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Finance – Competition/State Aid: Commission Approves Bradford & Bingley Bank Rescue
Contact Philip Bentley
The European Commission has approved the rescue aid package for the UK mortgage bank Bradford & Bingley under the EU competition rules on subsidies and State aid. Bradford & Bingley was nationalised by the UK Government on the weekend of 27 September 2008 when it ran into difficulties. The rescue measures include the nationalisation and winding down of the bank, the sale of Bradford & Bingley’s retail deposit book and branches together with a matching cash element to another bank, Abbey National (which is owned by a Spanish bank), the provision of a working capital facility and guarantee elements.
The Commission, which worked with the UK authorities on designing the package, approved the rescue package under the EU State aid competition rules within 24 hours of receiving formal notification. The Commission considered that the working capital facility and the guarantee arrangements provided by HM Treasury constituted State aid. However, this aid was considered to be in line with the EU rules on granting State aid to rescue and restructure businesses. The sale of the deposits and other assets of the bank did not constitute State aid because market value was paid for these assets by the purchasing bank (with the result that it received no indirect subsidy from the sale). The Commission considered that any benefit to individual depositors in Bradford & Bingley fell outside the scope of the State aid rules.
This case demonstrates the willingness of the Commission to assist in the fight to stem the current financial crisis and its ability to react quickly to assist governments in designing rescue packages that comply with EU State aid rules.
Energy: Commission’s Latest Energy Standards Endorsed
On 26 September 2008, the Ecodesign Regulatory Committee, which is made up of national experts, endorsed the European Commission’s proposals for two regulations to reduce European energy consumption. The first sets new energy standards for office, industrial and street lighting products whilst the second covers television set top boxes. According to the Commission, the former alone has the potential to reduce energy consumption in Europe by an amount equivalent to the annual electricity usage of Romania.
The proposals are the latest to result from the 2005 Ecodesign Directive, which gives the Commission the mandate to set energy standards on a product-by-product basis. The aim is to reduce energy consumption and carbon dioxide emissions in Europe through improvements in product design. However, the costs and consequences of manufacturers implementing these standards remain to be seen. The current proposals are expected to be formally adopted by the Commission in January 2009. Concurrent studies of other products are ongoing.
Environment: New Directive on Collection and Recycling of Spent Batteries
The European Parliament and Council Directive 2006/66/EC on the collection and recycling of spent batteries entered into force on 26 September 2008. Amending former EU legislation on batteries, the new Directive provides a more adequate system of handling waste batteries by setting collection targets and requiring the recycling of all batteries in a more homogeneous framework.
With the objective of making consumption and production in Europe more sustainable, the Directive imposes collection targets of up to 25 per cent of portable batteries in each Member State, as well as the recycling of all collected batteries in respect of certain efficiency levels. Furthermore, the use of certain hazardous heavy metals such as lead, mercury and cadmium is restricted.
These efficiency levels are novel in EU waste legislation and are expected to trigger innovation and more effective processes and technologies. However, batteries already placed on the market before 26 September need not be withdrawn or relabelled.
So far, seven Member States have completely transposed the Directive and four others have partially done so. The Commission will not hesitate to take any necessary infringement action against Member States who do not meet their obligations.
Chemicals: EU Bans Mercury Exports From 2011; US Likely to Follow in 2013
The EU Council, following the European Parliament, has adopted legislation that bans the export of mercury after March 2011. As part of this legislation, stockpiles of mercury used in connection with certain industrial applications within the European Union will also need to be kept in a safe storage facility. Both the export ban and the storage requirement were envisaged as part of the European Union’s 2005 comprehensive plan to reduce mercury pollution on a global level.
Mercury is a heavy metal that is highly toxic and harmful to human and environmental health. Although the European Union ceased mining the metal in 2000, it still accounts for approximately 25 per cent of worldwide supply. Within the European Union, the main use of mercury is in the chlor-alkali industry, the chemicals sector that produces chlorine and caustic sodas. When the export ban is introduced, mercury that is no longer used in this sector—or that is produced from other industrial processes—must be put into a safe storage facility.
In a nearly simultaneous move, the US Congress passed the Mercury Market Minimisation Act, which will similarly ban exports of mercury from the United States from 2013 and also require the safe storage of mercury stockpiles in the United States. The bill is expected to be signed into law. On both sides of the Atlantic, legislators hope that the respective export bans and safe storage rules will reduce supply and demand globally and correspondingly reduce mercury pollution and associated human and environmental harm.
Company Law: Proposal to Simplify EU Rules on Mergers and Divisions
The European Commission has proposed a directive that will further reduce the administrative burden related to mergers and divisions of European public limited-liability companies. Pursuant to the proposal, companies would benefit from simplified requirements for the reporting and publishing of draft terms, including the possibility of using the internet and electronic mail for these publications. The proposal complements the two packages of "fast track" measures that were put forward by the Commission in March 2007 and April 2008. These measures will contribute to the objective of reducing administrative burden on EU companies by 25 per cent by the end of 2012.
Competition: Commission Fines Wax Cartel EUR 676 Million
The European Commission has fined nine petrochemicals companies a total of EUR 676 million for participating in a cartel for paraffin wax in the European Economic Area in violation of the EC Treaty’s ban on cartels and restrictive business practices (Article 81). Paraffin waxes are used in a wide variety of products ranging from candles to automotive components and rubber packaging. The investigation, which began with surprise inspections in April 2005, found that the wax producers held regular meetings to discuss prices, allocate markets and customers and exchange sensitive commercial information. This cartel existed between 1992 and 2005 and affected 75 per cent of the European market. Some of the companies challenged the legality of the surprise inspections. The Commission, however, made it clear that a decision to authorise a dawn raid is binding when a company voluntarily submits to an inspection.
In setting the fines, the Commission took into account the respective affected sales of the companies involved, as well as the combined market share and geographical scope of the cartel agreements. It was the fourth highest total fine ever imposed by EU regulators on one sector. One of the companies escaped any fine under the 2002 Leniency Notice, whereas another company’s fine was increased by 60 per cent as it had previously participated in similar cartels.
Despite the Commission’s fine, individuals or companies that may have been harmed by the cartel are entitled to seek damages in the national courts. The Commission actively encourages these types of actions, which are permitted under Council Regulation (EC) 1/2003 and case law of the European Court of Justice. Both the Council Regulation and case law confirm that in cases before national courts, a Commission decision is binding proof that the behaviour that took place and was illegal.
NEXT WEEK’S EVENTS
Monday 6 October – Friday 10 October 2008
Transport, Telecommunications and Energy Council (9 – 10 October 2008)
COURT OF JUSTICE
Approximation of laws
C-304/07 Directmedia Publishing
C-239/07 Sabatauskas and Others
Police and judicial cooperation in criminal matters
C-70/08 Commission v Luxembourg
Approximation of laws
C-276/05 The Wellcome Foundation
C-431/07 P Bouygues and Bouygues Télécom v Commission
C-407/07 Stichting Centraal Begeleidingsorgaan voor de Intercollegiale Toetsing
COURT OF FIRST INSTANCE
T-411/06 Sogelma v AER
T-68/04 SGL Carbon v Commission
T-73/04 Carbone Lorraine v Commission
T-69/04 Schunk and Schunk Kohlenstoff-Technik v Commission
T-122/06 Helkon Media v Commission
T-51/07 Agrar-Invest-Tatschl v Commission