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BT Loses Battle Over EU Order to Repay U.K. Pensions Aid

BT Group Plc, the U.K.’s largest fixed-line phone company, and its pension fund lost a court fight against a European Union order forcing repayment of as much as 16.6 million pounds ($26.5 million) of exemptions from pension rules.

The EU General Court in Luxembourg today rejected the appeals by BT and BT Pension Scheme Trustees against the findings of a European probe that the company benefited from unlawful government aid which had to be recovered.

The European Commission, the 28-nation EU’s antitrust regulator, concluded in 2009 that an exemption for the BT Pension Scheme to contribute to the country’s Pension Protection Fund was unlawful state aid. The EU probe was started after one of BT’s competitors complained to the Brussels-based regulator.

The U.K. Pension Protection Fund was created in 2004 to guarantee pensions when sponsor companies go bankrupt and was financed by their contributions. BT’s exemption was created under a so-called crown guarantee at the time of its privatization in 1984 to protect the staff’s pensions.

“We are disappointed with the decision, which is not in the best interests of BT Pension Scheme members,” Dan Thomas, a spokesman for the company, said in an e-mailed statement. “We shall analyze the judgment in detail and decide upon next steps.”

Annual Levies

“The commission’s adverse decision had already been implemented through changes to U.K. pension legislation prior to the General Court’s decision as required by EU law,” Thomas said. “The court’s decision maintains this status quo.”

“Annual levies for Crown Guarantee protection will continue to be paid by the Trustee to the” Pension Protection Fund “from Scheme funds,” said Thomas.

The EU in its 2009 decision said the recovery of the aid would “restore the situation that existed prior to the granting of the aid” and that this could be “achieved once the incompatible aid is repaid by BT.”

“The amount to be recovered should be such as to eliminate the economic advantage given to BT which,” the EU decision said, “is the beneficiary of the measure.”

The commission said in 2009 that an amount of 16.6 million pounds had already been blocked in an escrow account corresponding to the levies payable until 2008.

The cases are: T-226/09, British Telecommunications v. Commission, T-230/09, BT Pension Scheme Trustees v. Commission.

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