Export credits are an essential tool for international trade. In the European Union, they are governed by a complex legal framework, somewhere between competition law and the common commercial policy. Understanding these rules is crucial for exporting companies and their banks.
State aid prohibited in intra-Community trade
European law penalises subsidised export credits within the single market. Article 87 of the EC Treaty (now Article 107 TFEU) clearly prohibits aid between Member States.
Case law confirms this prohibition. On 10 February 1969, the Court of Justice of the European Communities condemned France for its system of rediscounting export credits at a preferential rate (ECJ, 10 Feb. 1969: D. 1971, jurispr. p. 665, note Gavalda).
Several Commission decisions subsequently reiterated this ban. Member States had to phase out their financial support programmes for intra-European exports.
Framework for short-term credit insurance
Credit insurance is no exception to this logic. In 1997, the Commission published a communication inviting Member States to withdraw from the short-term credit insurance market (OJ C 281, 17 Sept. 1997, p. 3).
This initiative defines "marketable" risks - those that the private market can cover without public intervention. Initially limited to commercial risks on private debtors in the EU or OECD, since 2001 they have included political risks on all types of debtors in these same zones (OJ C 217, 2 August 2001, p. 2).
Public insurers can therefore no longer cover these risks under market conditions. This prohibition is designed to avoid any distortion of competition between private and public insurers.
The lawyer who consulted us last week learned this the hard way. His client, an exporter in the textile sector, was refused the public guarantee for sales in Germany. An alternative solution had to be found.
The common commercial policy and the OECD Arrangement
For exports outside the EU, export credit policy is part of the common commercial policy. An ECJ opinion of 11 November 1975 made this clear (ECJ Reports 1975, fasc. no. 8, pp. 1355-1365).
This European competence is particularly evident in the negotiation and application of the OECD Arrangement on Export Credits. This informal gentlemen's agreement limits credit competition between exporting countries.
The EU negotiates with a single voice. The Commission represents the Member States in discussions at the OECD. The guidelines are then transposed into Community law by Council decision.
Member States must therefore comply with these international rules concerning :
- maximum credit periods
- minimum interest rates (CIRR)
- credit insurance premiums
- advance payment percentages
Any failure to comply could render the State liable. However, we note that controls remain limited.
The prior consultation procedure
European law has established a transparency mechanism between Member States. Council Decision 73/391 of 3 December 1973, amended in 1976, imposes a prior consultation procedure for certain export credits.
In practical terms, a Member State considering granting a derogation must inform the other Member States, the Council and the Commission. If any of the States consulted delivers an unfavourable opinion, a consultation meeting becomes compulsory.
This procedure applies in particular to :
- over 5 years
- financing a local share of more than 5%
In practice, these consultations help to avoid unfair credit competition between European exporters. They also help to align national practices.
European cooperation projects
The EU has tried to go beyond mere coordination to create genuine European instruments. These projects have so far come to nothing.
For example, the idea of a European Export Bank, proposed as long ago as the 1970s, remains on the drawing board (OJ C 76, 14 March 1976, p. 2). The same applies to a European credit insurer (OJ C 230, 28 August 1987, p. 4).
However, a concrete step forward does exist: Directive 84/568 of 27 November 1984 on European subcontracting. It organises cooperation between national credit insurers when an export transaction involves subcontractors from other member countries.
Attempts to harmonise credit insurance policies have also failed despite several initiatives (OJ C 272, 30 Sept. 1994, p. 2).
Last month's case illustrated this problem. A French exporter working with an Italian subcontractor had to juggle two national guarantee systems. A more integrated approach would have greatly simplified the operation.
Practical implications for exporters and their advisers
The European framework for export credits requires an appropriate strategy:
- For intra-European transactions, favour market solutions without public support
- For exports outside the EU, check that the assembly complies with the OECD Arrangement.
- Anticipating notification and consultation obligations
- Exploiting possible synergies between national systems for multi-country projects
It makes sense to consult a specialist lawyer when navigating this complex framework. By analysing the European legal implications upstream, you can avoid stumbling blocks later on.
In the case of a recent export financing deal for a car parts manufacturer, we were able to restructure the operation to make it compatible with European rules. This preliminary work saved several months of delay.
Our firm regularly supports exporters, banks and insurers in optimising their financial packages. Don't hesitate to contact us to assess your export project from the point of view of European law.
Sources
- Fasc. 1050: Export credits. Buyer and supplier creditsJurisClasseur Banking and Financial Law
- ECJ decision, 10 February 1969 (D. 1971, jurispr. p. 665, note Gavalda)
- Communication from the European Commission (OJ C 281, 17 Sept. 1997, p. 3)
- Directive 84/568 of 27 November 1984 (OJEC No. L 314, 4 Dec. 1984, p. 24)
- ECJ opinion of 11 November 1975 (ECJ Reports 1975, fasc. no. 8, pp. 1355-1365)
- Council Decision no. 73/391 of 3 December 1973 (OJEC no. L 346, 17 Dec. 1973, p. 1)