The MEIP and the bank sector – new (and surprising?) examples of use of the private investor test

Two recent rulings handed down by the GC demonstrate that the MEIP is one of the most dynamic tools within the EU/EEA State aid framework. The said judgments were given on 28 February 2012 in Joined Cases T‑268/08 and T‑281/08 Land Burgenland and Austria v Commission and on 2 March 2012 in Joined Cases T-29/10 Netherlands v Commission and T-33/10 ING Groep NV v Commission.

The former judgment concerned privatisation of Bank Burgenland (BB). The Austrian authorities decided to sell BB to an Austrian insurance company GREWE although an Austro-Ukrainian Consortium offered a significantly higher price in the tender procedure. The seller, however, claimed that a much longer duration and an uncertain effect of an authorization procedure by an independent financial agency to which such transactions are subject to justified rejecting a better offer. Neither the Commission, nor the GC accepted that such behavior complied with the private vendor test (a subtype of the MEIP). In particular, two points of the judgment must be highlighted. First, costs resulting from the so-called Ausfallhaftung¹ do not qualify as costs that a private vendor would have taken into account. Secondly, the Commission´s argument that rejecting the Consortium´s offer on the basis of the duration of the authorisation procedure amount to discrimination of non-Austrian operators were described by the GC as mixing two dimensions within which the state acts, the entrepreneurial and the public authority one (see Hytasa case law).

The latter judgment concerned various forms of aid granted to ING on account of the financial crisis of 2008. ING was considered financially sound, but received three state measures aimed to maintain the continuity of the payments system and the inter-bank in the Netherlands. These were a capital increase (by issuing hybrid securities), an exchange of cash flows applied to impaired assets in relation to a portfolio of residential mortgage-backed securities granted in the United States and guarantees on ING liabilities. The initial terms of repayment of the securities were subsequently amended. The Commission qualified them as aid. The GC, however, ruled that Commission could not limit itself to finding that the amended terms constituted by its very nature State aid, without first examining whether they conferred on ING an advantage to which a private investor in the same situation as the Netherlands would not have agreed. This examination presupposed in particular a comparison of the initial repayment terms with the amended terms. The initial terms were considered by the Commission as complying with the MEIP. Thus, the GC hold that it could not be ruled out that private investors could still have been interested in the amended terms of repayment of the securities.

¹Ausfallhaftung (deficiency liability) is a guarantee measure for public credit institutions. It gives rise to a guarantee obligation whereby, in the event of the insolvency or liquidation of a credit institution, the guarantor (the State, the province or the municipality) is obliged to step in. The bank's creditors have direct claims against the guarantor, which, however, is required to perform only if the bank's assets are insufficient to satisfy the creditors. Ausfallhaftung is limited neither in time nor in amount.