2003/599/EC: Commission Decision of 13 November 2002 (concerning the cash advance granted by France to Bull) (notified under document number C(2002) 4366) (Text with EEA relevance.)
Date: 2002-11-13
Institutions: European Commission
Subjects: France, State aid, advance, computer systems, control of State aid

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 13 November 2002

(concerning the cash advance granted by France to Bull)

(notified under document number C(2002) 4366)

(Only the French text is authentic)

(Text with EEA relevance)

(2003/599/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Com-
munity, and in particular the first subparagraph of Article 88(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 these provisions (1),

Whereas:

I. PROCEDURE

(1)

On 20 November 2001 the Commission learned from
several sources that France was planning to grant a
repayable advance of EUR 100 million to Bull.
It
accordingly sent a request for information to France by
letter No D/54828 of 22 November 2001 and a
reminder (D/55337) on 21 December 2001. By letter
dated 19 December, the French Minister for the Econ-
omy informed the Commission about the aid plan in
question. By fax dated 7 January 2002, registered
as received on 8 January under No A/30093,
the
Commission received a provisional reply from the
French authorities which stated that a cash advance of
EUR 100 million had been paid and that the information

requested by the Commission would be sent as soon as
possible. When it failed to receive the information, the
Commission sent France a reminder by letter No D/
50581 of 11 February, stating that a decision requiring
the information to be provided would be taken under
Article 10(3) of Council Regulation (EC) No 659/1999
of 22 March 1999 laying down detailed rules for the
application of Article 93 of the EC Treaty (2) if it failed
to received the information within ten working days.

France replied by fax of 4 March 2002, registered on
5 March under No A1/31700, asking for an extension
of twenty working days in which to reply. By letter
No D/50983 of 7 March, the Commission informed
France that it had registered the case as non-notified aid
(NN 23/2002) and extended the deadline for providing
the information requested to 18 March 2002.

By fax dated 14 March 2002, registered under No A/
32004 on 15 March, France notified the aid measures in
question. By fax dated 20 March, registered on 22 March
under No A/322021, the French authorities sent the
Commission a memo on Bull’s audited annual accounts.
By letter of 20 March, registered by the Commission on
the French authorities
2 April under No A/32431,
submitted Bull’s annual report for 2000.

(2)

(3)

( 1) OJ C 128, 30.5.2002, p. 8.

(2) OJ L 83, 27.3.1999, p. 1.

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(4)

(5)

(6)

(7)

On 9 April 2002 the Commission decided to initiate the
procedure in Article 88(2) of the Treaty and to require
France to supply it with certain information concerning
the measure in question. The decision was communi-
cated to France by letter No SG/2002/229344/D of
12 April. Publication of the letter in the Official Journal
of the European Communities (3) did not give rise to any
comments from third parties.

By letter of 3 May 2002, registered on the same date
under No A/332709, France informed the Commission
of the confidential information to be removed from the
decision before publication. By letter registered on the
same day under No A/33300, it also applied for a further
month to provide the information requested when the
procedure had been initiated. The Commission agreed
to the request by letter No D/52321 of 13 May. By letter
of 5 June, registered under No A/34118 on 6 June,
its comments on the initiation of the
France sent
procedure and some of the information requested.

On 10 June 2002 a meeting took place between the
Commission and the managing director of Bull. On
4 July, by letter No D/53522, the Commission sent
France a reminder asking it to send the restructuring plan
required in point 23(d) of the Community guidelines on
rescue and restructuring aid for firms in difficulty (4)
(hereinafter referred to as the guidelines) as soon as
possible. France sent the plan to the Commission by
letter of 17 July 2002, registered on 18 July under No A/
35380.

By letter No D/54766 of 26 August 2002, the Com-
mission sent further questions to France, which replied
by letter of 23 September, registered under No A/36914
on 24 September. The annexes to the letter arrived on
2 October, registered on the same date under No A/
37167.

II. DESCRIPTION OF THE RECIPIENT

1. Earlier Commission decisions concerning Bull

(8)

Bull has been the subject of several Commission
decisions. In 1992 the Commission decided that the
injections from state resources amounting to
capital

FRF 4 billion (EUR 609 million) contained elements of
aid but that the aid was compatible with the common
market (5). In the same decision, it concluded that aid of
FRF 2,68 billion (EUR 408 million) for research and
development was also compatible with the common
market.

(9)

In 1993 and 1994 France granted further aid to Bull.
The Commission decided that the aid contained in the
advance of FRF 2,5 billion (EUR 381 million) granted in
February 1993 and the public
contribution of
FRF 8,6 billion (EUR 1 311 million) in 1993 and 1994
were compatible with the common market (6) provided,
however, that the conditions of the restructuring plan
were complied with, that the company was privatised
and that no further aid not complying with Community
law would be granted to the Bull group.

2. The recipient and its development since 1994

(10) The shareholders of the French computer group Bull are
the French State with 16,3 % and France Télécom,
Motorola and NEC with 16,9 % each. The other share-
individuals and
holders are institutions with 14 %,
employees with 7 % each and Dai Nippon Printing
(DNP) (7) with 5 %. Bull is a limited company under
French law.

(11) Bull is an international computer group based in Europe,
with businesses in over 100 countries. It operates chiefly
in two areas:

— Top of-the-range professional servers

(12) Bull designs and supplies a range of large professional
servers based on the proprietary operating system GCOS.
It also markets servers using IBM and NEC technology. In
addition, Bull provides its customers with maintenance
services directly linked to the servers. The French
authorities reported that Bull’s share of the European
market in this sector is estimated at 3 %. Its main
competitors are IBM (46,6 % of the market), Fujitsu
(11,75 %) and Sun (11,07 %).

( 3) OJ C 128, 30.5.2002, p. 8.
( 4) OJ C 288, 9.10.1999, p. 2.

(5) OJ C 244, 23.9.1992, p. 2.
(6) Commission Decision 94/1073/EC of 12 October 1994 (OJ

L 386, 31.12.1994, p. 1).
(7) DNP is a Japanese group.

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— Specialised computer engineering services

TABLE 1

(13) Bull’s activities in the computer engineering sector
(development and integration of different applications,
engineering of software architectures, etc.) are housed in
Integris. Here its main competitors are Xerox, Compaq,
IBM, Hewlett Packard, Oracle and SAP. Bull’s share of
the European market amounts to some 2 %, according
to the French authorities.

(14)

In 2001 Bull’s turnover, broken down by activity, was
as follows:

— 44 % in systems integration and information

management services,

— 17 % in proprietary servers,

— 20 % in standard servers,

Bull: assets sold in the last two years (9)

Date

Business

Amount

(in EUR million)

December 1999 29,7 % holding

in

104,4

Ingenico

February 2000 Automated

teller

70

machines

Electronic
tracting

July 2000

subcon- 50-100

February 2001

Smart cards (CP8)

February 2001

Irish service subsidiaries
(CARA)

341

31

— 19 % in various infrastructure products and ser-

vices.

End 2001

European services

Various financial
including
tools
acquisition
of
13,4 % stake in
Steria

(15) Bull’s customer breakdown is as follows: 40 % in the
public sector, 20 % in telecommunications, 8 % in
energy and transport, 20 % in banking and insurance,
and the remainder in various sectors.

(16)

In 1994 Bull implemented the measures advocated in
Decision 94/1073/EC. Following that restructuring, Bull
again became profitable in 1995 and employed
21 400 persons in 85 countries in 1996, with a turnover
of FRF 24 billion.
In addition, as recommended by
the independent expert appointed by the Commission,
France launched Bull’s privatisation by opening up its
capital to DNP, France Télécom, Motorola and NEC in
1995-1996. In 1997 the company was listed on the
stock exchange.

(17)

In 1999, however, Bull again showed a loss, chiefly
owing the depreciation of certain financial assets. In
2000 the operating result was still negative. Bull was
therefore compelled to sell some assets (see Table 1) and
to lay off staff under a social plan. By 2001 Bull
throughout
employed only some 9 500 persons
Europe (8).

( 8) Of these employees, 1 026 work in Italy, 498 in the United
Kingdom, 316 in Germany, 234 in the Netherlands, 441 in Spain
and Portugal, and the others (nearly 6 800) in France.

2002

Louveciennes headquar-
ters

2002

Lottomatica

2002

SOFOM

2002

Sale on the market of
the first tranche of Steria
shares(10)

50

11

5

29

(18) Bull acquired the Italian activities (11) of Integris Europe
from Steria on 19 December 2001 in exchange for a
taken over by Steria of
reduction in the debt
expected
the
11 million
EUR
EUR 21 million) (12).

(instead

of

( 9) According to Les Echos, 20 November 2001.
(10) The first package of shares had been received in payment for the
transfer to Steria of Bull’s service business in Europe (excluding
its information management activities in the United Kingdom)
and its Scandinavian and Swiss subsidiaries.

(11) It should be noted that Bull’s Italian service activities are in

deficit.

(12) See ‘Bull va racheter tout de suite sa division italienne à Steria’,

La Tribune, 28 December 2001.

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(19) According to the information in the possession of the
Commission, a recovery and development plan for
2001-2003 (known as the ‘strategic plan’) was adopted
in November 2000 (13) and was implemented at the
beginning of 2001. It provided for a strategic recentering
on its services and mainframes and the conversion of
the two businesses into subsidiaries. It also provided
for disinvestment, the sale of non-strategic assets, a
reduction in costs and workforce adjustments.

(20)

In 2001, according to the French authorities, Bull
experienced several setbacks. First, the strategic plan
failed. It had been aimed partly at selling the loss-making
French service businesses. Negotiations were under way
with a consortium of French investors, and it was
planned to list Integris on the stock exchange. However,
the crisis in the technology stock market scuppered this
plan. In addition, the sharp fall in technology shares in
March 2000 affected the financing of Internet tech-
nology activities in which Bull had invested heavily,
focussing its commercial offer on the concepts of ‘e-
services’ and ‘net-infrastructure’.

(21) A fresh restructuring phase began in December 2001
with the appointment on 2 December of a new CEO
who was given the task of analysing the financial
situation and assessing Bull’s prospects. The analysis
resulted in a three-stage recovery strategy which was
adopted in principle by Bull’s board of directors on
14 March 2002. The recovery strategy was presented to
the Commission in July 2002 (see Section V).

(22) Bull also planned to sell other assets: its second tranche
of Steria shares received in exchange for the transfer of
its United Kingdom service business and the proceeds
from the sale of Louveciennes and from the transaction
with Steria. The sale of other property was also planned,
as was the outsourcing of spare parts and the termination
of the pension plan at Bull HN Information Systems Inc.

EUR

(23) The 2001 financial report showed losses for 2001
totalling
(compared with
253 million
EUR 243 million in 2000), whereas the subscribed
capital was EUR 340 million and there was a negative
net worth of EUR 158 million (compared with
EUR 86 million in 2000). Consolidated net
losses
amounted to EUR 544 million (compared with
EUR 292 million in 2000).

(24) As regards the firm’s most recent figures, the accounts
for the first half of 2002 show the loss of 2 160 jobs,
of which 1 240 in France. According to the French
authorities, the redundancy plan was fully financed from
the sale of assets (14). The plan of 14 March 2002 also
provided for a reduction in administrative costs and
overheads. According to the results presented on 25 July
2002, total distribution and administration costs were
reduced to 18 % of turnover in the second half of 2002,
compared with 25 % in 2001. The report also showed a
turnover of EUR 780 million (15), a gross margin of
result of
EUR 170 million and a negative net
EUR 524,2 million (16). The losses before tax and
interest payments amount to EUR 151 million. Business
nevertheless continued at the same pace in the first
half of 2002 and the group received orders worth
EUR 713 million (17).

III. DESCRIPTION OF THE AID

(25) The

aid

granted

French Government

totalling
EUR 450 million to Bull. This figure covers a first
instalment of EUR 100 million at the end of 2001
which was not notified and a second instalment of
EUR 350 million in the first half of 2002. The aid was
subject to several conditions that were listed in the
notification:

— the aid was a loan in the form of repayable

shareholder’s advance,

— the loan carried an annual interest rate of 5,23 %,
equivalent to the Commission reference rate appli-
cable on the date of the first payment of the cash
advance,

— the loan was to be reimbursed no later than

12 months after the final payment,

— the aid would be paid over a maximum period of

six months,

— France undertook to submit a restructuring plan to

the Commission by 30 June 2002,

(14) The total cost of the redundancy plan amounts to EUR 210
million, which corresponds to the total revenue from assets sold
or asset sales decided on in September 2002.

(15) Compared with the target for March 2002 of EUR 700 million,

turnover in the previous having been EUR 1,27 billion.

(16) The loss is due, among other things, to provisions for restructur-

ing of EUR 225 million.

( 13) By the end of 2000 Bull was already discussing selling assets so

(17) C. Jay ‘Bull a assaini son bilan mais doit encore faire ses preuves’.

as to reduce its debts.

La Tribune, 29 July 2002.

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— the maximum amount of

the

cash

advance

loan was
EUR 450 million.
of
The
EUR 450 million was justified by the French
authorities on the basis of the liquidity plan shown
in Table 2 (18) and a margin of EUR 7 million
granted in view of the fact that the firm’s liquidity
requirements might exceed EUR 443 million by
June 2002 (19). The liquidity prospects for the
period 31 December 2001-30 June 2002 were
presented as follows by the French authorities:

TABLE 2

Liquidity plan

Available
liquidity

Position at
start of
period

(in EUR million)

Operating
liquidity
generated
(cash con-
sumption)

Increase
(decrease)
in available
resources

Position at
end of
period

January 2002

103 (20)

– 84

– 12

7

February 2002

7 (21)

– 43

– 30

– 66

March 2002

– 66

– 79

– 116

– 261

April 2002

– 261

– 28

– 42

– 331

May 2002

– 331

– 10

– 2

– 343

(27)

First, the Commission questioned the one-off nature of
the aid in question which, according to paragraph 25 of
the guidelines, must be designed to keep a company in
business for a limited period, during which its future can
be assessed. In the present case, it seemed at this stage
that the firm was committed to a long-term restructuring
process.

(28)

Second, the Commission was not certain about the exact
date on which the first tranche of EUR 100 million had
been granted. The importance of knowing the exact date
is due to the fact that the guidelines provide that the
Member State must, not later than six months after the
rescue aid measure has been authorised, communicate a
restructuring plan or a liquidation plan or proof that the
loan has been reimbursed in full.

(29) Third, the duration of the aid did not seem clear.
According to the guidelines, the aid must cover a
maximum period of six months. However, according to
the notification, there was a risk that the aid granted
would last more than six months.

(30)

Fourth, the Commission doubted that the aid would
have no ‘spillover’ effect, as claimed by France, as Bull
had businesses in other Member States (22).

June 2002

– 343

8

– 4

– 339

(31)

Fifth, the Commission had doubts as to the source
of
the cash requirements. As the firm had started
restructuring some years earlier, as stated in Section II,
the aid could be intended more to finance the current
restructuring. As Bull had already received restructuring
aid in 1993-1994, fresh restructuring aid would have
come up against the principle of ‘one time, last time’ aid
provided for in Section 3.2.3 of the guidelines.

V. COMMENTS FROM FRANCE

(32)

Following the initiation of the procedure, the French
authorities provided the following details:

IV. REASONS WHY THE ARTICLE 88(2) PROCEDURE
WAS INITIATED

(26) The Commission decided to initiate proceedings under
Article 88(2) of the Treaty for five main reasons based
on its review of the compatibility of the aid with the
guidelines.

( 18) The cash advance is

in two parts: a first advance of
EUR 100 million at the end of 2001 and a further advance of
EUR 350 million on 14 March 2002.

( 19) The French authorities explained that, for example, the firm’s
self-financing capacity could deteriorate more rapidly than
expected.

( 20) This figure includes the EUR 100 million already paid by the

State at the end of 2001.

( 21) Situation as at 31 December 2001 after payment of the cash

advance by the State.

(22) See Section II.2.

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(33) The French authorities pointed out that, as regards the
one-off nature of
the aid and the firm’s long-term
restructuring, Bull was undergoing continuing adjust-
ment, in step with developments on the IT market, like
the other firms present (23). This adjustment process had
led Bull to expand in the services market, regarded
as less capital-intensive. These adjustment efforts (24),
contained in the strategic plan covering end-2000 and
2001, were self-financed by the firm. However, the
development of the services sector was not carried out
under favourable conditions owing to the lack of
financing for certain products, leading to a deterioration
in the position of the firm. The French authorities stated
that external factors such as the very difficult position
on the IT market and the collapse in the stock market
value of IT firms had led to the failure of Bull’s strategic
plan in 2001. They stressed the fact that the price for
Bull’s European service activities had been amended
downwards several times between May and November.
The strategic plan having failed, the firm found itself in
difficulties once again and encountered problems in
finding short-term credit. That was why Bull applied to
the French Government for rescue aid at the end of
December 2001.

(34) Regarding the exact date on which the first instalment
of EUR 100 million was granted, the French authorities
indicated that it had been granted on 31 December
2001. The cash advance had been granted under
Article 24 of the amending Finance Law for 2001 (25).
In accordance with the Decree of 5 December 1870 on
the promulgation of laws and decrees, this Law became
applicable only one clear day after its publication in the
French Official Gazette, i.e. on 31 December 2001. The
EUR 100 million was actually paid to Bull on 2 January
2002.

(35) As regards the total duration of the aid, the French
authorities stated that, following the first tranche of
EUR 100 million on 31 December 2001, a second
tranche of EUR 150 million had been granted on 2 May
2002 and a third of EUR 200 million on 17 June 2002.
They confirmed that the aid had indeed been paid over
a maximum period of six months from the date on
which it was granted, in accordance with Section 3.1 of
the guidelines.

(36) As regards the question of spillover of the rescue aid
granted to Bull, France stated that Bull had only a very
small share of the market for services and servers (26)
and that it lagged far behind its competitors. It concluded
that the effect of the aid on intra-Community trade
and competition was minimal. It also stated that the
disappearance of Bull would help to weaken competition
in Europe as Bull offered its customers a freedom of
choice that would not otherwise exist. France also
pointed out that Bull was a recognised specialist in
heterogeneous and open environments and thus facili-
tated the free interplay of competition.

(37) As regards the source of the liquidity requirements and
the doubt expressed by the Commission when it initiated
the procedure concerning the possible use of the aid
to finance the successive restructuring plans, France
provided a detailed statement on the use of the cash
advance of EUR 450 million:

— EUR 134 million was allocated to financing the
operating losses incurred since 1 January 2002.
The French authorities stressed that the require-
ments were set to disappear in the second quarter
owing to the reduction in management costs,

— EUR 106 million was used to reimburse short-term
credit lines. According to the French authorities,
most of the banks had withdrawn their credit lines
from Bull, which had been unable to find fresh
credit,

— EUR 91 million was allocated to repayment of a

debenture loan,

— EUR 37 million was allocated to repayment of
yen bonds involving a private placement. The
repayment had been contractually obligatory owing
to Bull’s inadequate capital and reserves as at
31 December 2001,

— EUR 85 million was used to repay a bank loan
secured with claims which the lender decided at
short notice to terminate, although it has so far
agreed to extend the arrangements on a month-by-
month basis. The French authorities pointed out
that Bull must have sufficient resources to allow it
repay the loan at any time.

( 23) This was true of other European mainframe manufacturers such
as ICL, Siemens, Nixdorf, Olivetti and Philips, which had to shut
down or sell their businesses in this sector.
Involving changes in the portfolio of activities and staff cutbacks
or retraining.

( 24)

( 25) Law No 2001-1276 of 28 December 2001 (Journal Officiel de la

République Française, No 302, 29.12.2001).

(26) France stated that, as regards top-of-the-range servers, Bull held
less than 3 % of the European market and its share of the market
for IT services was less than 2 %.

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(38) The French authorities concluded that the advance from
the State allowed Bull to remain in business in the first
half of 2002 although the firm had a negative cash flow
of EUR 134 million and had to repay EUR 319 million
in bank or debenture loans rapidly.

(39) As regards the financing of the restructuring costs,
France stated that the cost of the restructuring plan in
the first half of 2002 was EUR 55 million and was
financed by selling assets: sale of the Louveciennes
headquarters (EUR 50 million), sale of Lottomatica
(EUR 11 million) and Sofom (EUR 5 million), and sale
on the market of the first tranche of Steria stock received
in exchange for the transfer to Steria of Bull’s service
businesses in Europe, as well as its Scandinavian and
Swiss subsidiaries (EUR 29 million). The sale of these
assets provided Bull with a total of EUR 95 million,
giving it a surplus of EUR 40 million over the costs of
the redundancy plan in the first half of 2002. The
surplus, coupled with the sale of assets decided by the
board of directores but not yet carried out (27) and
involving an amount of [...] (*), will make it possible to
finance the rest of the restructuring plan.

(40) The French authorities also submitted a restructuring

plan that can be summarised as follows:

Rescue phase — 1.1.2002-30.6.2002

— The aim is to achieve operational equilib-

rium.

— Workforce cut by some 1 500 persons, of

whom 1 200 in France.

— Reduction in overheads (from 25 % in 2001

to 18 % in 2002) (28).

— Consolidation of positive results achieved
by Bull
in proprietary servers and their
maintenance, reversal of negative results in
the other fields.

— Financing of the redundancy plan through
the sale of Bull’s assets: sale of land and
buildings, sale of Steria stock, transfer to IBM
of maintenance parts management business
and the corresponding stocks.

(*) Square brackets with an asterisk denote confidential information

which has been deleted from the text.

( 27) [...]*.
( 28) Bull’s budget was based on overheads reduced to some 17,5 %,

excluding the cost of the redundancy plan.

Lasting recovery strategy — 2002-2005

— The purpose of this phase is to combine all
the strengths of the group so that together
they provide their customers with appli-
cations development and information man-
agement services, together with advice on
computer architecture systems and help
in order
with putting it
to optimise
the corresponding physical
infrastructures.

into practice

— As regards servers, reduction in the supply of
servers, concentration on servers using the
new Intel Itanium 2 components. These will
essentially be top-of-the-range servers. Bull
plans to withdraw from the development and
marketing of [...]*.

— As regards infrastructure services, Bull’s aim
is to increase the added value of services
supplied. To that end, a small number of
services will be promoted using specific Bull
products in the field of systems security and
administration, open-source solutions or the
tools provided by a small number of first-
rank partners. Synergy between the different
teams will be established in order to enhance
productivity.

— In the field of applications services and
security products, Bull’s aim is to restore
the profitability of the systems integration
activities through professional management
and a gradual increase in skills on the basis
of the experience already acquired in the
telecommunications sector, the public sector
and the energy sector. Bull is also planning
to expand in the defence sector in view of
the possibilities for cooperation offered by
the development of new scientific sectors.
Bull is already offering competitive services,
especially in the field of electronic messag-
ing services, 24-hour call management,
portals for mobiles and invoicing of tele-
phone calls. It also plans to improve tools
and skills in the area of the security of
information systems. The skills will be
available [...]*.

— In figures, Bull’s aim is to have [...]* depart-
ments and [...]* products by 2005. The
products would consist of proprietary ser-
vers, large open servers and security prod-
ucts.

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Recapitalisation of the group — September 2002 to
30 June 2003

(43)

It can be concluded therefore that the shareholder’s
advance granted by the French State to Bull constitutes
aid within the meaning of Article 87(1) of the Treaty.

— On the basis of the activities described above,
Bull should reach equilibrium by the second
half of 2002 and return to profit by 2003.
it will not
Even if Bull returns to profit,
be able to reimburse the cash advance of
EUR 450 million from its own resources by
17 June 2003.

— That is why Bull will need to be recapitalised.
It plans to achieve this either through one
or several large private-sector shareholders
wishing to participate in a capital increase or
through other private investors interested in
acquiring a stake in Bull.

— The search for capital will start on [...]*, once
Bull has shown it can return to operational
equilibrium.

VI. ASSESSMENT OF THE AID

1. Existence of aid

(41) Article 87(1) of the Treaty states that ‘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, insofar as it affects
trade between Member States, be incompatible with the
common market’.

(42)

In the present case, the shareholder’s advance was
granted by the French State under Article 24 of the
amending Finance Law for 2001. The aid consists in a
repayable cash advance from the French State, a Bull
shareholder. The advance is for a specific firm, Bull. It
does not comply with the principle of a private investor
in a market economy since the other Bull shareholders
have not stated that they intend to grant an advance to
in view of its financial situation,
Bull and as Bull,
was not able to obtain the advance on the market.
Furthermore, the aid strengthens the position of the firm
by enabling it cover its normal operating costs and
distorts or threatens to distort competition since Bull is
an international company and its products are the
subject of international trade. Furthermore, Bull has
foreign competitors such as IBM, Fujitsu and Sun.

2. Obligation to notify

(44) Article 88(3) of the Treaty requires Member States to
notify any plans to grant or alter aid. The Member State
concerned may not put its proposed measures into effect
until the procedure has resulted in a final decision.

(45)

It is clear that, in the present case, the aid was granted
and paid both before France officially notified the aid
and before the Commission could ascertain whether it
was compatible with the common market, the aid having
been granted on 31 December 2001 and paid on
2 January 2002, with the formal notification reaching
the Commission only on 14 March 2002.

(46) The Commission concludes that,

in failing to notify,
France unlawfully implemented the aid in question and
was thus in breach of its obligations under Article 88(3)
of the Treaty.

3. Compatibility of the aid with the common
market

(47) The aid cannot be exempted under Article 87(2) of the
Treaty as it is not aid of a social character, granted to
individual consumers, or aid to make good the damage
caused by natural disasters or to compensate for the
economic disadvantages caused by the division of Ger-
many.

(48) Nor can the aid be exempted under Article 87(3)(a), (b)
and (d) of the Treaty as it is not intended to promote
economic development in certain regions, to promote
the execution of an important project of common
European interest or to promote culture and heritage
conservation.

(49)

It is therefore necessary to determine whether the aid
qualifies for exemption under Article 87(3)(c) of the
Treaty as aid to facilitate the development of certain
activities where it does not adversely affect
trading
conditions to an extent contrary to the common interest.

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(50) This is the Treaty provision that prompted the Com-
mission to adopt the guidelines it applies to assess
measures in the field of rescue and restructuring aid.
And rescue aid is precisely the exemption claimed by
the French authorities.

and is planning a recapitalisation operation. It proposes
to verify this condition at a later date and insists that the
reimbursement take place as soon as possible, and no
later than 17 June 2003.

4. Assessment of the aid under the guidelines

(51) According to the figures supplied by the French auth-
orities and given in Section II.2, Bull can be regarded as
a firm in difficulty within the meaning of the guidelines.

(52)

In view of its status as a limited company, Bull can thus
be regarded as a firm in difficulty under point 5(a) of the
guidelines ‘where more than half of its registered capital
has disappeared and more than one quarter of that
capital has been lost over the preceding 12 months’. In
the present case,
the losses in 2001 amounted to
EUR 253 million (against EUR 243 million in 2000), the
to
capital
EUR 340 million. Bull had a negative net worth of
EUR 158 million (compared with EUR 86 million in
2000), which is less than half the equity. Furthermore,
over a quarter of the capital has disappeared in the last
twelve months.

amounting

subscribed

that date

to

(53) An analysis of these figures shows that Bull is indeed in
the position of a firm in difficulty within the meaning of
the guidelines, a fact also confirmed by the mounting
losses and the necessary disposal of a large number of
assets.

(54) A review of the aid under Section 3.1 of the guidelines

produces the following assessment:

(57)

(58)

Point 23(c) of the guidelines states that the aid must be
warranted on the grounds of serious social difficulties
and have no unduly adverse spillover effects on other
Member States. This condition had caused doubts when
the procedure was initiated owing to the fact that Bull
operated in other Member States. However, France has
provided sufficient information for the Commission to
conclude that the aid has no negative spillover effect,
thereby dispelling the latter’s doubts. Bull has only a
small market share and, in addition, it is selling most of
its businesses outside France, which limits the adverse
effect of the aid in other Member States.

Point 23(d) of the guidelines requires France to com-
municate, not later than six months after the rescue aid
has been authorised, a restructuring plan or a liquidation
plan or proof that the loan has been reimbursed in full
and/or that the guarantee has been terminated. When
the procedure was initiated, this point posed difficulties
as the Commission did not know the exact date on
which the first aid instalment had been granted. France
stated that it had been granted on 31 December 2001.
As a result, it was required to submit a restructuring
plan by 30 June 2002, an undertaking it gave at the time
of the notification. It communicated the restructuring
plan with a slight delay six and a half months after
payment of the first aid instalment. The Commission
regrets that France failed to communicate the restructur-
ing plan by the deadline set but concludes that the
submission of the plan satisfies the requirements of the
guidelines.

(55)

(56)

In accordance with point 23(a) of the guidelines, the aid
consists of liquidity support granted at an interest rate
corresponding to the reference rate adopted by the
Commission. In case in question, the rate is 5,23 %,
which was the reference rate on the date on which the
first tranche of aid was granted, i.e. 31 December 2001.

(59)

Point 23(b) of the guidelines stipulates that the aid must
be linked to loans that are to be reimbursed over a period
of not more than twelve months after disbursement of
the last instalment to the firm. In the present case, the
last instalment having been granted on 17 June 2002,
reimbursement must be completed by 17 June 2003.
The Commission notes that, according to France, Bull
will not be able to repay that sum from its own resources

Point 23(e) of the guidelines states that rescue aid must
be restricted to the amount needed to keep the firm in
business. The Commission had doubts concerning this
point when it initiated the procedure as Bull had been
restructuring for several years and it was possible that
the aid would be used to finance the restructuring. Bull
had received restructuring aid in 1993-1994, so that
further restructuring aid would have come up against
the principle of ‘one time, last time’ aid referred to in
Section 3.2.3 of the guidelines. The Commission con-
siders that the details supplied by France when the
procedure was initiated are sufficient to enable it to
conclude that the cash advance was used solely to
reimburse the credit lines, debenture loans and bank

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19.8.2003

loans and to finance operating losses. France also
presented data confirming that the restructuring costs,
notably the redundancy plan, had been financed in full
by the sale of assets (Section V). The Commission
accordingly concludes that the aid was used in accord-
ance with point 23(e) of the guidelines since it was
limited to the amount needed to keep the firm in
business for the six months during which the rescue aid
was authorised.

(60) The Commission points out, however, that France will
have to comply strictly with the principle of ‘one time,
last time’ aid and must not grant restructuring aid to
Bull before 31 December 2004. Any recapitalisation of
Bull will thus have to conform to the private investor
principle.

(61)

Point 24 of the guidelines requires rescue aid to cover a
maximum period of six months. The situation as regards
this requirement was not clear when the procedure was
initiated as the Commission did not know when the first
aid instalment was paid or what the total duration of
the aid was. The Commission concludes from the
explanations provided by France that the aid granted
complies with that requirement since the first instalment
was granted on 31 December 2001 (29) and the last
instalment on 17 June 2002, a period of less than six
months. The Commission’s doubts concerning this
aspect were thus removed.

(62) Under point 25 of the guidelines, rescue aid must be a
one-off operation designed to keep a company in
business for a limited period, during which its future can
be assessed. The situation regarding this requirement
gave rise to questions when the procedure was initiated
as the company had been engaged in a long-term
restructuring process and the cash advance could have
served to cover the costs of restructuring. According to
the information communicated by France, the rescue aid
allowed the company to take stock and to develop a
recovery strategy which was implemented in early 2002.
France also supplied evidence that the cash advance had
been allocated to cover liquidity requirements and that
restructuring costs had been financed from the sale
of assets. The Commission’s doubts were accordingly
dispelled.

( 29) See Section V.

(63) However, the Commission stresses that no further rescue
aid may be granted as such aid must be a one-off
operation.

VII. CONCLUSION

(64) The cash advance granted by France to Bull constitutes

aid within the meaning of Article 87(1) of the Treaty.

(65) The aid granted by France in breach of its obligations
under Article 88(2) of the Treaty constitutes unlawful
aid.

(66) The exemption in Article 87(3) of the Treaty is applicable
in so far as the cash advance satisfies the criteria spelt
out in the guidelines. The Commission has accordingly
assessed the aid in the light of the guidelines.

(67) The Commission concludes, having regard to the infor-
mation communicated by the French authorities, that
the cash advance was granted to a firm in difficulty, that
it consists in liquidity support subject to the Commission
reference rate, that it is linked to a loan to be reimbursed
over a period of not more than 12 months after
disbursement of the last instalment and that the aid will
not have any adverse spillover effects on other Member
States.

(68) The Commission must, however, ensure that the reim-
bursement obligation is satisfied not more than twelve
months after payment of the last instalment,
i.e. by
17 June 2003. France will accordingly be required to
submit evidence to the Commission that Bull has repaid
in full the cash advance and interest as soon as possible
and by 17 June 2003 at the latest.

(69) The Commission must also ensure that rescue aid is a
one-off operation. Accordingly, France may not grant
any further rescue aid to Bull in the future in order to
safeguard the one-off nature of the aid.

(70)

In order to comply with the ‘one time,
time’
condition, the Commission points out that no restructur-
ing aid may be granted by France to Bull within ten
years of payment of the last restructuring aid, i.e. until
31 December 2004,

last

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HAS ADOPTED THIS DECISION:

Article 3

Article 1

France shall inform the Commission, within two months of
notification of this Decision, of the measures taken to comply
with it.

The aid granted by France to Bull in the form of a cash advance
of EUR 450 million is compatible with the common market,
subject to the conditions set out in Article 2.

Article 2

France shall submit evidence of the reimbursement by Bull,
no later than 17 June 2003, of the cash advance of EUR 450
million, including interest.

Article 4

This Decision is addressed to the French Republic.

Done at Brussels, 13 November 2002.

For the Commission

Mario MONTI

Member of the Commission