The Commission has opened an in-depth investigation under EC Treaty state aid rules on the effects of a UK Crown guarantee covering the pension liabilities of the BT Group plc on the EU telecommunications markets. The Commission investigation does not question the safeguards for BT's employees, introduced by the guarantee. The issue is a consequence of the guarantee where BT is exempted from certain common law financial obligations, such as the payment of a levy to the Pension Protection Fund. The investigation will enable the Commission to determine whether these exemptions constitute state aid and, if so, whether such aid could be found compatible under EC Treaty state aid rules. The opening of an in-depth investigation gives interested parties the opportunity to submit their comments to the Commission. It does not prejudge the outcome of the investigation.
In 2006 and following a complaint, the Commission initiated a preliminary investigation on the Crown guarantee for BT's pension liabilities, granted by the UK government in 1984, at the time of BT's privatisation. The aim of this measure is to guarantee the pension rights of the employees working at BT at the time of the privatisation. The guarantee can only be called upon if BT goes bankrupt and if there are not enough assets in its pension fund to finance the covered employees' pension rights. The Commission does not question the principle of the guarantee as far as it concerns the pension liabilities. The Commission's investigation found that this aspect of the guarantee only benefits these employees.
However, subsequent UK legislation imposed obligations on pension funds, from which funds with a Crown guarantee were exempted. As a result, BT's pension fund is exempted from the respect of minimum funding requirements and from the payment of a levy to the Pension Protection Fund, a safety net created in 2004 to guarantee pensions when sponsor companies go bankrupt and financed by their contributions.
At this stage of the investigation, the Commission considers that these exemptions from the application of the normal rules may confer a financial advantage to BT and may therefore constitute state aid. [29 November 2007]