The European Commission (EC) has stated that a UK crown guarantee covering the pension liabilities of British Telecom (BT) is partially unlawful under EC Treaty state aid rules.

The EC found that as a result of the guarantee BT is partially exempt from certain common law financial obligations, such as payment of the Pension Protection Fund (PPF) levy. The EC found that this gave BT a financial advantage and constitutes state aid. It was further held that this aid could not be justified because it merely exempts BT from making payments that its competitors are required to pay.

The EC has now requested that the UK recover the aid by ensuring that BT pays the PPF levy that would have been paid since 2005.