Commentary: Time for BAe to give in

If British Aerospace is wise it will comply with the European Commission's ruling yesterday and repay the pounds 44.4m sweetener it received from the Government to buy Rover, plus interest, and close the door on a saga that has bedevilled the company for the past four years.

At least one senior member of the BAe board believes this is what the company should have done three years ago when Brussels reached its original verdict that the sweeteners were unlawful. There is some force to this argument. The episode has continued to hang like a millstone around Rover's neck since, guaranteeing it periodic bouts of bad headlines, undermining customer confidence and generally distracting management.

To appeal against the ruling of the EC's competition commissioner, Karel van Miert, would be folly. BAe has been fighting the case for four years - surely long enough to convince shareholders that everything possible has been done to protect their interests.

Whether BAe pays pounds 44.4m or pounds 70m once the interest is added to the bill is irrelevant as far as the stock market is concerned - as the continued revival yesterday of its share price amply demonstrated.

In any case, BAe would almost certainly lose another appeal to the European Court of Justice since its first appeal only succeeded on a technicality. That the sweeteners were unlawful was never disputed.

What the case tells us about the commission's determination to

stamp out illicit state aid is less clear, since it always had more to do with the wool being pulled over Brussels' eyes by the British government than BAe gaining an unfair competitive advantage.

Mr van Miert has staked out his future plans in very vague terms so far, saying that 'a pragmatic rather than dogmatic approach is called for' in relation to competition policy as a whole, hinting that he would be more relaxed over state aid.

What we can be certain about is that if the money is promptly repaid the sighs of relief will be heard in both London and Brussels.