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Belgium : Commission orders Belgium to recover incompatible state aid from financial cooperative ARCO

July 4, 2014

Following an in-depth investigation, the European Commission has concluded that a Belgian guarantee scheme for shareholders of financial cooperatives was incompatible with EU state aid rules. In particular, the guarantee conferred a selective advantage to the Belgian financial cooperative ARCO, the only beneficiary of the scheme, who now has to pay back the undue advantage it received.

In November 2011, Belgium notified a scheme aimed at protecting from losses shares held by individual shareholders in recognised financial cooperatives. The measure had already been put in place, in breach of the obligation for Member States to get prior Commission approval for new state aid measures. It appeared that ARCO was the only financial cooperative that had made use of the scheme. In April 2012, the Commission opened an in-depth investigation (see IP/12/347).

The Commission's investigation revealed that the public guarantee makes the financial cooperatives that benefit from it more attractive for investors as compared to their competitors, who have to operate without such a guarantee. The scheme thus confers a selective advantage to its beneficiaries and therefore constitutes state aid.

The Commission then proceeded to assess whether the aid could be found compatible with EU rules that allow aid measures to further certain objectives of common interest, provided they do not unduly distort competition in the Single Market.

The Belgian authorities contend that individual shareholders of financial cooperatives are in a situation similar to bank depositors. However, the Belgian legal framework for cooperative companies and the articles of association of the companies concerned make it clear that financial cooperatives are limited liability companies and unlimited liability companies. Contributions to their capital are made in the form of equity investments and are subject to equity risk. There would be no basis for considering such a measure compatible with EU rules on state aid.

Since Belgium had already implemented the measure before notifying it to the Commission, ARCO now has to pay back the economic value of the advantage that it has received.

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Source: TendersInfo (India)

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