EU Court: France Telecom Must Repay Up to EUR1.1 Billion State Aid

BRUSSELS -(Dow Jones)- Europe's top court ruled Thursday that France Telecom must repay the French government up to EUR1.1 billion in state aid, upholding a previous European Commission judgment.

The commission ruled in 2004 that France was giving illegal tax breaks worth between EUR798 million and EUR1.14 billion to its national phone company, and ordered the French government to recover the funds.

National governments in the European Union aren't normally allowed to give preferential treatment to certain companies or sectors.

After two years, the commission found that France hadn't recovered any of the cash that had gone to France Telecom in the form of tax breaks, and took the company to the European Court of Justice in Luxembourg.

The French government argued that Brussels wasn't clear enough about how much money needed to be recovered, according to Thursday's ruling.

Still, the court Thursday sided with Brussels, saying the commission didn't need to specify a precise amount of money to be recovered. The court also admonished Paris that it "is has not been established that any problems posed by calculating the amount of aid to be recuperated" should have stopped France from getting the money back from France Telecom.

The court added that it was "forced to conclude that the French Republic has neglected the obligations incumbent upon it" under E.U. law, chiding Paris for its "lack of cooperation" with Brussels.

On Thursday a France Telecom spokeswoman said France Telecom will "analyze this decision and the consequences that can be drawn from it," adding "the decision we make will be in the interest of all our shareholders."

The commission said that the French authorities must now come up with a "reasonable figure" of money to be recovered, which the commission will then have to approve.

-By Carolyn Henson, Anne Jolis, Dow Jones Newswires; +32 2 741 1484; carolyn.henson@dowjones.com

(Jethro Mullen in Paris also contributed to this report.)

(END) Dow Jones Newswires

Posted to the site on 18th October 2007