The European Court of Justice has upheld a European Commission ruling that funding given by the French government for the adaptation of vineyards in Charentes constituted illegal state aid.

"The Commission was fully entitled to find in the contested decision that the aid at issue was incompatible with the provisions governing the common organisation of a market," the court declared.

The French government had informed the EC that it was encouraging Cognac producers to switch to local wine production in a 1000-hectare area of the Charentes region, offering incentives for pulling up ugni blanc and planting other grape varieties.

The Commission subsequently ruled that the programme, conducted during the 1998/1999 and 1999/2000 vintages, violated state aid rules and ordered France to cancel the scheme and recover the funds it had granted.