The Court of Justice of the European Union qualifies the Arco-guarantee as unlawful and incompatible State aid. The judgment was rendered in response to the questions referred to it by the Belgian Constitutional Court. The Court of Justice held that the Arco measure confers an advantage on Arco – who can offer its participants a guarantee similar to the deposit guarantee scheme – because other companies operating in the financial sector were not in a position to offer a similar guarantee.

The facts

The Court of Justice of the European Union sided with Advocate General Kokott condemning the Arco guarantee regime. The European rules on State aid preclude the members of the Arco financial cooperative from benefiting from the deposit guarantee schemes.

Belgian bank Dexia’s bankruptcy in 2011 also affected its shareholders, Arco being among the most important ones. Arco was a cooperative operating in the financial sector and predominantly held Dexia shares. The Belgian government had developed a regime for participants of financial cooperatives – in fact only Arco – providing for repayment up to a maximum of EUR 100 000 of funds invested. Unhappy Dexia shareholders – who did not benefit from the Arco guarantee – introduced an appeal against the regime. The judgment of the Court of Justice is the response to the questions referred by the Belgian Constitutional Court, who, in turn, has to render a judgment on a question referred to it by the Council of State.


The Arco guarantee consitutes unlawful and incompatible aid in accordance with the conditions set out in Article 107 of the Treaty on the Functioning of the European Union. A measure constitutes State aid if it was granted by the State or funded through State resources (which was not contested). Furthermore, the intervention should give the recipient an advantage on a selective basis. Finally, in order to qualify as State aid, the measure should distort or threaten to distort competition and affect trade between the Member States.

After assessing these condtions, the Court found that the measure constituted State aid. Arco and other economic operators which offer for sale participations in their ownership in the form of shares are in a comparable factual and legal situation. The guarantee scheme only benefiting financial cooperatives, and not the other operators in the financial sector, amounts to a selective advantage for the latter. In other words, the Court assimilates the participants to the cooperative – indirect Dexia shareholders – to direct shareholders.

Arco had invoked the fact that the participants to such financial cooperatives were actually small investors and that Arco, therefore, should be distinguished from other marketplayers in the financial sector. They claimed that the situation of financial cooperatives is specific and that the application of the deposit guarantee scheme to such cooperatives does not constitute a selective advantage. The Court did not follow Arco’s reasoning and found that the measure allowed Arco to offer a guarantee that other economic operators which offer for sale participations in their ownership in the form of shares, could not offer.

The advantage that Arco had enjoyed thanks to the application of such a guarantee regime consisted in protection against the imminent flight of private investors. Arco was able to maintain its market share over a longer period and suffered to a lesser extent from capital outflows, capital that would otherwise have been available to other actors for investment. Accordingly, the guarantee scheme at issue distorted competition.


The Arco guarantee constitutes unlawful and incompatible State Aid. The Constitutional Court is bound by the Court of Justice’s judgement and will, in turn, render a judgment on this basis. The saga has not yet come to an end, but it is clear from this judgement that the Arco participants will not be reimbursed on the basis of the original scheme. The Belgian government is working on a “plan B”, but the options seem limited.

To conclude, we clarify that the preliminary questions referred to the Court concerned on the one hand, the question whether the adoption of the Arco-guarantee was actually imposed by a European Directive. The question was answered in the negative. The second issue adressed in the judgement, which is the subject of the present contribution, is the State aid matter. The referring judge wanted to learn in essence whether a previous Commission decision qualifying the Arco regime as State aid, was valid. The Court of Justice confirmed the Commission’s decision and decided, accordingly, that the measure was contrary to the European State aid rules.