France's top administrative court the Conseil d'Etat is examining the legality of the sale of 49.9% of one of France's leading regional airports to a Chinese-led consortium. Though last Tuesday the court refused to grant an emergency injunction stopping the sale of the French state's shares in Toulouse-Blagnac Airport in the south-west of the country, it will now consider in detail whether the administrative procedures surrounding the deal were lawful.
The sale of most of the state’s shares in the airport to Chinese group Symbiose – made up of the Hi Speed Group and Friedmann Pacific Investment Group (FPIG), who are working in partnership with Canadian firm SNC Lavalin - was announced last December. At the time economy minister Emmanuel Macron denied that the airport was being “privatised” as the state, with 10.1%, and the local chamber of commerce and councils, with 40%, still hold a controlling interest on paper. Instead, insisted Macron, the deal simply involved “opening up” the airport's capital to outside investors. He said: “We're not selling the airport, we're not selling the runway or the buildings which remain state property … we have sold this stake for the sum of 308 million euros.” And Macron added indignantly: “Those I have heard who profess to be outraged by this sale of a minority stake in Toulouse Airport's management company see it as their role on the one hand to attack the government and on the other to alarm the French people.”
However, on December 7th, 2014, Mediapart published documents showing that Emmanuel Macron was, quite simply, lying when he claimed the state was not handing over control of the airport to the consortium. This website revealed details of a confidential shareholders' pact signed between the state and the Chinese consortium, rather than between the state and one of the other public bodies.
This shareholders' pact states that from now on the three members of the airport management company's board will be nominated by the Chinese investor. And in another part, clause 2.2.2, the state even agrees to relinquish all its own voting powers: “The state agrees not to oppose the adoption of decisions that conform with the industrial project as set out by the purchaser in its offer and in particular those investments and budgets that conform with the offer's guidelines.”
The minister's claims led to a lively session in the National Assembly on December 9th, when Green MP Noël Mamère led the chorus of disapproval, brandishing the clauses of the contract revealed by Mediapart and accusing Macron of having misrepresented the truth. In his not entirely comfortable response, the minister – who has still refused to respond directly to Mediapart – was forced to confirm much of the information disclosed. For example, he admitted that the Chinese group involved was domiciled in a tax haven. Nor did he deny that last year SNC Lavalin Inc. - a major subsidiary of the SNC Lavalin Group - suffered “debarment” by the World Bank for ten years for the firm's “misconduct” in deals tainted by corruption (see details here).
The minister's main defence was that the shareholders' agreement gives the local authorities a blocking minority within the airport's management company. This stance sits oddly with Emmanuel Macron's initial arguments that the public authorities retained a majority shareholding in the company; he now seems to be admitting that they simply have a blocking minority.
The economy minister's economy with the truth has provided fresh ammunition for opponents of the privatisation scheme, of whom there are many in the Toulouse region. Coordinated by lawyer Christophe Lèguevaques, a collective made up of local residents and councillors from across the Left (the Socialist Party, the hard-left Front de Gauche and the Greens) and from all the local authorities involved (the region, the Haute-Garonne département – akin to a county – and the city itself) has been set up to fight the plans. Other members of the collective include the SUD and FSU trade unions from the département, two residents' associations, an anti-noise pollution group and the Francazal Collective, which is trying to get another local airport, Francazal, closed. Christophe Lèguevaques, incidentally, has for some time had his his own blog on Mediapart.
The legal battle begins
It is this collective that has taken legal action against the airport sell-off, including the failed bid earlier this week to get an injunction (see the outline of their legal case below, in French).
To support their claim that the sell-off procedure amounted to an abuse of power, the groups says that the state flouted the specifications laid out for this privatisation. For example, the specifications state that once established the lead partner for the consortium cannot be changed during the course of the process. Yet it seems that was the case here. At the beginning it seems the lead partner could well have been the Canadian group SNC Lavalin, but when the World Bank's verdict on the group became widely known and started to create waves, it seems that the Chinese investors surreptitiously took over the status instead.
In their legal submissions the opponents also claim that there was no consultation about the noise and nuisance caused by the airport, in violation of the legal obligations set out in the French Constitution's environmental charter the Charte de l'environnement. Nor were any obligatory impact studies carried out. The opponents also note that “several members of the Symbiose consortium are based in tax havens, which makes it impossible for social and fiscal obligations to be respected”.
Their legal arguments also refer to the secret shareholders' pact revealed by Mediapart. “The procedure does not respect the principle of transparency as, even after the purchaser has been chosen, the state refuses to communicate [details of] the shareholders' pact with the buyer, this making any monitoring impossible,” they write. “In fact, there is a concern that the shareholders' pact negotiated with the Symbiose consortium might be different from the one offered to other bidders.” The opponents assert that “each of these facts constitute a breach of general [European] community principles or of a general principle of French law in regard to invitations to tender”.
The state's defence (see document, in French, below) came from the Agence des participations de l'État (APE), which is the department at the ministry of finance in charge of public enterprises and shares held by the French state.
In its written pleading the APE admits, after its own fashion, that the sale procedure was not totally transparent and that something did happen in relation to the allocation of roles between the Canadian group SNC Lavalin and the Symbiose consortium. According to the APE, Symbiose first made an offer pointing out that “SNC Lavalin might participate in it [editor's note, the consortium] with a very small minority stake (10%)”, and then in the end Symbiose made a “firm offer without the participation of SNC Lavalin, who will simply provide technical assistance for the consortium”.
However, if this is the case, why was this not revealed earlier? And why did it require an application for an injunction for the information that the Chinese-Canadian alliance had changed in nature to be disclosed? The opponents say this strengthens their argument that the whole procedure has been far from transparent. The rest of the APE legal case relies heavily on procedural rather than substantive arguments. For examine, their lawyers argue that none of the opponents seeking the injunction have the legal standing to do so, and that there was no urgent need for an injunction anyway.
The APE also brushes aside the question of whether SNC Lavalin is a suitable participant on the grounds that it is not – any longer at least – part of the consortium itself. As for the fact that parts of the consortium are based in tax havens, the ministry of finance department does not seem to think this is a problem. “Unless it can be shown that an offence has been committed, tax residence is not a criteria for admissibility; in fact the acquisition body that will be set up by the Symbiose consortium will be based in France and subject to French taxation,” says the APE.
In other words, the fact that a group is based in the British Virgin Islands or the Cayman Islands, and benefiting from the financial opacity that such tax havens offer, is no obstacle to doing business with the French state, as long as they set up a shell company here. Coming from a department of the French ministry of finance itself, this is a statement that will be studied with interest by the international business community.
The opponents' lawyer Christophe Lèguevaques responded to the APE's arguments in a supplementary memo to the Conseil d’État, which was also reproduced on his Mediapart blog.
Writing before Tuesday's judgement he stated: “Whatever ruling the Conseil d’État makes … the controversy over the privatisation of Toulouse Airport is far from being over. For whether in law there was or was not an abuse of power, it is in any case certain that Emmanuel Macron has handled this case not as if he were a minister of the Republic but as if he were still the managing partner of a merchant bank, with just two concerns; one, [maintaining] the cult of secrecy and opacity, the other, [ensuring] the best possible fortune for the happy shareholders. Even though the principles of a true democracy are based on respect for the citizens, and a concern for the truth and for transparency...”
Since Lèguevaques wrote those words the attempt to win an emergency injunction to stop the sale in its tracks has been turned down. But, as he states, the battle against the privatisation looks set to continue both inside and outside the courtroom.
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- The French version of this story can be read here.
English version by Michael Streeter