The European Commission’s plans to rule that France Telecom has benefited from illegal state aid have run into problems because of objections by the executive’s own lawyers. As a result, the case may take longer to resolve than had been expected, and a cap may be placed on any amount that France Telecom has to repay.
The Commission’s legal service is uncomfortable with aspects of the draft ruling against the group, and particularly with officials’ attempts to place a monetary value on government statements of support for France Telecom.
The draft ruling reached by the staff of Mario Monti, competition commissioner, is also believed to order France Telecom to repay €1.1bn ($1.36bn) in unpaid taxes an issue that is less contentious within the Commission.
But the legal service’s doubts concerning statements made by Francis Mer, France’s former finance minister, could affect any additional amount France Telecom is asked to repay and the timing of the case.
The French government said in August and October 2002 that it would take appropriate measures to support the state-controlled telecom operator should it run into refinancing problems at a time when it was seeking to cut its debt burden.
The Commission has sought to quantify the benefits of these comments, as well as the effect on investor confidence of a €9bn credit line supposedly granted to the company, but never drawn. One of the chief problems for the Commission has been that it has never managed to prove that the credit line existed. Instead, competition staff have looked at ministerial statements of support what their critics have termed “psychological state aid”.