Fret SNCF train

FRANCE: The European Commission has begun a detailed investigation into measures taken by the French government in 2007-19 to provide financial support to Fret SNCF, the rail freight subsidiary of Rail Logistics Europe, itself a subsidiary of national operator SNCF.

The objective is to determine whether or not the measures gave Fret SNCF an economic advantage over its competitors and specifically if the measures met the requirements set out in the European Union’s regulations on state aid.

Throughout the period under investigation Fret SNCF made a loss. This was covered by payments from parent company SNCF SA by means of intra-group cash advances that constituted public resources because of state ownership and control.

Announced on January 18, the investigation will examine three specific measures taken by the French government to determine if they were compatible with the applicable rules.

First were cash payments totalling €4bn to €4∙3bn made by the French government to Fret SNCF from early 2007 at least until its conversion into a commercial business with effect from January 1 2020.

Second was the cancellation in 2019 of Fret SNCF’s debts amounting to €5∙3bn, including the state-funded cash payments, when the company was converted to a commercial business.

Third was an injection of €170m of capital when Fret SNCF was converted to a commercial business.

The European Commission said that ‘interventions by public authorities in favour of companies may be considered as not constituting state aid if they are made under conditions that a market-oriented private business would have accepted’. If this principle is not respected, such interventions constitute a form of state aid as specified in Article 107 of the Treaty on Functioning of the European Union as they provide the beneficiary with an economic advantage over its competitors.

In response, the French government said that it was ‘fully mobilised to provide all the relevant elements to the European Commission within the framework of this procedure, which it is approaching in a co-operative and determined spirit’. It noted that SNCF Group helped to maintain rail freight in France at a time when it was facing more competition.

The government also drew attention to its rail freight recovery plan that was designed to support rail as an environmentally friendly means of freight transport. This support, it noted, ‘is part of the European Commission’s Green Deal, with the ambition of doubling rail freight’s market share by 2030’.

French Transport Minister Clément Beaune said that ‘given the reforms and efforts undertaken, the government is approaching this procedure with confidence. We are more than ever determined to guarantee and develop the position of rail freight in France.’