2007/217/EC: Commission Decision of 22 November 2006 on State aid implemented by France for the Laboratoire national de métrologie et d'essais (C24/2005) (notified under document number C(2006) 5477) (Text with EEA relevance)
Date: 2006-11-22
Institutions: European Commission
Subjects: State aid, control of State aid, investment aid, metrology, public sector, research body, services of general interest, testing

5.4.2007

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Official Journal of the European Union

L 95/25

COMMISSION

COMMISSION DECISION

of 22 November 2006

on State aid implemented by France for the Laboratoire national de métrologie et d'essais
(C24/2005)

(notified under document number C(2006) 5477)

(Only the French version is authentic)

(Text with EEA relevance)

(2007/217/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

(4)

The Commission Decision to initiate the procedure was
published in the Official Journal of the European Union (3).
The Commission invited interested parties to submit their
comments on the measure.

Having regard to the Treaty
establishing the European
Community, 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 the provisions cited above (1) and having regard to
their comments,

Whereas:

1. PROCEDURE

(1)

(2)

(3)

a

complaint

Following
the
Commission was informed that France had implemented
State aid for the Laboratoire national de métrologie et
d'essais (hereinafter referred to as ‘LNE’) (2).

competitor,

from a

to submit

By letters dated 3 September 2003, 11 February 2004
and 7 June 2004, the Commission requested the French
authorities
the State's
financial assistance for the LNE. The French authorities
provided the Commission with information by letters
dated 7 November 2003, 5 April 2004 and 6 August
2004.

information about

By letter dated 5 July 2005, the Commission informed
France that it had decided to initiate the procedure laid
down in Article 88(2) of the EC Treaty in respect of
certain measures by letters dated 4 November 2005
and 19 April 2006. France provided the information
requested in the decision to initiate the procedure.

(1) OJ C 263, 22.10.2005, p. 22.
(2) LNE is the acronym for the Laboratoire national de métrologie et
d'essais, established by Decree of 25 January 2005, following the
incorporation of the Bureau national de métrologie into the Labor-
atoire national d'essais.

(5)

The Commission received comments from interested
parties. It forwarded them to France, which was given
the opportunity to react; its comments were received by
letter dated 1 March 2006.

(6)

The Commission sent additional questions on 6 June
2006. The French authorities’
replies were sent on
2 August 2006 and were registered as received by the
Commission on the same day.

2. DETAILED DESCRIPTION OF THE MEASURES

2.1. Recipient

Status and activities

(7)

The LNE was set up in 1901 as part of the Conservatoire
National des Arts et Métiers. It ranked as a public insti-
tution under the supervision of the Ministry of National

(3) See footnote 1.

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all

analysis,

research,

In 1978 it acquired EPIC status

(public
Education.
enterprise of an industrial and commercial nature)
pursuant
to Law No 78-23 of 10 January 1978 on
consumer protection and information (products and
services), under which, the LNE was made responsible
for performing
consultation,
expertise, testing and supervisory services and providing
technical assistance to protect and inform consumers or
to improve product quality. The LNE was also authorised,
as and when requested by the Ministries, to study on
their behalf the test methods for drawing up regulations
and standards and to issue quality certificates. Its tasks
also included liaising on the public authorities’ behalf
with the international bodies
these
areas. In 2005 the LNE was given the additional task
of heading up the national scientific metrology service
(a role previously played by the public interest group
Bureau national de métrologie — ‘BNM’ and it became
the Laboratoire national de métrologie et d'essais.

responsible for

(8)

Besides its public service task, the LNE offers companies a
wide range of services covering every stage in the life of
their products. Its four core activities are measurement,
testing, certification and training. It has the resources to
conduct standard or tailor-made testing programmes in
many fields (4). Its clients are industrial companies, distri-
authorities,
bution companies,
legal experts and courts of
consumer organisations,
law,
government
insurance
departments (5).

companies

regional

local

and

and

(9)

The LNE uses its premises and equipment both to
perform the tasks assigned to it by the State and to
provide services to third parties.

(10)

The LNE plays an active part in European and interna-
tional organisations
the CEN (European
such as
Committee for Standardisation), EUROLAB (European
Federation of National Associations of Measurement,
Testing
EOTC
(European Organisation for Conformity Assessment)
and the
Laboratory Accreditation
Committee).

ILAC (International

and Analytical

Laboratories),

the

(11)

It has 700 staff divided into 30 multidisciplinary teams
and 55 000 m2 of laboratory space,
including 10 000
m2 in Paris and 45 000 m2 in Trappes.

(12)

The LNE has offices in Asia (LNE-Asia in Hong Kong (6))
and in the United States
(North America G-MED
subsidiary in Washington). These activities are, however,
small-scale.

(13)

In 2005 its revenue was EUR 65 million and its profits
EUR 0,7 million.

(14)

(15)

Performance contracts

Since 1997 the mandate given to the LNE by the State
has been enshrined in performance contracts concluded
between the French authorities and the LNE for a period
of four years. The first performance contract was in force
between 1997 and 2001, the second between 2001 and
2004. The third contract is for the period 2005 to 2008.

These contracts include tasks as a national metrology
the provisions of
laboratory and as a research body,
and
to the public
technical
support services to businesses in the field of
testing
and conformity attestation.

authorities

assistance

The LNE's resources

(16) According to Decree No 78-280 of 10 March 1978 on
the LNE, the resources accruing to the enterprise include
grants from the central government, regional or local
authorities, public institutions and public or private
bodies of all kinds (7). On this basis, the LNE has to
date been awarded operating grants (8) and investment
grants:

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

(EUR million)

Operating grants

Investment grants

14,7

13,8

13,0

13,6

12,6

11,2

10,8

10,9

10,9

10,4

10,7

11,0

10,6

6,9

6,1

5,5

4,6

4,6

4,6

4,4

4,1

4,2

4,2

4,1

4,0

3,8

(4) For example, metrology and instrumentation, materials, consumer
products, health and medical apparatus,
industrial equipment and
components, logistics and packaging, energy and the environment.

(5) Source: www.lne.fr
(6) In 2001 the LNE set up LNE-Asia, a joint venture between the LNE

and the CMA Testing and Certification Laboratories.

(7) This decree was amended by Decrees Nos 2005-49 of 25 January
2005 and 2005-436 of 9 May 2005, in particular as regards the
financial and accounting arrangements and the supervision of the
LNE. The LNE's resources, however, remain exactly the same.

(8) The sum of the amounts corresponding to the Metrology Contract

and of the operating grants on the profit and loss account.

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(17) According to the French authorities, the operating grants
and the investment grants were awarded by the Ministry
of Industry and the BNM in return for the LNE's public
service tasks. Essentially, they are designed to cover the
costs incurred in performing these tasks. The legal basis
of these grants is the Finance Law voted on each year by
the French Parliament.

(18)

the investment grants are linked to the
Some of
two new laboratory complexes ‘Trap-
construction of
pes 3’ and ‘Trappes 4’
(phases 1 and 2), named after
location. These grants were awarded by the
their
Industry and the Environment Ministries, the BNM, the
Conseil Régional d'Ile-de-France and the Conseil Général
des Yvelines.

(19)

The LNE also obtains resources from its commercial
activities. The turnover from the market sector always
accounted for over 50 % of the LNE's total resources
over the period examined, reaching 63 % in 2005.

2.2. The relevant markets

(20)

(21)

The LNE operates in the testing, metrology, certification,
measurement, training and R & D markets. It provides
the above services mainly in the following sectors:
packaging,
consumer
construction products, and industrial products.

medical/health,

products,

These markets are open to competition in the European
Community. In particular, the LNE competes with other
organisations on the market for the certification required
by Community Directives
and with thousands of
its
conformity assessment bodies, mainly because of
authorisation to award national standards established by
other Member States’ authorities
the
German GS mark).

example,

(for

2.3. Grounds for initiating the procedure

(22) At

the

end of

its preliminary

examination,
it was not possible at

the
Commission found that
that
stage to ascertain accurately whether some of the tasks
assigned to the LNE were services of general interest or
not and also whether these activities were commercial or
not.

for activities of a different nature, which,
accounts
moreover, could not be precisely demarcated, the LNE
could have used part of the public grants to carry out
its competitive activities. This would be tantamount to
and would
cross-subsidising
constitute State aid within the meaning of Article 87
of the EC Treaty.

commercial

activities

(24) According to the Commission,

the advantage gained
from cross-subsidising
activities would
favour the LNE in its activities on markets open to
EU-wide
Intra-Community trade would
therefore be affected.

competition.

commercial

(25)

The aid would have to be considered unlawful aid within
the meaning of Article 1(f) of Council Regulation (EC)
No 659/1999 of 22 March 1999 laying down detailed
rules
the EC
the application of Article 93 of
for
Treaty (9).

(26)

The exceptions to incompatibility provided for in Article
87(2) and (3) of the EC Treaty would not be applicable
in this case.

(27) Article 86(2) of the EC Treaty applies only to services of
general economic interest operated on behalf of the State.
After preliminary analysis of the cases, the Commission
decided, however, that it was not clear from the infor-
mation it possessed at that stage that the tasks entrusted
to the LNE by the State under a performance contract
were of an unconditionally economic nature. Nor did it
the services performed by the LNE on a
seem that
competitive basis were the subject of a separate task of
general economic interest. The Commission therefore
took the view that, at that stage, Article 86(2) of the
Treaty could not be involved in support of the compat-
ibility of the measures in question.

3. COMMENTS FROM INTERESTED PARTIES

(28)

Three interested parties submitted comments under the
procedure:

— the company Emitech, by letter dated 14 November

2005,

— the laboratory Intertek Testing Services (France), by

letter dated 21 November 2005,

(23)

The Commission accordingly expressed doubts about the
grounds for the amount of the operating and investment
grants awarded to the LNE to compensate for the costs
of its activities or investment projects of a non-economic
nature or deriving from the fulfilment of a remit
separate
conferred by the State.

In the absence of

— the laboratories Pourquery Analyses Industrielles, by

letter dated 21 November 2005.

(9) OJ L 83, 27.3.1999, p. 1. Regulation as last amended by Regulation

(EC) No 1791/2006 (OJ L 363, 20.12.2006, p. 1).

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(29)

comments, many of which are

similar, are
These
summarised and grouped together by topic under
recitals 30 to 32.

and public undertakings (10) are met. This relieves the
LNE of the need to keep separate accounts.

(30)

(31)

Firstly, it is claimed that the public service task entrusted
to the LNE was not clearly defined and that
it was
therefore impossible for its competitors to draw the
line between possible public service obligations and
commercial activities. They also had no way of objec-
tively and transparently checking whether the LNE used
the grants that it received from the State solely for its
public service obligations. Grants were paid by the
regional
the
for
Trappes site, where commercial activities were carried
out. Nor did the LNE perform certain tasks, such as
representing the public
in international
bodies (Intertek, refers, for example, to taking part in
AFNOR and CEN committees without any compensation
from the public authorities). The aid in question was also
granted to the LNE without prior notification — it was
therefore illegal and as such invalid.

extension of

authorities,

authorities

e.g.

the

a

special

legislation scheme,

Secondly, on account of its public enterprise status, the
LNE enjoyed a number of selective advantages, such as
self-insurance and, more generally, non-payment of
insurance,
in
labour
particular for retirement and unemployment insurance,
the right to use documents with the French Republic’s
image or an
header and logos, the use of an official
official
to the
research tax credit, and free archiving. The LNE was
also favoured by the customs administration, which
used the LNE’s services or required firms to use those
services, to the exclusion of any other laboratories.

laboratory image, de

facto entitlement

(35)

The French authorities stress, however, that the LNE has
had an analytical accounting system since 1990. The
system was revised in 2005 to comply with the 2005
to 2008 performance contract between the State and the
LNE. It allows a complete separation of the accounts for
commercial and non-commercial activities and shows, in
particular,
the commercial services
performed by the LNE, regardless of the annual grant
made to it and assigned to public service tasks.

the profitability of

(36)

the LNE is
The full-cost accounting method is used:
structured around analysis
that directly or
indirectly contribute to its various tasks and activities.
The amount of expenditure and revenue is allocated as
precisely as possible:

centres

— there are 80 operational sections or main analysis

centres, with a staff of some 500 people,

— there are some 40 auxiliary centres comprising the
functional sections and cost centres, with a staff of
some 200 people.

(37)

LNE staff enter their working hours via input software.
Depending on the nature of the activity, the hours are
direct (operational sections) or indirect (operational and
functional sections), given that the overheads are made
up of
the auxiliary centres (functional
sections and cost centres).

the costs of

(32)

Thirdly, the Government grants distorted competition,
especially at international level. The LNE also had many
branches abroad.

(38)

The costs of
the auxiliary centres are then divided
between the main centres according to several cost
IT
units or allocation keys (staff, payroll, number of
posts,
their
temperature and heat regulation systems).

area of premises, quality of

surface

4. COMMENTS FROM FRANCE

(33)

By letters dated 4 November 2005 and 19 April 2006,
the Commission its comments on the
France sent
decision to initiate a formal
investigation procedure in
respect of the aid granted to the LNE and it provided
additional information about the LNE’s accounts.

Separation of accounts

(34)

France

emphasis

Firstly,
criteria
the
mentioned in Article 4(2)(a) and (b) of Commission
Directive 80/723/EEC of 25 June 1980 on the trans-
financial relations between Member States
parency of

that

fact

the

(39)

The full costs of
the main analysis centres are then
charged to the activities on the basis of two cost factors:

— the hours of direct

labour charged by each staff

member,

— the rate of utilisation of equipment.

(10) OJ L 195, 29.7.1980, p. 35. Directive as last amended by Directive

2005/81/EC (OJ L 312, 29.11.2005, p. 47).

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(40)

(41)

(42)

(43)

(44)

This second factor is designed to allocate in an appro-
priate manner depreciation and infrastructure costs to the
LNE’s activities (infrastructure costs are made up of the
indirect
the maintenance, workshop and
costs of
property management units).

In a main analysis centre (average operational section of
six people), a rate of utilisation is calculated for each
sector by weighting the rate of utilisation by the value
of the equipment. The depreciation and infrastructure
costs, directly linked to the equipment, can then be
charged, pro rata to these
the
commercial and public sectors.

to each of

rates,

The analysis centre’s indirect costs and other overheads
are allocated to the commercial or public activities pro
rata to the direct hours charged by the section’s staff
members.

In 2005 the effective rates of utilisation of equipment in
the commercial sector and the public sector allowed an
individual breakdown of infrastructure and depreciation
costs for each piece of equipment pro rata to its utili-
sation. The sum of these individual breakdowns gives the
total figures for 2005.

equipment by

therefore used.

feasible. An overall

the years 1993 to 2004,

such an individual
For
indicator for
breakdown was not
It was
the rate of utilisation was
reached by weighting individual rates of utilisation of
each piece of
the
for 2005 is
equipment. The value of
44 % for
the
the commercial
public sector. These rates of utilisation were calculated,
on a team-by-team basis, for the laboratory’s main items
of equipment with a purchase value of EUR 7 500 or
more, i.e. almost 1 200 items of equipment, representing
in value 70 % of all the LNE’s apparatus and equipment.

this indicator
sector and 56 % for

value of

the

(45) However, for its cost allocation calculations and thus for
the public and commercial
estimating the results of
sectors, France uses a more cautious allocation ratio of
50:50, rather than a 56:44 ratio. This corresponds to a
safety margin of about 10 % (in fact, 6 points out of 56).

(48)

(49)

in order to allocate fixed production overheads to either
the commercial or the public sector, whereas they had
been entered in the accounts as ‘mixed’ costs. The
method used is based on a principle developed in the
IAS 2 international accounting standard, whereby fixed
production overheads must be allocated to production
costs on the basis of
the
production facilities.

the normal capacity of

Service of general economic interest

Secondly, France recalls the activities linked to the public
service tasks that were entrusted to the LNE and points
out that the LNE is an EPIC subject to compliance with
the principle of specification, which applies to any public
establishment specifically created to operate a public
service. Basing itself on European Court of Justice case-
law (11), it goes on to say that the LNE’s public service
tasks are of general economic interest as the LNE uses
resources that it would not commit if it considered only
identified in the
interest. The tasks
its commercial
2005/2008 performance contract are therefore of a
clear and specific economic nature. Lastly,
the case-
law (12)
that undertakings
states, on the one hand,
entrusted with the operation of
services of general
economic interest must have been assigned that task by
an act of a public authority which defines precisely the
content of the public service obligations and, on the
other hand, that the Commission can call into question
the definition of services of general economic interest
only in a case of manifest error. France maintains that,
by definition, EPICs satisfy the above criteria.

Absence of State aid and cross-subsidation

four

the provisions of

the Altmark judgment (13) are,

Thirdly, according to France, the compensation granted
to the LNE for its public service obligations does not
cumulative
constitute unlawful State aid. The
in fact,
conditions of
met. Analysis also reveals that
the
Community framework for State aid in the form of
public service compensation (14)
(the framework) are
met. In addition, any penalty imposed on France would
contravene Commission Decision No 2005/842/EC of
28 November 2005 on the application of Article 86(2)
of the EC Treaty to State aid in the form of public service
compensation granted to certain undertakings entrusted
with the operation of services of general economic
interest (15). Article 2(1)(a) of the Decision lays down
the compatibility of such compensation under certain
conditions that the LNE meets.

(46)

Buildings are not included in the above sampling but the
utilisation ratios in analytical accounts result in a 2/3-1/3
allocation in favour of the public sector.

(47)

The LNE’s accounts for the period 1993 to 2004 have
therefore been re-done as requested by the Commission

(11) Including the judgment of the Court of 11 April 1989 in Case

66/86, Ahmed Saeed Flugreisen et al. [1989] ECR 803.

(12) Judgment of the Court of 15 June 2005 in Case T-17/02 Fred Olsen,
SA v Commission [2005] ECR II-2031, at paragraphs 186 et seq. and
216.

(13) Judgment of 24 July 2003,

in Case C-280/00 Altmark Trans and

Regierungspräsidium Magdeburg [2003] ECR I-7747.

(14) OJ C 297, 29.11.2005, p. 4.
(15) OJ L 312, 29.11.2005, p. 67.

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(50)

The grants for the Trappes sites, awarded by the regional
authorities and the State, funded the resources needed to
perform the public service tasks entrusted to the LNE.

5.1. Classification as State aid

The LNE’s public service tasks are economic activities

(51) Using an analysis of the relevant markets, France wishes
to prove that, at the date of referral, there had been no
irregular cross-subsidies, i.e. enabling the LNE to charge
predatory prices in the relevant commercial sectors.

(52)

Lastly, France considers that the LNE does not have a
significant market share as it
is estimated at 4,2 %
nationally and at 1 % Europe-wide.

Other factors

(53)

(54)

is

that

Ile-de-France

consistent with a

Fourthly, France points out
the trade discount
granted to small and medium-sized enterprises (SMEs)
in the
scheme
authorised by the Commission in 1989 (16), for which
any laboratory was eligible, including the complainants.
The subsidies granted by the Conseil Régional d’Ile de
France amount
to EUR 61 000 since 1995. The real
recipients of these subsidies were the SMEs in question.
Furthermore, France has found no trace of an alleged
the Environment and
subsidy from the Agency for
Energy Management (ADEME) to the LNE.

and

indirect

to perform their tests,
taxation

the
Fifthly, France notes that,
authorities
French
customs
the
(DGDDI) use their own laboratories or those of
for Competition, Consumer Affairs
Directorate-General
and Prevention of Fraud (DGCCRF) if they possess the
ad hoc technical expertise (for example, a large number
of tests on toys are carried out by a customs laboratory).
If not, the DGDDI uses external laboratories, such as the
its
LNE. The laboratory is chosen on the basis of
expertise in applying the regulations in question. The
the
DGDDI
National Research and Safety Institute (INRS)
in the
cases of protective masks or
to the Scientific and
Technical Centre for Buildings (CSTB) for construction
products.

can therefore

turn to,

example,

for

5. ASSESSMENT OF THE MEASURES

(55)

The subject matter of
this procedure is the annual
operating and investment grants awarded to the LNE
by the public authorities between 1993 and 2005.

(16) File NN 6/89,
transfer. Letter
23.5.1989).

regional centres of
to the French authorities,

innovation and technology
(SEC(1989)814 of

(56)

The competition rules do not apply to non-economic
activities. The first matter to be assessed is, therefore,
whether the LNE’s activities in the public sector (17) are
economic in nature or not.

(57) Any activity consisting in supplying goods or services on
a given market is an economic activity (18). According to
Mr Advocate-General Jacobs, in his conclusions in Case
C-222/04, the emphasis when interpreting whether an
activity is economic in nature should be placed on
whether that activity could, at
in principle, be
carried on by a private undertaking in order to make
profits.

least

(58)

In this context, the Commission considers that the study,
research, consultation, expertise, testing and control work
the technical assistance measures designed to
and all
improve product
protect and inform consumers or
quality carried out by the LNE as part of
its general
interest task, correspond to a supply of services on the
in
relevant markets and that
principle, be supplied by an undertaking in order to
make profits. The tasks entrusted by the State to the
LNE are therefore economic in nature (19).

these services could,

Criteria required to classify a state measure as State aid

(59) Under Article 87(1), a measure constitutes State aid if the
four following conditions are all met. First, it must be a
state measure or involve state resources. Second,
the
measure must confer an advantage on its recipient.
Third, it must distort or threaten to distort competition
by favouring certain undertakings. Fourth, it must affect
trade between Member States.

State resources

(60)

State budget allocations are clearly state resources.

(61)

The public interest group ‘Bureau national de métrologie’
was under state control (20), before being incorporated
into the LNE in 2005. The LNE’s resources linked to
contracts with BNM are therefore state resources.

(17) Clearly, activities in the market sector are economic activities within

the meaning of the case-law.

(18) Judgment of the Court of 10 January 2006 in Case C-222/04 Cassa

di Risparmio di Firenze et al. [2006] ECR I-289.

(19) Subject to what is stated in paragraph 5.4 of this decision.
(20) The BNM was a public interest group made up of the French State,
represented by the Ministry for Industry and the Ministry for
Research and New Technologies, and of public entities, viz. the
Commissariat à l'énergie atomique, the Conservatoire national des
arts et métiers, the LNE and the Observatoire de Paris. The public
interest group was funded by its members.

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(62) Aid granted by regional and local bodies of the Member
States, whatever their status and description, must be
scrutinized to determine whether
complies with
the Treaty (21). The grants paid by the
Article 87 of
Conseil Régional d’Ile de France and by the Conseil
Général des Yvelines are state resources.

it

(71) Moreover, for the effect-on-trade condition to be met, the
Commission is not required to establish the real impact
of this aid on trade between the Member States and an
effective distortion of competition but must
simply
examine whether this aid could affect trade and distort
competition.

(63)

Therefore, all
through state resources.

the measures in question are financed

(72)

Advantage conferred on the recipient

(64) Measures which, in various forms, mitigate the burdens
which are normally included in the budget of an under-
taking and which are thereby similar
to subsidies
constitute
the purposes of Article
87(1) (22).

advantages

for

In this context, it is sufficient to note that the markets on
which the LNE operates have a cross-border dimension
and that the LNE competes with undertakings located in
other Member States and with French undertakings active
on these markets at international level. It was argued here
that any granting of aid to an undertaking that operates
on the Community market would be likely to distort
competition and affect trade between Member States (24).

(65) Operating and investment grants mitigate the charges
that are normally included in the LNE’s budget. These
grants therefore confer an advantage on the LNE.

(73)

Consequently, France’s claims that trade would not be
affected because of LNE’s small market shares cannot
be accepted, especially since the amounts granted are
far from negligible.

Distorting or threatening to distort competition by favouring
certain undertakings

(74)

(66) Article 87(1) prohibits aid that favours certain under-
takings or the production of certain goods, i.e. selective
aid.

the

in question hamper

commercial
The measures
activities of Community operators (25) wishing
to
expand their
in France. Without public
support, the LNE’s operations would be on a smaller
scale, enabling the LNE’s competitors to increase their
turnover.

activities

(67) As the sole beneficiary of

subject of
condition is clearly met.

this procedure is the LNE,

the measures that are the
the selectivity

(68)

It should also be recalled that, in principle, aid intended
to relieve an undertaking of the expenses which it would
itself normally have had to bear
in its day-to-day
management or its usual activities distort the conditions
of competition (23).

(75) As the measures in question put the LNE in a stronger
competing in intra-
position than other operators
Community trade,
it can be concluded that they affect
trade between Member States and are likely to distort
competition between these operators.

(69)

Consequently the measures in question, which favour the
LNE, could distort competition.

(76)

Effects on trade

(70)

The Commission notes that the relevant markets are the
subject of intra-Community trade. In 2005 the LNE had
a turnover within the European Union of EUR 4 million
(excluding France) and of EUR 2,35 million outside the
European Union. In 2000, according to France, the LNE
generated 13 % of its turnover outside France, i.e. 9 % in
the European Union and 4 % outside.

(21) See the judgment of the Court of 14 October 1987 in Case 248/84
Federal Republic of Germany v Commission [1987] ECR. I 4013, at
paragraph 17).

(22) See the judgment of 19 September 2000 in Case C-156/98
Germany v Commission [2003] ECR I-6857 paragraph 30, and the
case-law cited.

(23) See the judgment of 16 September 2004 in Case T-274/01 Valmont

ECR II-3145, at paragraph 44, and the case-law cited.

Compensation for a public service obligation — the Altmark
judgment

In July 2003 the Court ruled in Altmark (26) that, where a
state measure must be regarded as compensation for the
services provided by the recipient undertakings in order
to discharge public service obligations, so that
those
undertakings do not enjoy a real
financial advantage
and the measure thus does not have the effect of
putting them in a more favourable competitive position
than the undertakings competing with them, such a
measure is not caught by Article 87(1) of the Treaty.
referred to in the
To do so,
judgment must all be satisfied.

the four conditions

(24) See, for example the judgments of the Court of 17 September 1980
in Case 730/79 Philip Morris/Commission [1986] ECR 2671, at para-
graphs 11 and 12 and of 30 April 1998 in Case T-214/95 Vlaams
Gewest/Commission [1998] ECR II-717, at paragraphs 48 to 50.
(25) The LNE's competitors are both domestic companies and interna-

tional groups (Bureau Veritas, Intertek, etc.).

(26) See the judgment of 24 July 2003 in Case 280/00 in Altmark Trans
and Regierungspräsidium Magdeburg [2003] ECR I-7747, at paragraph
87.

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(77)

France maintains that the compensation paid to the LNE
for its public service obligations is not unlawful State aid
because the four conditions referred to by the Court are
satisfied.

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

(78)

The Commission does not share this opinion.

(79) According to the fourth condition listed in the Altmark
judgment, where the undertaking which is to discharge
public service obligations in a specific case is not chosen
to a public procurement procedure which
pursuant
would allow for the selection of the tenderer capable
of providing those services at
to the
community, the level of compensation needed must be
determined on the basis of an analysis of the costs which
a typical undertaking, well run and adequately equipped
so as to be able to meet the necessary public service
requirements, would have incurred in discharging those
obligations, taking into account the relevant receipts and
a reasonable profit for discharging the obligations.

the least cost

5.2. Unlawfulness of the aid

(86)

The Commission considers it irrelevant for the purposes
of this procedure that the 1978 Decree constituted a
financing scheme. This Decree is very general in nature
and the decisions on the amount of the grants awarded
by the State and the BNM to the LNE were taken
annually, on grounds and terms that could vary widely
to the next. Annual operating and
from one year
investment
LNE therefore
awarded to the
constitute new individual aid measures.

grants

(87)

These aid measures were implemented without prior
notification to the Commission. They are therefore illegal.

(80)

In its arguments to demonstrate compliance with the
condition spelt out in the preceding paragraph, France
limits itself to saying that the analysis of the costs which
a typical undertaking would incur must take into account
the range of public service tasks entrusted to the LNE,
which concern both regulatory applications and basic
research in various sectors (metrology, health, envir-
onment,
industry, consumer goods, construction and
packaging products).

5.3. Compatibility of the aid with the common
market

5.3.1. T h e e x c e p t i o n s i n A r t i c l e 8 7

(88)

The exemptions laid down in Article 87(2) of the Treaty
concerning aid having a social character, granted to indi-
vidual consumers, aid to make good the damage caused
by natural disasters or exceptional occurrences and aid
granted to certain areas of
the Federal Republic of
Germany are clearly irrelevant to this case.

(81)

France has not provided any analysis of the costs of ‘a
typical undertaking, well run’. In addition, no explanation
is given as to why it might not be possible to compare
LNE to a typical undertaking of this type.

(82)

The Commission is unable to conjure up out of nothing
the comparison required by Community case-law.

(83)

The Commission therefore considers that
the fourth
criterion listed in the Altmark judgment has not been
met.

(84)

France’s abstract reference to points 13 to 17 of the
framework in no way alter this view.

(89) As for exemptions in Article 87(3) of the Treaty, the
Commission notes that the aim of the aid in question
is not to promote the economic development of areas
where the standard of living is abnormally low or where
there is serious underemployment, that it is not designed
to promote the execution of an important project of
common European interest or
to remedy a serious
disturbance in the French economy. Nor is it intended
to promote culture and heritage conservation. As for the
exemption in Article 87(3)(c), the Commission considers
the doubts expressed when the procedure was
that
initiated have not been dispelled: the aid in question
does not facilitate the development of certain economic
areas or of certain economic activities.

Conclusion

(85)

In the light of all
the
Commission considers that the budget allocations and
the grants paid by the regional authorities in question

the foregoing considerations,

(90)

It should be noted in this connection that neither the
French authorities nor the interested parties made use of
the exemptions in Article 87(2) and (3) during the
administrative procedure. In particular, France considered
that the provisions of Article 87 would not be applicable
as the measures examined would not distort competition
or affect trade between the Member States.

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L 95/33

5.3.2. A r t i c l e 8 6 ( 2 )

to the rules contained in the Treaty,

(91) Under Article 86(2), undertakings entrusted with the
operation of services of general economic interest or
having the character of a revenue-producing monopoly
in
are subject
particular to the rules on competition, in so far as the
such rules does not obstruct
application of
the
performance,
in law or in fact, of the particular tasks
assigned to them. The development of trade must not
be affected to such an extent as would be contrary to the
interests of the Community.

(97)

It has already been established that the LNE’s activities in
the public sector are economic activities.

(98) As for the general interest classification, apart from the
sectors in which this question is already covered by
Community rules, the Member States enjoy wide discre-
tionary powers, subject to a manifest error of assessment
detected by the Commission.

(92) According

to point 26 of
the

the
Commission will
the
framework to non-notified aid if it was granted after
29 November 2005 and the provisions in force at the
time the aid was granted, in all other cases.

framework,
of

provisions

apply

the

(93)

procedure

This
29 November 2005.

concerns

aid

granted

before

(94)

The Commission Communication on services of general
interest in Europe (27), which was in force when the aid
was granted, should therefore be applied. Accordingly,
where the rules apply, compatibility with those rules is
based on three principles:

— neutrality with regard to the public or private

ownership of companies,

— Member States’ freedom to define services of general

interest, subject to control for manifest error,

(99)

In this case, the Commission considers that the definition
of the LNE’s public service tasks, as it derives from the
1978 text and the additions made in 2005, is sufficiently
clear (28) and that there is therefore no manifest error of
assessment on the part of
the French authorities.
Moreover, undertakings
entrusted with operating a
service of general economic interest must have been
entrusted with it through an act of public authority. In
this case, Law No 78-23 of 10 January 1978 and the
2005 Decrees are official acts of the public authorities. In
addition,
the performance contracts co-
signed by the State set out the LNE’s tasks clearly and
in detail.

from 1997,

(100) The comments from interested parties, which essentially
indicate that it would be impossible for the LNE’s compe-
titors to draw the line between its public service obli-
gations and its commercial activities, do not invalidate
this
to the
refer,
requirement for separate accounts to be kept for activities
that come under the heading of services of general
economic interest and for commercial-type activities, in
order to avoid any cross-subsidisation incompatible with
the EC Treaty. These latter points are discussed below.

conclusion. They

in practice,

— proportionality requiring that restrictions of compe-
tition and limitations of the freedoms of the single
market do not exceed what is necessary to guarantee
effective fulfilment of the task.

Proportionality

Neutrality

(95)

There is no difficulty with compliance with the principle
of neutrality in this case.

Task of general economic interest

(96) As regards the definition of the LNE’s public service task
as a task of general economic interest,
it is up to the
Commission to assess the economic nature of the activity
in question and to check that the Member State has not
committed a manifest error of assessment by classifying
it as a task of general interest.

(101) Proportionality under Article 86(2)

that

implies

the
interest task do not
means used to fulfil the general
create unnecessary distortions of
it
trade. Specifically,
has to be ensured that any restrictions imposed on the
is necessary to
rules of
guarantee
The
task.
the
fulfilment
performance of the service of general economic interest
must be ensured and the entrusted undertakings must be
able to bear the specific burden and the net extra costs of
the particular task assigned to them.

the EC Treaty exceed what

effective

of

(102) The Commission considers that

the aid in question

comes under the LNE’s general interest task.

(27) OJ C 17, 19.1.2001, p. 4.

(28) The tasks in question are described in detail in Section 2.

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(103)

In this context, if the annual compensation paid by the
public authorities does not exceed the net extra costs
incurred by the LNE in the performance of the service
of general economic interest, the principle of propor-
satisfied. This can be verified if, when
tionality is
income and expenditure in the public and commercial
sectors have been correctly entered in the analytical
accounts, the result of the public sector including all
grants in the financial year
is negative or zero or
generates a reasonable profit, particularly taking into
account
in which LNE
operates.

the activities and the sector

Validation of the LNE’s analytical accounting methodology

(104) The Commission has examined the methodology used
for the LNE’s analytical accounts,
in order to check
whether
the
income and expenditure relating to the service of
general economic interest
the period 1993 to
2005 (29).

indeed possible to identify all

it was

for

(105)

In 2005 the LNE’s analytical accounts were based on full
costs, which entails identifying exactly all the activities,
by means of a large number of operational sections (80)
and functional sections (some 40).

(106) Revenue from the LNE’s commercial sector is made up of
the turnover from services performed and from other
the
products,
provision of staff, charging for carriage to the customer
and withdrawals from contingency reserves.

charging for

including,

example,

for

(107) Revenue from the public sector includes the ‘studies’
turnover, the Metrology contract (ex-BNM), miscellaneous
revenue (for example, from international technical coop-
eration), operating grants and the share of investment
grants transferred to the profit and loss account.

(108) The share of investment grants transferred to the profit
and loss account includes the investment grants paid by
the regional authorities. Consequently,
the grants in
question, which helped finance the resources needed to
perform the public service tasks entrusted to the LNE, are
included in the analysis of the amount of compensation
granted to the LNE to cover
the
general economic interest service tasks. The 2/3-1/3

costs of

the

(29) For the purposes of this procedure, it is not necessary to establish
whether the LNE has set up separate accounts and has identified
public funds made available in accordance with Commission
Directive 80/723/EEC. A possible infringement of this Directive
would not affect the compatibility of the aid in question with the
common market.

breakdown between public and private sectors for the
depreciation of buildings is in line with the use made
of the ‘Trappes 3’ and ‘Trappes 4’ buildings.

(109) Expenditure is similarly divided between the commercial
and the public sectors. It is basically split between direct
task
labour, purchases/outsourcing/direct costs, direct
expenses,
infrastructure
indirect expenses, overheads,
and depreciation costs.

(110) As regards the depreciation and infrastructure costs of
materials used in both the commercial and the public
these are calculated in the analytical accounts
sector,
using widely accepted methods and on the basis of the
rate of utilisation of these materials.

(111) The Commission considers that the sampling carried out,
which represents 70 % in value of the LNE’s materials
and equipment and serves as the basis for calculating
the 44/56 allocation ratio,
In addition,
this overall allocation ratio to the
the application of
most costly equipment can be extended to the less
expensive equipment, which complements
the heavy
equipment.

is satisfactory.

(112) The 44/56 ratio is also acceptable for the whole of the
period examined as the commercial sector activities were
then on an upward trend (30). It is therefore reasonable to
assume that the rate of utilisation recorded for public
sector equipment in 2005 represents a minimum for
the period 1993 to 2004.

(113) Furthermore, the Commission considers that the upshot
of the 10 % safety margin used by the French authorities
in their recalculations for the period 1993 to 2004 is
that the expenditure charged to the public sector is not
overestimated and does not therefore warrant possibly
excessive grants. The French authorities’ approach is
therefore cautious.

(114) The Commission accordingly concludes that the LNE’s
analytical accounts correspond to normally accepted
standards and have no particular specificities and also
that
the accounts
by sector (31) during the period 1993 to 2004 are
acceptable (32).

the recalculations done to present

(30) The commercial sector represents the following percentages of the

LNE's turnover:
2005 — 71 %, 2004 — 70 %, 2003 — 69 %, 2002 — 66 %, 2001
— 66 %, 2000 — 66 %, 1999 — 64 %, 1998 — 65 %, 1997 —
61 %, 1996 — 60 %, 1995 — 58 %, 1994 — 60 % and 1993 —
62 %.

(31) The revenue and expenditure of the ‘mixed’ sector mentioned when
the procedure was initiated were allocated between the public and
commercial sectors according to the methodology set out in the
preceding paragraphs.

(32) The possibility for the Commission,

in the absence of analytical
accounts,
the costs
to rely on an analytical reconstruction of
carried out ex post by backward projection was endorsed by the
Court (see the judgment of 7 June 2006 in Case T-613/97, Report
2006, p. II-01531, Union française de l'express (UFEX), in particular
paragraph 137).

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L 95/35

No overcompensation

(115) The annual results of the public sector which include
public grants and as established by the LNE’s analytical
accounts, are as follows:

the public sector, 0,6 % for all of its activities) than for
the interested parties, whose ratios ranged between 0 %
and 4 %. This confirms that the profits made by the LNE
in the public sector can be considered reasonable profits.

(EUR '000)

Result public
sector

Result/turnover
public sector (*)

(1 414)

(851)

(321)

204

(186)

(856)

65

(459)

271

(223)

56

178

(41)

(8,4 %)

(5,1 %)

(2,2 %)

1,3 %

(1,3 %)

(6,2 %)

0,5 %

(3,5 %)

2,0 %

(1,7 %)

0,4 %

1,3 %

(0,3 %)

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

(*) The turnover of

the public sector does not

include the share of

investment grants paid into the profit and loss account.

(116) Since 1993, the results of the public sector, i.e. activities
covered by services of general economic interest, have
more often than not shown a loss despite the granting
of the aid in question. When a surplus is recorded, it is
2 % or less than the turnover generated in the public
sector. The weighted result
the period 1993 to
2005 is a loss of 1,9 %.

for

(117) These results, generally negative, are clearly lower than
what a reasonable profit would be for a comparable
private undertaking.

(118) Furthermore, the Commission has examined in detail the
results and the turnover of the LNE and of the three
interested parties, which have comparable activities to
for the period 1998 to 2005 (33).
those of
This
ratios were
lower for the LNE (– 3,2 % for the LNE’s activities in

result/turnover

shows that

the LNE,

the net

(33) For the Laboratoires Pourquery, the available data does not go

beyond 2004.

(119) The Commission therefore concludes that the LNE has
not benefited from any overcompensation for the costs
of the services of general economic interest since 1993.
The public service compensations paid to the LNE during
the period 1993 to 2005 constitute State aid that is
compatible with Article 86(2) of the Treaty.

(120)

It follows that it is not necessary to check the existence
of any cross-subsidisation for the LNE (34) for its activities
in the commercial sector.

(121)

5.4. Non-commercial nature of certain of the LNE’s
activities in the public sector

It should be noted that, while some — although not
many — of
the LNE’s activities in the public sector
should be considered non-commercial (35) and akin to
public service tasks, checks should also be made to
verify that the compensation paid by the public autho-
rities remains equal to or less than the net costs incurred
for the performance of these tasks (36).

(122) This analysis has already been carried out, for example, in
there is no
paragraphs 115 to 120 and shows that
reason to object
It
implies that the financing of these activities does not
constitute State aid.

to the compensation in question.

5.5. Comments from third parties

(123)

In the comments submitted under this procedure, some
competitors have mentioned other aid allegedly received
by the LNE. These measures have not been the subject of
In the light of the French authorities’
this procedure.
replies, the Commission none the less considers that it
informed to take a position on them.
sufficiently well

(34) After analysing the loan conditions granted by the banks to the
LNE, even if the guarantee that is the corollary of its status as a
public industrial and commercial enterprise conferred an advantage
on the LNE for public sector activities, this advantage would be very
small in value, close to the de minimis amount, and would not call
into question the proportionality tests carried out in paragraphs
101 to 103 in respect of public service compensation.

(35) This could be the case, for example, of basic research in metrology.
(36) See in this connection Commission Decision 2001/46/EC of
26.7.2000 on the State aid measure implemented by Germany
for the SICAN group and its project partners, and in particular
paragraphs 87 to 92 (OJ L 18, 19.1.2001, p. 18).

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(124) The total amount of the grants awarded to the LNE by
the Conseil Régional d’Ile-de-France
to finance the
commercial discount granted by the LNE to SMEs in
that
region was EUR 61 000 in 2003. Since these
grants can be regarded as aid to the LNE (and not to
the client SMEs) and since they are not part of an
existing aid scheme (see paragraph 54), they satisfy the
conditions set out in Article 2 of Commission Regulation
(EC) No 69/2001 of 12 January 2001 on the application
of Articles 87 and 88 of the EC Treaty to de minimis
aid (37). The Commission cannot therefore oppose them.

(125) The Commission also notes that ADEME has not granted

any aid to the LNE.

(126) Neither the LNE’s alleged use of the official logos of the
French Republic nor its degree of participation in the
work of
international bodies seems to be relevant in
this case. The LNE’s logo is different from the official
logo, which can be used only by the public authorities.
As for the LNE representing the public authorities in
and
certain
organisations
the International Organisation for
(working parties of
Legal Metrology
the Committee on
European Cooperation in Legal Metrology (WELMEC)),
any advantage that
the LNE may gain from this in
terms of image could not rank as State aid.

international

European

(OIML)

and

(127) The alleged advantages as regards self-insurance, a special
labour legislation scheme for employees or free archiving
do not exist in practice. The LNE’s insurance policies,
which cost over EUR 300 000 in 2004, are similar to
those taken out by private undertakings. The LNE’s
employees do not have special status,
like that of the
civil service, but instead come under private law both
for unemployment insurance and for retirement. Lastly,
the LNE is not entitled to free archiving — on the
contrary, the direct cost of this was some EUR 80 000
in 2005.

(128) The LNE’s de facto entitlement to the research tax credit
does not constitute State aid within the meaning of
Article 87(1), especially since this de facto entitlement
does not involve any state resources. It results from the
LNE having been the subject of an ad hoc evaluation of
its researchers in the context of its public obligations in
the research field. Furthermore, the research tax credit is
taken into account in the LNE’s income and expenditure.

(129) As for the customs authorities’ alleged support for the
LNE, this is not backed up by any precise information. It

of

the DGCCRF

the DGDDI uses its own laboratories,
transpires that
those
laboratories,
including the LNE, the Institut national de recherche et
de sécurité or the Centre scientifique et technique du
bâtiment (CSTB) for construction products.

external

or

6. CONCLUSIONS

(130) Subject to Section 5.4, public service compensation in
the form of budget allocations from the State and the
BNM and grants from the regional authorities that were
awarded to the LNE between 1993 and 2005 constitute
State aid.

(131) The Commission finds that France has unlawfully imple-
mented the aid in question in breach of Article 88(3) of
the Treaty.

(132) However, this aid is compatible with Article 86(2) of the

Treaty.

(133) This decision does not concern the state guarantee for
which the LNE’s activities in the commercial sector could
qualify because of its EPIC status. This aspect, which has
led to a proposal for appropriate measures under Article
88(1) of the Treaty (38), will be the subject of further
decisions,

HAS ADOPTED THIS DECISION:

Article 1

The public service compensation which France implemented
unlawfully for
the Laboratoire national de métrologie et
d’essais between 1993 and 2005 is compatible with the
common market.

Article 2

This Decision is addressed to the French Republic.

Done at Brussels, 22 November 2006.

For the Commission

Neelie KROES
Member of the Commission

(37) OJ L 10, 13.1.2001, p. 30.

(38) Aid E 24/2004 and letter of 5 July 2005.