State aid to banks (IVOR nr. 109) 2018/5.10:5.10 The case of ARCO (I)

State aid to banks (IVOR nr. 109) 2018/5.10

5.10 The case of ARCO (I)

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Case T-664/14, Belgium v. Commission; case T-711/14, Arcofin and Others v.Commission

Strictly speaking, the case of ARCO is not a bank State aid case, since ARCO is not a bank. Indeed, the ARCO Group consisted of three financial cooperative companies (ARCOPAR, ARCOPLUS and ARCOFIN). However, ARCO was one of the main shareholders of Dexia, a Belgian-French bank.1 In the context of the recapitalisation of Dexia, the Belgian State decided to extend the Belgian Deposit Guarantee Scheme so that the individual shareholders in financial cooperatives would be protected against losses up to the limit of EUR 100.000 (hereafter: “the cooperative guarantee scheme”).

The Commission was of the opinion that the cooperative guarantee scheme was tailor-made for ARCO, which had run into trouble because of its investments in Dexia. The Commission therefore considered that the guarantee conferred a selective advantage to the Belgian financial cooperative ARCO, the only beneficiary of the scheme.

In the decision on the cooperative guarantee scheme (“the ARCO-decision”), the Commission concluded that the Belgian cooperative guarantee scheme constituted State aid. In the context of the compatibility-assessment, the Commission held that financial cooperatives are not financial institutions. As a result, the guarantee scheme did not fall under the 2008 Banking Communication. The Commission therefore assessed the aid directly under Article 107(3)(b) TFEU. The Commission came to the conclusion that the guarantee could not be considered compatible with the internal market because it was neither appropriate nor necessary nor proportionate for the purposes of Article 107(3)(b) TFEU and it did not come within the scope of any other provision governing compatibility of State aid. Since the guarantee was incompatible, ARCO had received an undue advantage. By the ARCO-decision, the Commission ordered the recovery of the aid. In other words: ARCO had to pay back the undue advantage it received.

Both the Belgian State and Arcofin brought an action for annulment against the ARCO-decision. NB: this PhD-study was concluded on 1 August 2017. At that time, the Court had not yet rendered a judgment in this case.

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