation, French law does acknowledge the existence of implied guarantees, and in particular the existence of a state guarantee deriving from the status of publicly owned establishment

1. The arguments of the French authorities (63)

(120) First, the French authorities assert that there is no legislation or decision laying down the principle that the State is to guarantee the debts of EPICs.

(121) The Commission observes that while it is true that there is no legislation or decision providing expressly for a state guarantee for EPICs — just as there is no legislation or decision expressly ruling out any state guarantee for such establishments — this does not mean that there can be no implied guarantee.

(122) Second, according to the French authorities, the courts have held, notably in the judgment in the case of Société de l’hôtel d’Albe (64) and in Campoloro (65), that there is no such guarantee.

(123) The Commission would observe that in Société de l’hôtel d’Albe, as pointed out by the Commission’s expert, the Council of State merely refused to grant an application brought by a creditor directly against the Minister for Public Works. A guarantee would come into play in the event of insolvency. The judgment cited did not concern the specific situation in which a guarantee might be invoked. A guarantee mechanism does not require the State to pay a debt of a publicly owned establishment whenever a creditor so requests.

(124) The Commission’s analysis of the Campoloro case is set out in section 4.1.1.A(b)(3) of this Decision. It will be shown that the judgment in Campoloro establishes a scheme of state liability in proceedings for the recovery of the debts of publicly owned establishments which displays all the characteristics of a guarantee mechanism.

(125) Third, the French authorities’ expert concludes that the debts contracted by La Poste since the entry into force, on 1 January 2005, of the Organic Law governing the Finance Act (‘LOLF’) do not qualify for an implied guarantee. With regard to debts contracted before that date and whose lifetime extends beyond it, the expert acknowledges that two views are possible. — On the first view, the Constitutional Council has found that guarantees do not lapse merely because they are not expressly authorised by the Finance Act, and the constitutional grounds on which it made this finding, in particular the principle of equality before public burdens and the right of property (66), apply to guarantees whether express or implied. In so far as there is an implied guarantee for the debts of La Poste, therefore, the fact that it was not authorised by the Finance Act would not mean that it would lapse in respect of debts contracted by La Poste before 1 January 2005. — On the second view, rights as indisputable and decisive as these cannot be claimed by the holders of a supposed implied guarantee. In so far as there is an implied guarantee for the debts of La Poste, therefore, the fact that that guarantee is not authorised in the Finance Act means that it also lapses in respect of debts contracted before 1 January 2005.

(126) The Commission notes that the French authorities’ expert accepts that it is not certain that the absence in the Finance Act of authorisation for an implied guarantee means that the guarantee lapses in respect of debts contracted before 1 January 2005. More fundamentally, the Commission believes that, in order to determine whether or not the implied guarantee given by the State to La Poste has lapsed as a result of the Organic Law governing the Finance Act, what has to be considered is not the dates on which the debts were contracted by La Poste, but the date from which La Poste has enjoyed the guarantee. The guarantee links the State and La Poste; creditors of La Poste benefit only indirectly; and the guarantee covers not just the payment of individual claims (see Section 4.1.1.A of this Decision) but also the continued existence of La Poste or its obligations or both (see Section 4.1.1.B). The implied state guarantee to La Poste dates from before 1 January 2005, and the Commission takes the view that the argument that there can be no implied guarantee since 1 January 2005 is false.

(127) In paragraph 110 (67) of its decision of 25 July 2001 on the Organic Law on the Finance Act, the Constitutional Council found that guarantees which were given before the enactment of the Organic Law governing the Finance Act and which have not been identified and listed have not lapsed as a result. According to the Commission’s expert, this reasoning applies squarely to implied guarantees, linked to the status of publicly owned establishments, which have not yet been identified and listed but which nevertheless remain valid.

(128) But although the Constitutional Council has indeed found that guarantees given without the authorisation of the Finance Act have not lapsed, the French authorities’ expert doubts whether the arguments that led to that conclusion apply without distinction to express guarantees and to implied guarantees. He takes the view that holders of a supposed implied guarantee cannot claim rights as indisputable and decisive as those conferred by an express guarantee.

(129) The French authorities’ expert merely expresses doubt, so his argument is not decisive, and the Commission notes that it is not suggested in this paragraph 110 of the Constitutional Council’s decision that guarantees given expressly do not lapse whereas implied guarantees do. Article 61 of the Organic Law on the Finance Act, to which the paragraph relates, does not confine itself to express guarantees either. The Commission believes that the opinion of the Constitutional Council that a guarantee does not come to an end merely because it is not authorised in the Finance Act applies whether the guarantee is express or implied. The Commission takes the view, therefore, that the fact that the implied guarantee given by the State to La Poste has not been authorised in the Finance Act does not mean that it has lapsed.

(130) In addition, as the Commission’s expert pointed out, the obligation to enter state guarantees in a Finance Act is confined to the ‘giving’(octroi) of such guarantees. To ‘give’ a guarantee the State must by an express manifestation of its intention confer a guarantee on an organisation or an operation. The scope of the obligation to enter guarantees in the Finance Act does not extend to guarantees that arise out of the legal form of an organisation, or out of an obligation established in case law, which are guarantees of an implied and automatic character. This category is not the result of a decision of the State, but of the fact that the State places itself in an existing legal framework, the guarantee being only one effect of that framework. The existence of this second category outside the scope of Article 34 of the Organic Law on the Finance Act explains why the rule established by the case law on guarantees given by concessionaires has continued beyond 2001. It also explains why when the State is a shareholder or partner in a company or grouping whose debts are covered under the Commercial Code by an unlimited guarantee, the State is not required to specify that fact in a Finance Act.

(131) The Commission concludes that the argument put forward by the French authorities on the basis of the Organic Law on the Finance Act is not convincing, and that the fact that it is not stated in any Finance Act that the State extends a guarantee to La Poste by reason of its legal form does not mean that there is no such guarantee. The Commission would emphasise that it is not in any event bound by the description of the measure as a ‘guarantee’ for purposes of French law, or by the fact that a guarantee is or is not caught by the Organic Law on the Finance Act. From the Commission’s point of view the only relevant consideration is how the measure is to be described for purposes of Community law, and the Guarantees Notice in particular. Community law recognises the existence of a guarantee once a Member State legally has to repay a claim on another person in the event of that person’s defaulting (68).

(132) Fourth, the French authorities contend that if EPICs enjoyed a state guarantee, any change in their legal form would necessitate measures to preserve the rights of creditors arising before the change. No such mechanism has ever been set up (for example in connection with the conversions of France Télécom, Gaz de France, EDF or ADP) (69), which proves, it is claimed, that there is no guarantee.

(133) The Commission’s expert explains that this assertion is based on a very broad interpretation of the constitutional protection of the right of property. According to the French authorities’ argument, the protection of the right of property requires that all claims be preserved. The constitutional protection of the right of property is not confined to cases where the right of property depends on a public body; on the French authorities’ interpretation, therefore, claims would have to be protected whenever they were rendered more fragile by any event in the life of any company. But in French positive law as it stands there is nothing to preserve such claims. If the argument is confined to claims guaranteed by the State, it would mean that a right of property that had once been guaranteed by the State would enjoy constitutional protection superior to other property rights. There is nothing to suggest that this is so. Lastly, a claim is a right in personam, not to be confused with a right of property, which by its nature is a right in rem. Rights in personam cannot be brought within the more far-reaching protection extended to rights in rem.

(134) The Commission concludes that, when an EPIC is converted into a company that can be made the subject of court proceedings for administration or winding up, the right of property does not require that a specific measure be taken to preserve the entitlements of creditors. The fact that no such measure has been taken, therefore, does not constitute evidence that there is no implied guarantee.

(135) Contrariwise, the French authorities argue that, if La Poste had enjoyed a state guarantee by reason of its legal form, there would have been no need to give an express guarantee for the debts contracted by the old Administration of Posts and Telecommunications which were transferred to La Poste. But, they argue, such a guarantee was in fact given, in an order dated 31 December 1990.

(136) The Commission points out that the fact that the French authorities may have decided to give an express guarantee does not mean that there was no implied guarantee. The same reasoning applies to an argument put forward by the French authorities regarding the guarantee given by the State for certain activities of ERAP or the French Development Agency. In choosing to give an express guarantee in certain cases even though there was already an implied guarantee, the State may have been motivated for example by a concern for transparency and a desire to augment the creditors’ legal certainty. As the French authorities’ expert asserts, ‘holders of a supposed implied guarantee cannot claim rights as indisputable and decisive as those conferred by an express guarantee’.

(137) Last, the French authorities cite an article by Mr Labetoulle, former president of the litigation division of the Council of State (70). This article will be considered along with the judgment in Campoloro in the section of this Decision dealing with the liability of the State (71).

(138) The Commission concludes that: — contrary to the affirmations of the French authorities, there is no legislation or decision that excludes the existence of a state guarantee to La Poste; and — the fact that there is no legislation expressly providing for such a guarantee does not mean that there can be no implied guarantee.

2. The existence of implied guarantees arising out of the legal form of publicly owned establishments is confirmed by a memorandum of the Council of State

(139) The existence of an implied guarantee arising out of the legal form of publicly owned establishments is confirmed by a memorandum of the Council of State drawn up in 1995 in the Crédit Lyonnais case, which was cited in the opening decision (72). The Council of State there took the view that the organisation concerned enjoyed an implied guarantee by reason merely of its character as a publicly owned establishment: ‘In connection with the draft law on state involvement in the recovery plans for Crédit Lyonnais and Comptoir des Entrepreneurs, the Council of State […] took the view that there was a state guarantee for this establishment which derived without any express legislative provision from the very fact that it was a publicly owned establishment’ (73).

(140) The Commission has repeatedly asked the French authorities to send it the full text of this memorandum.

(141) The French authorities have replied that the memorandum in question was not drawn up at the request of the Government and was not given formal status in any official document (74). According to the French authorities, the memorandum to which the Commission refers consisted only of the one sentence quoted in the annual report.

(142) In addition, the French authorities argue, that opinion cannot be transposed to the case of La Poste, for several reasons: because it concerned a publicly owned establishment with a public accountant set up specifically to manage state support for the recovery of Crédit Lyonnais; because it predated the Organic Law on the Finance Act, which was adopted on 1 August 2001; and because its application is contrary to the subsequent case law of the Council of State.

(143) The Commission would point out that the interpretation put forward by the French authorities according to which the Council of State’s opinion cannot be transposed to the case of La Poste contradicts that opinion’s very wording. The Council of State does not refer to the aims of the establishment. And it speaks of publicly owned establishments, and not of publicly owned establishments with public accountants. The French authorities do not explain why it should apply to publicly owned establishments only if they have a public accountant.

(144) As regards the arguments put forward by the French authorities to the effect that the opinion is not applicable because it predates the Organic Law on the Finance Act, and is contrary to the subsequent case law of the Council of State, the Commission has already shown here that the Organic Law does not stand in the way of an implied guarantee given by the State to La Poste.

(145) The Commission takes the view, therefore, that the Council of State’s opinion is indeed applicable to La Poste, and that it acknowledges the existence of a state guarantee deriving from the public character of an organisation.

(146) That there are state guarantees that derive from an administrative or legislative act which ‘produces and entails financial consequences for the State’ is confirmed in a memorandum from the Minister for Economic Affairs, Finance and Industry dated 22 July 2003, concerning a ‘Census of implied and express guarantee arrangements granted by the State’. That memorandum shows that a state guarantee can derive from legal acts of very different kinds (75).

(147) In an explanatory note attached to the memorandum, in part 3, under the heading ‘Experience of calls made on guarantees and the judgments of the Council have clarified a number of textbook cases of guarantees which need to be identified’, the French authorities affirm that ‘Some legal forms by their structure entail a liability on the part of their shareholders; this is true in particular of [the forms of partnership known as] the société en nom collectif, or SNC, and the groupement momentané d’entreprises, or GIE. With these last two forms third parties will always seek out the State shareholder. The same applies to the creation of publicly owned establishments and to some shareholdings in public limited companies’. Here the French authorities themselves point out that the setting up of a publicly owned establishment entails an implied guarantee given by the State to the establishment’s creditors.

(b) A creditor of La Poste can be sure that his claim will be repaid

(148) The Commission will now consider the steps to be taken by creditors of La Poste in order to settle their claims if La Poste were to be in financial difficulty and unable to meet its debts. The Commission will seek to determine whether, at the end of a procedure that is defined in advance and conducted in public, a creditor of La Poste will be in a position comparable to that of a creditor of an enterprise governed by commercial law.

(149) This examination will show that: — the conventional obstacles to the settlement of a claim against a body governed by private law are absent in the case of a publicly owned establishment (1); — the procedure laid down by the Law of 16 July 1980 for the recovery of the debts of a publicly owned establishment that has been found by a court to be in default does not in any way lead to the cancellation of the debt (2); — the rules governing the liability of the State in the procedure for the recovery of the debts of a publicly owned establishment have all the characteristics of a guarantee mechanism (3); — even if he were to fail to obtain satisfaction, a creditor could always invoke the effects of a legitimate mistake that he made when his claim arose regarding the prospect that it would always be honoured (4).

1. The conventional obstacles to the settlement of a claim against a body governed by private law are absent in the case of a publicly owned establishment

(150) It was made clear in the description of the measure that La Poste is not subject to the ordinary law rules governing the compulsory administration or winding up of firms in difficulty. A creditor of La Poste is not in danger of seeing his claim cancelled because compulsory winding-up proceedings have been brought (76), or of obtaining only partial payment of his initial claim at the end of compulsory administration or winding-up proceedings under the ordinary law.

(151) In addition, as the Commission’s expert has pointed out, the fact that La Poste has legal personality is no bar to the existence of a guarantee given by the French State. There are commercial forms of enterprise such as public limited companies (SAs) or private limited companies (SARLs) whose members are not obliged to pay the debts of the organisation in which they take part, but there are also many categories of organisation or legal person carrying on a commercial activity in which private members are indeed liable for the debts of the organisation they have set up. This is true of the forms of partnership known as the société en nom collectif, the groupement d’intérêt économique, or the société civile. Thus there is no express principle of ordinary law governing the liability of members for debts. In the absence of legislation, it cannot be said that the principle that applies must necessarily be that debts or losses are not guaranteed. In French law, the independence conferred by legal personality, or the existence of funds that belong only to the company, is not a test that allows it to be determined how the debts contracted by a legal person are guaranteed. It may also be concluded that there is nothing to prevent the legislature from providing that a publicly owned establishment can be set up by a public body that will bear any loss only up to the limit of its initial contribution or endowment.

(152) The Commission’s expert has sought to complete the picture by considering whether there is an implicit principle of ordinary law governing the guaranteeing of debts in cases where the partners or members in an organisation have not chosen to join together in one of the legal forms offered by the legislature; the Commission’s expert finds an answer in Articles 1871 et seq. of the Civil Code. These articles deal with partners who have not registered their partnership. Article 1871-1 provides as follows: ‘Unless another form of organisation has been provided for, the relations between partners are governed, to the extent reasonable, either by the rules applying to sociétés civiles, if the partnership is of a civil character, or, if the partnership is of a commercial character, by the rules applicable to sociétés en nom collectif’. It has been explained above that both of these forms of partnership are legal persons whose members have unlimited liability for their debts. The expert concludes that in so far as there is a principle of ordinary law, it would be a principle whereby those who set up a legal person guarantee its debts.

(153) In their memorandum of 27 October 2009, the French authorities dispute this view. The conclusion, they argue, is not based on any legislation, since the reference in Article 1871-1 of the Civil Code is concerned with ‘relations between partners’ and not relations with third parties. The legislation is silent on the matter, and its silence cannot be made to imply a principle of guarantee without infringing the rights of the defence that apply in French law and in the law of the Union.

(154) The Commission would observe, however, that Article 1871-1 of the Civil Code provides that every partner in an unregistered partnership contracts in his own name and is liable personally to third parties. Thus every partner has unlimited liability for the debts he has contracted. The Commission does not seek to deduce from this one consideration that the State is liable for the debts of La Poste; but it does believe that the French authorities’ argument does not invalidate the Commission’s expert’s argument that in so far as there is a principle of ordinary law it would be a principle of guarantee. In addition, the Commission would point out that in the explanatory note attached to the memorandum of 22 July 2003 from the Minister for Economic Affairs, Finance and Industry (77), the French authorities themselves draw a parallel between the liability of a shareholder for a société en nom collectif and the liability of the State for a publicly owned establishment.

(155) The Commission concludes that: — unlike the creditors of undertakings governed by commercial law, creditors of La Poste (which is not subject to the ordinary law rules governing the compulsory administration and winding up of firms in difficulty) are not in danger of seeing their claim cancelled in whole or in part following court liquidation proceedings; — the fact that La Poste has legal personality is no bar to a state guarantee to La Poste; and — in the absence of any express limitation on the State’s liability in respect of La Poste, La Poste’s creditors may legitimately act on the principle that the State will bear the debts of La Poste, even though La Poste possesses legal personality.

2. The procedure laid down by the Law of 16 July 1980 for the recovery of the debts of a publicly owned establishment that has been found by a court to be in default does not in any way lead to the cancellation of the debt

(156) The Commission will now consider the procedure for the recovery of the debts of publicly owned establishments that have been found by a court to be in default, in order to determine whether the procedure can result in the extinction of a claim on La Poste, which would make the outcome for the creditor similar to that of insolvency proceedings in the courts, as the French authorities assert. The procedure is laid down in the Law of 16 July 1980 and in implementing provisions which are cited in the section of this Decision describing the measure (78).

(i) The Law of 16 July 1980 confers important prerogatives on the State: the mandatory payment order and the creation of sufficient resources

(157) As has been explained in the description of the measure, the Law of 16 July 1980 provides that ‘if the decision-making body of the authority or establishment has not released or created the resources […] the supervisory authority shall do so, and if necessary shall issue a mandatory payment order’. The Decree of 12 May 1981, which on this point remains unchanged by the amending Decree of 2008, states that the representative of the State or the authority responsible for supervision ‘shall, as appropriate, release the necessary resources, either by reducing the appropriations allocated to other expenditures and still available, or by increasing resources’.

(158) Thus the Law of 16 July 1980 and the measures implementing it designate the State as the authority responsible for covering the debts of publicly owned establishments. They also confer important prerogatives on the State: the mandatory payment order and the creation of sufficient resources.

(159) The French authorities deny that the resources referred to here can ever be state resources. As has been indicated in the part of this Decision concerning the observations of the Member State (79), the French authorities contend that the power conferred on the supervising authority by the Law of 16 July 1980 is only one of substitution. The supervising authority is empowered only to exercise the powers of the executive into whose shoes it steps, and those powers do not include the power to avail itself of the state budget. In support of this interpretation the French authorities cite the legislative history of the Law of 16 July 1980, a number of scholarly articles, and the decisions of the Council of State in Campoloro. They acknowledge, however, that the 1980 Law does not in principle prevent the State from providing financing to support the public body concerned.

(160) The Commission accepts that the legislation does not expressly require the State to subsidise a publicly owned establishment on an exceptional basis if it is in financial difficulty. This does not in any way invalidate the demonstration of the existence of an implied guarantee.

(161) The Commission also accepts that the resources to be released in the first place are the resources of the establishment itself. But this does not prevent a finding that once a publicly owned establishment’s own resources are exhausted its debts can be honoured only out of state funds (80). Such a finding is consistent with the fact that a guarantee mechanism is a subsidiary mechanism, in that the debtor’s own resources are called upon before those of the guarantor.

(ii) The Law of 16 July 1980 and the measures implementing it do not lay down a procedure for liquidation with cancellation of obligations: a shortage of funds will be covered, or will be only temporary

(162) The Commission will now consider the interpretation of the French authorities which maintains that at the end of the procedure laid down by the Law of 16 July 1980 some creditors may see their claim irrevocably cancelled (81), and that their situation is equivalent to that of creditors of undertakings subject to court proceedings.

(163) The Commission’s expert (82) observes that the Law of 16 July 1980 and the Decree implementing it support the view that in the event that funds are insufficient there are only two possibilities open: either the supervising authority releases the necessary resources, or the payment is deferred. At no stage does the procedure indicate that in the event of a continuing insufficiency of funds the debt will come to an end.

(164) The Law of 16 July 1980 and the measures implementing it do provide for a situation where funds are insufficient, but they treat this situation as a temporary one, pending the creation of additional resources, which is the only outcome they envisage. At no stage do they contemplate a situation where the creation of additional resources is impossible or the resources thereby created are in turn insufficient. After the creation of resources, the legislation indicates that the responsible authority is to issue a mandatory payment order. The 1989 circular referred to above is more precise with regard to a shortage of funds, stressing that it is necessarily of a temporary character, since the creditor must be informed of the balance that will be paid later. According to the Commission’s expert, ‘from a reading of this legislation, creditors can conclude that if their claim is not met immediately it will be met at a later date’.

(165) The Commission’s expert also rightly observes that the procedure laid down by French law is a procedure only for the recovery of claims, and not for winding up. In the case of private persons the legislation links cessation of payments to winding up. The prospect of a cessation of payments may be grounds for a suspension of payments (83), and a cessation of payments is expressly stated to be grounds for winding up under the supervision of the court (84). But in the case of public bodies in general, and publicly owned establishments in particular, the legislature and the regulatory authorities have passed over the situation of cessation of payments, without linking it to any form of winding up, and have thus given creditors to understand that their claims will be honoured without limitation, if necessary by a third party such as the State.

(166) Lastly, the Commission’s expert observes that in the course of the reform of 2008, which took place after the opening decision in these proceedings, the French authorities did not take the opportunity to make it clear that the resources to be released had to be the establishment’s own, and that state resources would not be drawn upon. Such a clarification would have sent a strong signal to creditors at a time when in proceedings initiated by the Commission an express link was being made between a state guarantee and the vague wordings in the legislation. The fact that the necessary clarification was not supplied supports the affirmation that the French State does not wish to deny that it may supply the necessary resources itself.

(167) In the memorandum they sent on 27 October 2009, the French authorities argue that the statement of the Commission’s expert that ‘from a reading of this legislation, creditors can conclude that if their claim is not met immediately it will be met at a later date’ rests on a biased reading of the relevant wordings: apart from the fact that these are merely circulars, rather than statutes or regulations, there is nothing in them to show that state resources are to be substituted for those of the publicly owned establishment. There is no reason why publicly owned establishments should not become dormant, leaving their creditors unable to force them to pay their debts. In addition, the French authorities take the view that publicly owned establishments could fail to meet a claim without automatically being in a state of cessation of payments.

(168) The Commission will now consider whether, once a court has ordered a publicly owned establishment to pay a sum of money, and the order is no longer open to appeal, it is legally possible for the establishment to be allowed to fall into dormancy, with the result that the claim will never be honoured, as the French authorities contend. The Law of 16 July 1980 and the measures implementing it are binding on the State. In the case least favourable to the creditor, they require the State to inform the creditor of the balance that will be paid later. If no payment follows, the creditor can always claim that the State is liable (this point will be developed in Section 3 below). On the theoretical hypothesis that the debtor were to become dormant, therefore, the debt would not in any event be extinguished. In addition, the French authorities have not provided any specific example where this situation has actually arisen.

(169) The Commission concludes as follows: — The specific procedure laid down by the Law of 16 July 1980 and the measures implementing it is a procedure only for the recovery of claims, and not a procedure for winding up. At the end of the procedure the claim is not cancelled, whereas at the end of winding-up proceedings a judgment terminating the proceedings on the ground that the assets are insufficient, without penalty, prevents creditors from pursuing the proceedings further. — The Law of 16 July 1980 and the measures implementing it provide for the deferral of a payment order, and nowhere envisage a cessation of payments, and thereby give creditors to understand that there are or that there will be the resources necessary to settle a claim they hold on a legal person governed by public law. — It follows that a shortage of funds will be covered, if necessary by the State, or is temporary only. But winding-up procedures never provide for the possibility that a third party can become liable for the debts of the insolvent party, except of course in the case of a guarantor, or of a partnership with unlimited liability.

(iii) An exceptional subsidy can be envisaged that would be granted by the State to enable a publicly owned establishment to meet its obligations, and such a subsidy is in fact envisaged by certain legislation

(170) The Commission’s expert observes that:

(α) […] (41)

(171) In order to establish that the guarantee arising out of La Poste’s legal form constitutes State aid, it is not necessary to show that the resources of its own that La Poste would be able to mobilise in the event of a shortage of funds are limited; but the Commission would nevertheless point out that this is in fact so. The sale of assets (85) and the prices charged for providing the universal postal service (86) are both subject to very strict rules laid down by the French legislature. The difficulty of mobilising the undertaking’s own capital and reserves in order to meet its debts exacerbates the need for state action in the event of a shortage of funds. First, the fact that resources cannot be mobilised by selling assets means that more frequent use has to be made of other guarantee mechanisms (advances, efforts to establish a liability on the part of the State, etc.). Second, in the event of a default on the part of La Poste, the fact that the legislature has laid down rules protecting the assets might be invoked in any dispute in which it is alleged that there is a strict liability resting on the State (87).

(172) In their memorandum of 27 October 2009 the French authorities deny that it is ‘impossible’ for La Poste to mobilise its own capital and reserves. — As regards the sale of assets, the State is free to determine at its discretion whether an asset is ‘indispensable’ for the provision of the public service. Even if it does object to a sale, it does not thereby incur any obligation to compensate via a guarantee mechanism. As a matter of fact the State never has objected to a sale of assets under Article 23 of the Law of 2 July 1990, which has in any event fallen into desuetude since 2005, when La Poste transferred almost all of its immovable property assets (including post offices) to a subsidiary that was not subject to this system of prior authorisation. — As regards increases in charges for the universal postal service, ARCEP, the postal regulator, does not decide prices, and sets a price cap only for La Poste’s regulated activities, below which prices can be determined freely (with the exception of the prices of stamps, which are laid down by the Minister responsible for posts, who must stay within the price cap). It is reasonable to suppose that ARCEP would have difficulty refusing an increase in rates that was indispensable to the survival of La Poste and the public service functions it provides. The price cap applies only to the regulated sector, which accounts for less than half of the La Poste group’s operating profit.

(173) The Commission takes note of the clarifications provided by the French authorities, and makes two observations. — The French authorities contend that even if the State were to object to a sale, that would not entail a guarantee. Nevertheless, they have acknowledged that in applying the procedure laid down in the Law of 16 July 1980 the representative of the State is bound by the requirement of continuity of public service (88), which means that