Short Reads

Submarines, secret guarantees and imputation in the context of State aid

Submarines, secret guarantees and imputation in the context of State aid

Submarines, secret guarantees and imputation in the context of State aid

16.06.2016 NL law

Merely having general control over a public undertaking by public authorities does not warrant imputation (toerekening) of a specific measure by that public undertaking to a Member State in the context of State aid. 

 

This was the recent decision of the Dutch Supreme Court, after consultation with the Court of Justice of the EU, in a dispute about the validity of guarantees issued by the Rotterdam Port Undertaking to Commerz. According to the Rotterdam Port Undertaking, these guarantees should be classified as State aid. Commerz was represented by Stibbe (Toni van Hees, Rein Wesseling and Winfried van Hemel).

Guarantees issued by the Rotterdam Port Authority

Commerz offered a credit facility to an undertaking called RDM. The Rotterdam Port Undertaking agreed to act as guarantor for RDM, in case it did not meet its obligations towards Commerz under the credit facility. These guarantees were issued on the basis of the so-called ‘submarines agreement’ between RDM and the Rotterdam Port Undertaking. This agreement entailed that RDM would not export submarine technology to Taiwan in exchange for guarantees by the Rotterdam Port Authority.

Forbidden State aid?

When RDM indeed failed to meet its obligations, Commerz invoked the guarantees issued by the Rotterdam Port Undertaking, amounting to approximately EUR 20 million. The Rotterdam Port Undertaking, however, refused to pay. It argued that the guarantees were void because these would qualify as forbidden State aid according to Articles 107 and 108 TFEU.

The imputation requirement

One of the requirements for a guarantee by a public undertaking to be classified as State aid under European law is that such guarantee can be imputed to a Member State. In the case at hand, the question therefore came up whether the guarantees issued by the Rotterdam Port Undertaking, a former municipal service that was privatized and converted into a private law legal entity, were to be imputed to the Rotterdam municipality and (from a European perspective) by that to the Dutch State.

Does general control by public authorities warrant imputation?

According to the Court of Appeal, the guarantees issued by the Rotterdam Port Undertaking were to be imputed to the Dutch state. It took into consideration that the Rotterdam municipality exerted ‘strong’ control over the Rotterdam Port Undertaking, for instance by holding all shares and nominating both the executive as well as the supervisory board. The Court of Appeal also took into consideration the fact that in the internal regulations of the Rotterdam Port Undertaking the purpose of the undertaking to serve the ‘general interest’ was explicitly inserted.

Commerz: no imputability if sole director acted on his own and in secret

In proceedings before the Dutch Supreme Court, Commerz argued that the guarantees could not be imputed to the Dutch State. The Court of Appeal did not properly appreciate that the guarantees were in fact issued by the sole director of the Rotterdam Port Authority, who acted on his own, while deliberately keeping the guarantees secret and ignoring the internal regulations (prescribing the approval of the supervisory board). In addition, it had to be assumed that the Rotterdam municipality was not willing to grant RDM any compensation in relation to the submarines agreement.

Dutch Supreme Court follows Commerz

In 2013, the Dutch Supreme Court asked the Court of Justice of the EU for a preliminary ruling on the interpretation of Article 107 (1) TFEU in this respect (ECLI:EU:C:2014:2224). In view of this preliminary ruling the Dutch Supreme Court in its recent decision on 27 May 2016 (ECLI:NL:HR:2016:994) ruled that the imputation requirement is met, when public authorities are in fact involved in the specific issuing of guarantees. With this in mind, it does not suffice that the Rotterdam Port Undertaking was under the general control – or even ‘strong’ control – of the Rotterdam municipality. This is even more so in the circumstances pointed out by Commerz, that the guarantees were issued by the sole director of the Rotterdam Port Undertaking, acting on his own, in secret and in violation of the internal regulations, while it had to be assumed that the Rotterdam municipality was not willing to issue any guarantee.

Follow up-proceedings

The Dutch Supreme Court set aside the award of the Court of Appeal. In follow up-proceedings, it will have to be decided whether, in view of the decision by the Dutch Supreme Court and given the above circumstances, the guarantees are to be imputed to the Dutch State. If that would be the case, another Court of Appeal will have to determine whether nullity of the guarantees would then be an appropriate sanction. According to the Dutch Supreme Court, this could only be the case if it would turn  out that not only RDM, but also Commerz benefitted from the State aid measure.

The post “Submarines, secret guarantees and imputation in the context of State aid” is a post of www.stibbeblog.nl

Related news

07.08.2018 NL law
Legislative proposal to protect trade secrets: update

Short Reads - On 5 July 2016, the EU Trade Secrets Directive came into effect (Directive 2016/943/EU). The directive intends to harmonise rules regarding the protection of undisclosed know-how and business information (trade secrets) across all EU member states. As the directive is not directly applicable in the member states, each member state must enact national implementing legislation.

Read more

07.08.2018 NL law
Protection of listed companies against unsolicited takeovers, prevention of unwanted influences in the telecoms sector and protection of other vital sectors: latest developments

Short Reads - Following a recent series of (attempted) unsolicited takeovers by foreign bidders of Dutch listed companies, such as PostNL, Unilever and AkzoNobel, the protection of companies against unsolicited takeovers and the protection of vital sectors have received more attention in both the Netherlands and Europe.

Read more

31.07.2018 NL law
Can an SPV be misled before it exists?

Articles - Transactions are regularly structured through special purpose vehicles (SPVs). An SPV is often established at the end of the negotiations, just before signing the agreement. The other party to the agreement provides information and raises certain expectations during the negotiations. The individuals negotiating for the SPV do not necessarily become officers of the SPV once it is established.

Read more

07.08.2018 NL law
Boskalis v. Fugro: scope of a shareholder's right to put items on the agenda

Short Reads - Under Dutch law (section 114a of book 2 of the Dutch Civil Code), shareholders have the right to put items on the agenda of the general meeting. The question arises as to whether shareholders also have the right to force an (informal) vote in the general meeting on subjects which are not within their powers. A judgment of the Dutch Supreme Court of 20 April 2018 between Boskalis and Fugro focused on this question.

Read more

12.07.2018 NL law
Voortgang wetsvoorstel Wet bescherming bedrijfsgeheimen

Short Reads - Op 5 juli 2016 is de Richtlijn bedrijfsgeheimen (2016/943/EU) in werking getreden. De richtlijn heeft tot doel de regels inzake bescherming van niet-openbaar gemaakte knowhow en bedrijfsinformatie (bedrijfsgeheimen) in de EU lidstaten te harmoniseren. De richtlijn moest voor 9 juni 2018 geïmplementeerd zijn in de Nederlandse wet- en regelgeving. Nederland heeft deze termijn niet gehaald.

Read more

Our website uses cookies: third party analytics cookies to best adapt our website to your needs & cookies to enable social media functionalities. For more information on the use of cookies, please check our Privacy and Cookie Policy. Please note that you can change your cookie opt-ins at any time via your browser settings.

Privacy – en cookieverklaring