2008/716/EC: Commission Decision of 2 April 2008 on State aid C 38/07 (ex NN 45/07) implemented by France for Arbel Fauvet Rail SA (notified under document number C(2008) 1089) (Text with EEA relevance)
Date: 2008-04-02
Institutions: European Commission
Subjects: France, State aid, aid for restructuring, company in difficulties, control of State aid, vehicle on rails

5.9.2008

EN

Official Journal of the European Union

L 238/27

COMMISSION DECISION

of 2 April 2008

on State aid C 38/07 (ex NN 45/07) implemented by France for Arbel Fauvet Rail SA

(notified under document number C(2008) 1089)

(Only the French version is authentic)

(Text with EEA relevance)

(2008/716/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty
Community,
and in particular
Article 88(2) thereof,

establishing the European
subparagraph of
the

first

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),

Whereas:

(1)

(2)

1. PROCEDURE

The Commission received a complaint informing it of
certain support measures implemented by France for
Arbel Fauvet Rail (hereinafter AFR). In communications
dated 28 January 2006, 25 October 2006, 30 January
2007 and 6 June 2007, France submitted additional
information.

By letter dated 12 September 2007, the Commission
it had decided to initiate the
informed France that
formal
in
laid
investigation
Article 88(2) of the Treaty in respect of the measure.

procedure

down

(3)

(4)

France submitted comments in communications dated
12 October and 18 and 19 December 2007.

The Commission Decision to initiate the formal investi­
gation procedure was published in the Official Journal of
the European Union (2). The Commission called on
interested parties to submit their comments.

(5)

The Commission has
interested parties.

received no comments

from

(6)

(7)

(8)

2. AID DESCRIPTION

2.1. Beneficiary

AFR is a manufacturer of railway equipment specialising
in goods wagons and tank containers. It is one of the
leading manufacturers of railway rolling stock on the
European market. The company is located in Douai
(Nord) and currently employs around 265 people.

In 2005 AFR was wholly owned by Arbel SA (3) and
employed around 330 people.

AFR’s business has been running at a loss for several
years. The company’s economic difficulties worsened
from 2001 onwards. This trend gathered momentum
between 2002 and 2005. The following table shows
some of AFR’s key performance indicators
the
period before the aid was granted.

for

At 31.12.2004

At 31.12.2003

At 31.12.2002

At 31.12.2001

(in EUR)

Turnover

Net result

22 700 000

42 700 000

42 000 000

70 000 000

– 11 589 620

– 14 270 634

– 2 083 746

– 10 500 000

Capital and reserves

– 21 090 000

– 23 000 000

– 8 700 000

– 6 600 000

(1) OJ C 249, 24.10.2007, p. 17.

(2) See footnote 1.
(3) On 29 June 2007 AFR was taken over by IGF Industries. Its business

name changed to ‘IGF Industries — Arbel Fauvet Rail’.

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Official Journal of the European Union

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2.2. Support measures

4. COMMENTS FROM FRANCE

(9)

On 4 July 2005 the Nord-Pas-de-Calais regional authori­
ties and the Communauté d’agglomération du Douaisis
jointly granted AFR a repayable advance of EUR 1
million each, making a total of EUR 2 million.

(10) According to the information provided by the French
authorities, the terms of the advances were as follows:

(13)

(14)

The French authorities claimed that, although AFR was
going through a difficult period at the time the repayable
advances were granted and then paid (i.e. July and the
second half of 2005), it had maintained the confidence
of its customers and bankers.

their

claims,

support

authorities
To
mentioned the following points, which they described
as
in AFR on the part of
customers and banks:

confidence’

‘signs of

French

the

— the repayable advance from the regional authorities
interest rate of 4,08 %
was granted at an annual
(equivalent
rate
the Community
to
applicable at the time), subject to the completion of
a financing plan that AFR was drawing up. It was to
be repaid in six-monthly instalments over a three-
year period starting on 1 January 2006. As far as
the Commission is aware, these advances have not
yet been repaid in full,

reference

— the advance from the Communauté d’agglomération
du Douaisis was granted at an annual interest rate of
4,08 % (equivalent to the Community reference rate
applicable at the time), subject to payment of the
advance from the regional authorities,
repayable
under the same terms, and to supply of proof of
the irrevocable merger between AFR and Lormafer,
another company controlled by Arbel SA. This
advance was also to be repaid in six-monthly
instalments over a three-year period starting on
1 January 2006.

3. GROUNDS FOR INITIATING THE FORMAL INVESTI­
GATION PROCEDURE

In its Decision to initiate the procedure, the Commission
took the view that the repayable advances constituted
State aid within the meaning of Article 87(1) of the
Treaty.
it noted that the measures
conferred an advantage on AFR in that the firm, given
its financial situation, could not have raised funds on
such favourable terms on the financial market.

In this connection,

The Commission also took the view that AFR was a firm
the Community
in difficulty within the meaning of
Guidelines on State aid for rescuing and restructuring
firms in difficulty (‘the Guidelines’) (4) and that the com­
patibility of
the State aid it had received needed,
therefore, to be assessed in the light of the Guidelines.
The Commission was doubtful whether, in the light of
the Guidelines, the aid in question was compatible with
the common market.

(11)

(12)

— […] (*) bank had increased the overdraft facility on
AFR’s current account by EUR 2 million (guaranteed
by […]),

— AFR had received EUR 7 million in advance
payments
by
[…]) (*), to which a further EUR 4 million in new
advance payments was added in January 2006,

(guaranteed

customers

from its

— at the same time, the firm held supplier guarantees

worth EUR 4 million with […] (*).

(15)

The French authorities backed up their comments with
documents which show the following:

— the overdraft interest rate was 4,4199 % as 1 July

2005,

— the outstanding amount of

the various guarantees
(suppliers, contract guarantees, financial guarantees)
provided by […] (*) to AFR was EUR 29 million of
at 6 May 2005.

5. ASSESSMENT OF THE AID IN THE LIGHT OF
ARTICLE 87 OF THE TREATY

5.1. Existence of State aid

5.1.1. State resources

(16) Article 87(1) of the Treaty stipulates that, save as where
otherwise provided for in the Treaty, aid granted by a
Member State or through State resource which distorts or
threatens to distort competition by favouring certain
undertakings or the production of certain goods is,
in
so far as it affects trade among Member States, incom­
patible with the common market.

(17) With regard to the repayable advances, the Commission

notes the following.

(4) OJ C 244, 1.10.2004, p. 2.

(*) Confidential information.

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(18) Article 87 of the Treaty does not apply only to aid
granted by the national governments of Member States,
but also to aid from local and regional authorities such
as the Nord-Pas-de-Calais region or the municipalities in
the Communauté d’agglomération du Douaisis. The funds
of such authorities constitute state resources, and their
decisions to grant the advances in question to AFR are
attributable to the State.

to the same risk analyses by creditors, and the fact that a
debtor can obtain short-term credit is not sufficient to
assess whether it could obtain a longer-term loan, the
repayment of which depends on the debtor’s ability to
survive.

(19)

(20)

5.1.2. Aid favouring certain undertakings

the Commission was of

The advances were granted at a time when AFR was in a
difficult financial situation. In its decision to initiate the
procedure,
the opinion that,
given its financial situation as described in point 8,
AFR was a firm in difficulty within the meaning of the
Guidelines when the aid was granted. It also noted that
the advances were granted without any guarantee being
lodged for their repayment, whereas the interest rates
applied are supposed to reflect the interest rate applicable
to loans ‘backed by normal security’ (5).
therefore
there is no way that AFR, given its
considers that
financial
situation, would have been able to obtain
funding on such favourable terms on the credit market.
The advances in question therefore confer an advantage
on AFR.

It

In this connection, it is worth noting that, basing them­
selves on the examples given in paragraph 14, the French
authorities stated that AFR still had the confidence of its
bankers and customers at the time the aid was granted.
The Commission takes these comments to mean that
France disputes the idea that AFR was unable to obtain
funds on similar terms on the credit market
(which
amounts
advances
conferred an advantage on AFR) and a fortiori that AFR
the
was a firm in difficulty within the meaning of
Guidelines at
the time the repayable advances were
granted.

to disputing that

repayable

the

(21) However, France’s comments did not alter the analysis
made in the decision to initiate the procedure, for the
following reasons.

(22)

The examples of credit quoted by the French authorities
(such as the current account overdraft facility and the
advance payments from customers) are not comparable
to the repayable advances in question. A current account
overdraft is a very short-term credit facility, unlike the
repayable advances, which have a maturity of three years.
These different types of credit are not, therefore, subject

(5) See the Commission notice on the method for setting the reference

and discount rates (OJ C 273, 9.9.1997, p. 3).

(23)

Concerning the advance payments from customers, the
Commission notes that they were counter-guaranteed by
[…] (*), an independent
institution, which means that
customers and suppliers were not incurring any risks in
connection with AFR’s financial situation and therefore
had no reason to subject the payment of these advances
to an analysis of the financial soundness of the firm
along the lines of that which would have been carried
out by a creditor considering the possibility of providing
an unsecured loan.

(24)

In conclusion, France’s comments do not lead to the
conclusion that AFR would have been able to obtain
funds on similar terms on the credit market.

5.1.3. Firm in difficulty

(25) With regard to AFR’s status as a firm in difficulty within
the meaning of the Guidelines, the Commission makes
the following observations.

(26)

Point 10(a) of the Guidelines states that a firm is in
difficulty where more than half of its registered capital
that
has disappeared and more than one quarter of
capital has been lost over the preceding 12 months.
This provision reflects the assumption that a company
experiencing a massive loss in its registered capital will
be unable to stem losses that will almost certainly
to go out of business in the short or
condemn it
medium term. The Commission considers
this
that
assumption logically applies a fortiori
to a company
that has lost all
its registered capital and has negative
capital and reserves.

(27) As shown by the financial data set out in paragraph 8
(and not disputed by France during the formal
investi­
gation procedure), AFR had had negative capital and
reserves since 2001 and had not, at the time the aid
was granted, been able to reverse this trend and move
back into a positive situation as regards capital and
reserves. Under
the Commission
considers that AFR was a firm in difficulty within the
meaning of point 10 of the Guidelines at the time the aid
was granted.

circumstances,

the

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(28)

(29)

In the alternative, the Commission notes that, at the time
the aid was granted, AFR also fitted the definition of a
firm in difficulty given in point 11 of the Guidelines,
which states that, even when none of the circumstances
set out in point 10 are present, a firm may still be
considered to be in difficulty,
in particular where the
usual signs of a firm being in difficulty are present,
such as
increasing losses and diminishing turnover.
However, point 11 does stipulate that a firm in difficulty
it cannot recover
is eligible only where, demonstrably,
through its own resources or with the funds it obtains
from its owners/shareholders or from market sources.
This provision is therefore a reminder that the status of
a firm in difficulty must be determined in the light of all
the relevant indicators, but with significant weight being
given to the firm’s ability to recover without State inter­
vention.

In this regard, the Commission notes (as is clear from the
table in paragraph 8) that, since 2001, AFR’s turnover
has fallen steadily while losses have persisted. These are
signs of a firm in difficulty within the meaning of point
11 of the Guidelines. In its decision to initiate the formal
investigation procedure,
the Commission had already
noted these signs in support of its preliminary conclusion
that AFR was a firm in difficulty. Moreover, the negative
trend in AFR’s financial situation is clear from the fact
that, from January 2004 onwards, the firm was unable to
pay by the due date taxes and social security contri­
butions totalling EUR 4,3 million and therefore needed
to ask the competent authorities for a moratorium and
an arrangement to clear the debt.

that AFR still had some ability to obtain
most
limited amounts of
short-term credit. However,
given the extent of AFR’s difficulties, particularly its
need for capital and reserves, the loans cited are not
sufficient to conclude that AFR could have resolved
its difficulties with funds from market sources.

(31) Accordingly, it must be concluded that, at the time the
aid was granted, AFR was in serious financial difficulties
that threatened its survival in the short or medium term
and that it was not in a position to address those diffi­
culties without help from the public authorities.

(32)

The Commission therefore takes the view, in the light of
the above observations and, in particular, of the financial
results shown in paragraph 8, that AFR was a firm in
difficulty within the meaning of point 10 and,
in the
alternative, of point 11 of the Guidelines at the time
the repayable advances were granted. Given the diffi­
culties being experienced by AFR,
the Commission
considers that AFR would not have been able to obtain
funds on such advantageous terms on the credit market.
The advances in question thus conferred an advantage on
AFR by providing it with finance on more favourable
terms than it would have been able to obtain on the
credit market.

5.1.4. Effect on trade and competition

(33)

The repayable advances confer an advantage on AFR in
relation to other firms in a similar situation in that they
are available only to AFR.

(30)

The only facts cited by France that might constitute signs
to the contrary are the loans granted to AFR (current
account overdraft and advance payments) and the fact
that AFR had received certain guarantees from […] (*).
The Commission considers that these signs should be
taken into account in the assessment, required by point
11 of the Guidelines, of the firm’s ability to recover with
the funds it obtains from market sources. In this respect,
the Commission notes that:

(34)

The railway rolling stock manufacturing sector is char­
acterised by the presence of several European operators
and by
the
advantage conferred on AFR is likely to distort compe­
tition and trade between Member States.

trade. Consequently,

intra-Community

5.1.5. Conclusion

— the fact that AFR had negative capital and reserves
suggests that it was unable to overcome its difficulties
with its own resources,

(35)

In the light of the above observations, the Commission
considers that the repayable advances granted to AFR
constitute state aid within the meaning of Article 87(1)
of the Treaty.

5.2. Amount of the aid

— the French authorities indicated that AFR’s shareholder,
Arbel SA, despite the support it provided to AFR, was
unable on its own to ensure the recovery of
its
subsidiary,

(36)

In the case of aid granted in the form of loans to firms in
difficulty, the aid element is made up of the difference
between the interest rate actually applied and the interest
rate at which the beneficiary company could have
obtained the same loan on the open market (6).

— lastly, with regard to financial market sources, the
loans and guarantees cited by France mean at the

(6) See the Commission Decision of 2 March 2005 in Chemische Werke
Piesteritz (OJ L 296, 12.11.2005, p. 19, points 107 and 108) and the
Commission Decision of 24 January 2007 in Case C 38/2005 Biria
(OJ L 183, 13.7.2007, points 27 and 83 et seq.).

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(37)

(38)

rates (5),

the Commission states

In its notice on the method for setting the reference and
the
discount
reference rate is a floor rate which may be increased in
situations involving a particular risk (for example, an
undertaking in difficulty or where the security normally
required by banks is not provided) and states that,
in
such cases,
to 400 basis
the premium may amount
points or more.

that

therefore considers that point 13 of the Guidelines is
no obstacle
for
rescuing and restructuring aid, despite its being part of
a group.

to AFR being considered eligible

(42)

The compatibility of the aid must therefore be assessed in
the light of the Guidelines.

(43)

in Chemische Werke Piesteritz (6), the Commission
Thus,
considered that a loan to a company in difficulty
justified an interest premium of 400 basis points.
It
confirmed this view in Biria (7), stating that
the risk
constituted by the lack of security justified an additional
premium of 400 basis points, i.e. a total increase of 800
basis points. The Commission considers that the circum­
stances of this case are broadly similar to those of the
in particular in relation to the
above-mentioned cases,
absence of security and the extent of
the difficulties
encountered. Consequently, the risks associated with the
repayable advances granted to AFR may be subject to the
same assessment.

The Commission
conditions
Guidelines are not fulfilled. Accordingly, it notes that:

compatibility
restructuring aid laid down in the

observes

that

the

for

— the French authorities did not present

it with a
restructuring plan consistent with points 34 to 37
of the Guidelines,

— the Commission was not aware of any compensatory
measures designed to prevent any excessive distortion
of competition that may be caused by the aid (points
38 to 42 of the Guidelines).

(39)

Thus, the State aid constituted by the repayable advances
is made up of the difference between the interest actually
due under the terms of the repayable advances and the
interest that would be due if the reference rate in force at
the time the aid was granted,
increased by 800 basis
points, had been applied.

5.3. Compatibility of

the aid with the common
market

(40) Given AFR’s economic situation at the time the aid was
granted, as described in paragraph 8 (running at a loss
for several years, negative capital and reserves,
falling
the Commission considers that AFR was a
turnover),
firm in difficulty within the meaning of the Guidelines
at the time the repayable advances were granted. For the
in paragraphs 22 and 23, France’s
reasons set out
comments do not alter this analysis.

(44) Nor does the aid appear

to fulfil

the compatibility
conditions for rescue aid provided for by the Guidelines,
given that the repayable advances were granted for a
period of more than six months (see point 25 of the
Guidelines).

(45)

These points suffice for it to be concluded that the aid is
not compatible with the common market.

6. CONCLUSION

in

aid

the

The Commission finds that France has unlawfully im­
plemented
of
Article 88(3) of the Treaty. As the aid is incompatible
with the common market, France must bring it to an end
and recover from the beneficiary the amounts already
paid,

question

breach

in

(41)

is true that

It
in 2005 AFR was part of a group
controlled by the holding company Arbel SA. Aside
railways division (made up of AFR and
from its
the group included a construction division
Lormafer),
firms specialising in the manufacture of
made up of
windows for the construction industry. However,
it is
clear from the information supplied by the French auth­
orities
in the correspondence exchanged before the
initiation of the formal investigation procedure that the
difficulties encountered by AFR were specific to it within
the group as its activity had no connection with the
construction division. Moreover, the Commission notes
that AFR’s difficulties seem to have been too great for the
It
group to overcome, given its mediocre

results.

(7) Case C 38/05, cited in footnote 6 (see points 83 to 86).

HAS ADOPTED THIS DECISION:

Article 1

The State aid which France has implemented for Arebel Fauvet
Rail SA is incompatible with the common market.

Article 2

1.
France shall take all necessary measures to recover from
the beneficiary the aid referred to in Article 1 and unlawfully
made available to the beneficiary.

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Recovery

shall be

effected without delay

and in
2.
accordance with the procedures of national law provided that
they allow the immediate and effective execution of
the
decision. The aid to be recovered shall
include interest from
the day on which it was at the disposal of the beneficiary
until the date of its recovery.

(b) a detailed description of the measures already taken and

planned to comply with this Decision;

(c)

the documents demonstrating that the beneficiary has been
ordered to repay the aid.

3.
Interest shall be calculated on a compound basis in
accordance with Chapter V of Commission Regulation
(EC) No 794/2004 (8).

4.
France shall cancel all outstanding payments of the aid
referred to in Article 1 with effect from the date of notification
of this decision.

Article 3

France shall ensure that

1.
within four months following the date of its notification.

this decision is implemented

France shall keep the Commission informed of
the national measures taken to implement

the
3.
progress of
this
decision until recovery of the aid referred to in Article 1 has
been completed.
to the
Commission, at the latter’s request, any information on the
measures already taken and planned to comply with this
decision, as well as detailed information concerning the
amounts of aid and interest already recovered from the bene­
ficiary.

immediately

forward

shall

It

Article 4

This Decision is addressed to the French Republic.

France shall inform the Commission, within two months
2.
of the date of notification of this decision, of the measures
taken to comply with it, and in particular the following:

Done at Brussels, 2 April 2008.

(a)

the total amount (principal and interest) to be recovered
from the beneficiary;

For the Commission

Neelie KROES
Member of the Commission

(8) OJ L 140, 30.4.2004, p. 1.