On 15 June 2017, the Constitutional Court delivered a judgment on the guarantee scheme granted by Belgium to three financial cooperatives of the ARCO group.

In November 2011, the Belgian authorities had decided to grant to the 800,000 ARCO shareholders the same protection provided for savings deposits and life insurance, i.e., a protection of funds limited to € 100,000 per investor. In the event of default on the part of the ARCO cooperatives, the Belgian state would repay up to € 100,000 of the funds invested by natural persons in shares issued by the financial cooperatives. ARCO, one of the main shareholders of the Belgian-French Dexia Bank, was thus protected against the threat of flight by private investors from the three financial cooperatives.

In December 2011, several parties introduced actions for annulment against the ARCO guarantee before the Belgian Council of State. Faced with questions regarding the constitutionality of the guarantee, the Council of State decided to refer the case to the Constitutional Court for a ruling on the compatibility of the ARCO guarantee with Articles 10 and 11 of the Belgian Constitution, i.e., the provisions on equality and non-discrimination. In a judgment of 5 February 2015, the Constitutional Court, in turn, asked the Court of Justice of the European Union ("ECJ") to rule on the compatibility of the ARCO guarantee with Directive 94/19/EC of 30 May 1994 on deposit-guarantee schemes ("Directive 94/19/EC") and on the validity of the decision of the European Commission (the "Commission") of 3 July 2014 (See VBB on Belgian Business Law, Volume 2016, No. 12, p. 24, available at www.vbb.com).

In that decision of 3 July 2014, the Commission had classified the ARCO guarantee as unlawful state aid (since it had not been notified in a timely manner) and incompatible with the internal market. Belgium and the three financial cooperatives brought actions before the General Court for annulment of the Commission's decision (Cases T-664/14 Belgium v Commission and T-711/14 Arcofin and Others v Commission). Those proceedings were stayed pending the ECJ's response to the questions referred by the Belgian Constitutional Court.

On 21 December 2016, the ECJ gave judgment on the request for a preliminary ruling. The ECJ held that Directive 94/19 does not impose on Member States an obligation to adopt a guarantee scheme with regard to shares in recognised cooperatives operating in the financial sector, such as ARCO. Nor does the Directive, according to the ECJ, prevent Member States from extending the deposit-guarantee scheme to shares in recognised cooperatives operating in the financial sector. However, such an extension must not undermine the practical effectiveness of the scheme that Directive 94/10/EC requires Member States to establish and must be compatible with the Treaty, in particular the provisions relating to state aid. With regard to the state aid rules, the ECJ confirmed the validity of the Commission's decision of 3 July 2014, classifying the ARCO guarantee as state aid which was unlawfully put into effect by Belgium.

On the basis of the Commission decision of 3 July 2014 and the judgment of the ECJ of 21 December 2016 confirming that the selective advantage granted to the three financial cooperatives of the ARCO group constituted unlawful and incompatible state aid, the Constitutional Court held in its judgment of 15 June 2017 that the ARCO guarantee violated Articles 10 and 11 of the Belgian Constitution. The Constitutional Court added it was no longer necessary to assess whether the guarantee undermines the practical effectiveness of the scheme that Directive 94/10/EC requires Member States to establish. With regard to the pending actions for annulment before the General Court against the Commission decision of 3 July 2014, the Constitutional Court considered it not necessary to wait for the outcome of these procedures, since the ECJ, in its response to the request for a preliminary ruling, had not identified any facts or circumstances that could affect the validity of that decision.

The case will now be dealt with again by the Council of State, which will have to draw the necessary consequences from the finding of unconstitutionality by the Constitutional Court.

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