France Télécom SA v European Commission.

• Jurisdiction: European Union
• ECLI: ECLI:EU:C:2011:554
• Court: Court of Justice (European Union)
• Docket Number: C-81/10
• Date: 08 September 2011
• Procedure Type: Recurso de casación - infundado
• Celex Number: 62010CC0081

OPINION OF ADVOCATE GENERAL

JÄÄSKINEN

delivered on 8 September 2011 (1)

Case C‑81/10 P

France Télécom SA

(Appeal – State aid to France Télécom – Concepts of ‘State aid’ and ‘advantage’ relating to France Télécom’s business tax regime for the years 1994 to 2002 – Set-off – Principle of legitimate expectations – Limitation period – Obligation to state reasons and principle of legal certainty)

I – Introduction

1. By its appeal, France Télécom SA (‘France Télécom’) is seeking to have set aside the judgment of the Court of First Instance of the European Communities in Joined Cases T‑427/04 and T‑17/05 France and France Télécom v Commission [2009] ECR II‑4315 (‘the judgment under appeal’), (2) by which that Court dismissed the action for annulment brought by the French Republic (Case T‑427/04) and by France Télécom (Case T‑17/05) against Commission Decision 2005/709/EC of 2 August 2004 on the State aid implemented by France for France Télécom (notified under document number C(2004) 3061) (‘the contested decision’). (3)

2. This case relates to the changes in France Télécom’s status in the course of the liberalisation of the telecommunications sector and raises questions as to whether an advantage can be identified with regard to tax measures and concerning the legal protection granted to beneficiaries of a tax measure which is proved to constitute unlawful State aid.

3. Until 1990, France Télécom’s business activities were conducted by a directorate in the French Ministère des Postes et Télécommunications (Ministry of Posts and Telecommunications) (PTT). France Télécom was established, in the form of a sui generis public-law corporation, on 1 January 1991, by Law No 90‑568 of 2 July 1990 on the organisation of the public postal and telecommunications service. (4) Under Law No 96‑660 of 26 July 1996 on the national undertaking France Télécom, (5) on 31 December 1998, France Télécom was transformed into a national undertaking in which, at the material time, the State held, directly or indirectly, more than half of the share capital. France Télécom was thus governed by Law No 90‑568 and was also subject, in so far as it was not contrary to that law, to the legislation applicable to public limited companies.

II – Relevant legislation

4. Regulation (EC) No 659/1999 (6) was adopted to codify the consistent practice developed and established by the European Commission for the application of Article 88 EC, in order to increase transparency and legal certainty. It entered into force on 16 April 1999.

5. Recital 14 to Regulation No 659/1999 states that ‘for reasons of legal certainty it is appropriate to establish a period of limitation of 10 years with regard to unlawful aid, after the expiry of which no recovery can be ordered’.

6. Under Article 15 of Regulation No 659/1999:

‘1. The powers of the Commission to recover aid shall be subject to a limitation period of 10 years.

2. The limitation period shall begin on the day on which the unlawful aid is awarded to the beneficiary either as individual aid or as aid under an aid scheme. Any action taken by the Commission or by a Member State, acting at the request of the Commission, with regard to the unlawful aid shall interrupt the limitation period. Each interruption shall start time running afresh. The limitation period shall be suspended for as long as the decision of the Commission is the subject of proceedings pending before the Court of Justice of the European Communities.

3. Any aid with regard to which the limitation period has expired, shall be deemed to be existing aid.’

III – Facts of the dispute

A – National provisions specifying the tax regime applying to France Télécom

1. France Télécom’s liability to business tax. General business tax regime (7)

7. As summarised at paragraphs 16 to 24 of the judgment under appeal, business tax is a local tax, the rules of which are laid down by law and codified in the General Tax Code. Business tax is payable each year by natural or legal persons regularly carrying on a self-employed business as at 1 January. The imposition of business tax depends on the taxable person’s ability to pay, which is assessed in accordance with economic criteria on the basis of the extent of the business activities engaged in by the taxable person in the territory of the recipient body.

8. It follows that business tax is a tax based not on the profit made by the undertaking’s business but, at the material time, on a proportion of the value of the production factors – capital and labour – used by the taxable person in each municipality in which the tax was established.

9. For taxation relating to the years 1994 to 2002, in the case of legal persons liable to corporation tax, the basis for the business tax included (i) the rental value of the fixed assets which the taxable person had used to meet its business requirements during the period of reference and (ii) a proportion of the salaries paid during the reference period. That reference period was the penultimate year preceding the year of taxation, where the financial year coincided with the calendar year, or, where that was not the case, the financial year ending during the penultimate year preceding the year of taxation.

10. Business tax is established in each municipality in which the taxable person has premises or land, on the basis of the rental value of the assets situated therein or connected therewith and the salaries paid to staff.

2. The rules applying to France Télécom

a) The principle of liability to tax under the general law

11. Law No 90‑568, by which France Télécom was founded, lays down special tax provisions. Subject to certain exceptions, France Télécom is, in principle, subject to duties and taxes payable by private undertakings carrying on the same transactions.

b) The fixed levy

12. Until 1 January 1994, France Télécom was subject only to such duties and taxes as were actually borne by the State. Consequently, France Télécom was not liable inter alia for corporation tax or local taxes, such as business tax. In exchange, France Télécom had to pay, for the years 1991 to 1993, a contribution fixed each year by the Finance Law of a maximum amount, the base for which, before the application of discount factors, was equal to the balance shown by the additional budget for telecommunications for the year 1989.

c) The special tax regime from 1994

13. The tax – the basis of assessment for which, for the purposes of calculating specific tax bases, followed the general rules laid down in the General Tax Code – was established by application of a national weighted average rate, based on the rates voted the previous year by all the local authorities. Furthermore, a rate of 1.9% – instead of 8% – was applied to France Télécom in respect of management costs.

14. In this regard I note at the outset that business tax is collected in this way by the State tax authorities, not by the local authorities concerned. The sums levied by the State in respect of the abovementioned management costs were intended to offset the expenses incurred by the tax authorities in assessing tax and collecting business tax for the local authorities.

15. The tax revenue had to be paid to the State or, for the proportion exceeding the contribution paid for 1994, adjusted each year according to the fluctuation in the consumer prices index, to the Fonds national de péréquation de la taxe professionnelle (National Business Tax Equalisation Fund).

16. The special rules governing the charging of business tax, which were laid down without limitation as to duration, were abolished by the 2003 Finance Law. (8)

B – The administrative procedure preceding the adoption of the contested decision

17. On 13 March 2001 the Association des collectivités territoriales pour le retour de la taxe professionnelle de France Télécom et de La Poste dans le droit commun (Association of local authorities for the reinstatement of the business tax regime applicable to France Télécom and La Poste under the general law) submitted a complaint to the Commission, to the effect that the special tax regime constituted State aid which was incompatible with the common market. The complainant referred inter alia to the loss of revenue for certain local authorities as a result of the application of a national weighted average rate.

18. Following that complaint, the Commission decided on 28 June 2001 to initiate the preliminary examination procedure in respect of the special tax regime and sent the French Republic a request for information in that regard.

19. On 30 January 2003 the Commission adopted a decision initiating the formal investigation procedure provided for under Article 88(2) EC in respect inter alia of the exemption from business tax granted to France Télécom from 1991 to 1993 and of the special tax regime. In the decision initiating the formal investigation, the Commission estimated the advantage conferred on France Télécom as being worth approximately FRF 1 000 million per annum since 1994 (paragraphs 73 and 74). That decision was published on 12 March 2003. (9)

20. In communications between the French authorities and the Commission, the French Republic, while stressing that its estimates were approximate, submitted by fax of 5 July 2004 a new estimate of the financial consequences of the application of France Télécom’s business tax regime from 1991 to 2002. This new assessment, calculated on the basis of the business tax to which France Télécom had actually been liable for the year 2003, showed that, during that period, France Télécom had been overtaxed in the amount of more than EUR 1 700 million exclusive of discounting.

C – The contested decision

21. On 19 and 20 July 2004, at its 1 667th meeting, the College of Commissioners approved a draft decision finding that France Télécom had received State aid during the period from 1994 to 2002 by virtue of the special...