CELEX: 62002CJ0276
State aid
Definition
Non-payment of taxes and social security contributions by an undertaking
Attitude taken by the national authorities following a declaration of suspension of payments

By its application, the Kingdom of Spain seeks the annulment of Commission Decision 2002/935/EC of 14 May 2002 on the State
aid granted to Grupo de Empresas Álvarez (OJ 2002 L 329, p. 1) (hereinafter ‘the contested decision’).
The factual framework and the contested decision
Grupo de Empresas Álvarez SA (hereinafter ‘GEA’), which was one of the main Spanish manufacturers and sellers of porcelain
and china, registered significant losses after its privatisation in 1991.
The undertaking received State aid in the form of guarantees and a direct subsidy which the Commission authorised by Decision
98/364/EC of 15 July 1997 (OJ 1998 L 164, p. 30) on condition that the Spanish authorities refrained from granting any new
aid and fully implemented the restructuring plan which they had submitted.
However, during the three years following that authorisation, GEA and its subsidiary, Vidrios Automáticos del Noroeste SA
(hereinafter ‘VANOSA’), failed to comply with their tax and social security contribution obligations.
After the statutory suspension of payments by GEA and VANOSA was declared upon their application, on 19 November 1997 and
14 November 1997 respectively, the Agencia Estatal de Administración Tributaria (State tax authorities, hereinafter ‘the tax
authorities’) entered into an individual agreement with each of the two undertakings, on 14 April 1998.
Under those agreements, some two thirds of the existing tax debt was waived and an extension, as well as long-term rescheduling,
namely, two years’ deferment followed by quarterly payments over 10 years, the first as from January 2000, were granted for
payment of the balance of that debt, subject to the condition that the two undertakings comply with the schedule and punctually
discharge their subsequent tax obligations. Failing compliance with those conditions, the agreements would be cancelled and
the initial debt revived in its entirety.
On 6 November 1998, the Tesorería General de la Seguridad Social (hereinafter ‘the social security authorities’) also entered
into an individual agreement with VANOSA of the same type as the agreements of 14 April 1998, with the first rescheduled monthly
payment due in January 2000. GEA, however, did not reach any similar agreement with the social security authorities.
During the two years which followed the conclusion of the agreements with the tax and social security authorities, GEA and
VANOSA continued to fail to pay their social security contributions and taxes when they fell due, with the exception of some
sporadic payments. As from the beginning of 2000, those undertakings also failed to pay arrears in accordance with the arrangements
set out in those agreements.
According to the Spanish Government, on 7 February 2001, having sent several letters of formal notice without result, the
tax authorities cancelled the agreements of 14 April 1998 with GEA and VANOSA. On 20 December 2001, the social security authorities
for their part terminated the agreement of 6 November 1998 with VANOSA.
The Spanish Government also states that, even after the declarations of suspension of payments, the social security and tax
authorities continued with various seizure procedures, following on from seizures prior to those declarations, and initiated
other forced collection measures. Thus, the tax authorities seized 96 council houses (on 23 December 1999), attached GEA group
trade marks (on 22 August 2000) and debts owed by the main customers of the undertakings in question (between October 2000
and April 2001), and seized VANOSA’s plant (on 5 June 2002), while the social security authorities were able to recover certain
sums of money (for example, ESP 42 767 950 in November 1998) and applied to attach bank accounts (in January 2001) and a claim
on the Treasury (in April 2001). Those actions finally resulted in the undertakings closing in the spring of 2001, since the
revenue which could be generated by their operations was largely diverted to the public creditors.
After it received two complaints in the first half of 2001 claiming, inter alia, that the Spanish authorities had waived the
recovery of taxes and social security contributions with regard to GEA and VANOSA, the Commission sent a number of requests
for information to those authorities. After several exchanges of letters, it decided on 19 September 2001 to initiate the
procedure under Article 88(2) EC and notified the Spanish authorities thereof by letter of the same date, which it subsequently
published in the
Official Journal of the European Communities
, inviting interested parties to submit their comments (OJ 2001 C 336, p. 6).
The Spanish authorities submitted comments, which were received by the Commission on 4 December 2001. No other Member State
or interested party submitted comments. On 14 May 2002, the Commission adopted the contested decision.
In the grounds for the decision, the Commission states that the systematic non-payment of social security contributions and
taxes by GEO and VANOSA, at least between November 1997, when payments were suspended, and January 2001, amounts to a transfer
of public resources to those undertakings and constitutes State aid within the meaning of Article 87(1) EC.
That transfer gave those enterprises a competitive advantage inasmuch as, unlike their competitors, they were not obliged
to defray the costs of social security contributions and taxes, as would ordinarily be the case. That advantage arises from
the failure to apply the measures available under Spanish law, namely the adoption of separate forced collection procedures
with regard to post-suspension debts which would have prevented the undertakings in question from continuing to operate without
fulfilling their tax and social security obligations.
The Spanish authorities thereby failed to act as a diligent private creditor trying to recover at least a marginal amount
of unpaid taxes and social contributions. Their passivity resulted in a considerable increase in tax and social security arrears,
entailing flagrant non-compliance with the restructuring plan on which the decision of 15 July 1997 was based.
The Commission next states that the aid identified cannot qualify for any of the exceptions provided for in Article 87(2)
and (3) EC and that, in particular, it does not satisfy the conditions set out in the information notice (1999/C 288/02) on
Community Guidelines on State aid for rescuing and restructuring firms in difficulty (OJ 1999 C 288, p. 2).
In conclusion, the Commission finds that ‘the aid in the form of the persistent non-payment of taxes and social security contributions
by [GEA] and VANOSA between the dates on which payments were suspended (19 November 1997 for GEA and 14 November 1997 for
VANOSA) and January 2001 is incompatible with the common market’. It also states that the Kingdom of Spain is to ‘take all
the necessary steps to recover from the recipient the aid [in question] unlawfully already made available to the recipient’.
The action
The Spanish Government claims, inter alia, that the Commission has committed an error of law and of fact in applying Article
87(1) EC. It is appropriate first of all to consider these pleas in law.
Plea alleging an error of law
Arguments of the parties
The Spanish Government maintains that the contested decision infringes Article 87(1) EC, inasmuch as the existence of State
aid within the meaning of that provision is not established in circumstances such as those in the present case.
The Spanish Government submits that the competent authorities merely entered into waiver and debt rescheduling agreements
with GEA and VANOSA, as they were allowed to do under the national legislation relating to suspension of payments by undertakings
and as they would have done with any undertaking in that situation. Merely concluding such agreements in the context of a
suspension of payments procedure cannot be considered to give rise to State aid.
To follow the Commission’s reasoning, according to which State aid is constituted by the fact that the undertakings obtained
agreements allowing them to continue to operate although the public creditors could have brought about their immediate liquidation,
amounts to considering that any suspension of payments procedure involves elements of aid and that procedures established
by the Member States to prevent insolvency are themselves contrary to the Community rules on State aid.
The Spanish Government also submits that in the present case the Commission neither demonstrated nor claimed that the agreements
entered into by the public creditors with GEA and VANOSA were different from or more advantageous than those normally concluded
in suspension of payments procedures.
The Commission points out, however, that it is not the agreements on waiver and debt rescheduling as regards the public creditors
as such that gave rise to State aid, but the passivity of the social security and tax authorities after those agreements were
concluded. Contrary to the assertion by the Spanish Government, the Commission has never stated in the present case that those
agreements gave rise to State aid.
Findings of the Court
Article 87(1) EC defines State aid which is governed by the EC Treaty as aid granted by a Member State or through State resources
in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production
of certain goods, in so far as it affects trade between Member States. The concept of aid within the meaning of that provision
is wider than that of a subsidy because it embraces not only positive benefits, such as the subsidies themselves, but also
measures which, in various forms, mitigate the normal burdens on the budget of an undertaking (see, inter alia, Case 30/59
De Gezamenlijke Steenkolenmijnen in Limburg
v
High Authority
[1961] ECR 1, 19; Case C-387/92
Banco Exterior de España
[1994] ECR I-877, paragraph 13; Case C-256/97
DM Transport
[1999] ECR I-3913, paragraph 19, and Case C-5/01
Belgium
v
Commission
[2002] ECR I-11991, paragraph 32).
In the contested decision the Commission does not call into question the agreements concluded with GEA and VANOSA for the
waiver and rescheduling of debts. Contrary to the assertion of the Spanish Government, the Commission does not deduce that
there is State aid from the fact that such agreements were entered into with the public creditors under a suspension of payments
procedure.
In the grounds and operative part of the contested decision, the Commission expressly refers to the persistent failure by
the two undertakings to fulfil their obligations to pay taxes and social security contributions. According to the contested
decision, inter alia in points 44 and 47, it is the advantage derived from the systematic non-payment of taxes and social
security contributions between at least January 1997 and January 2001, that is to say, both prior and subsequent to the declaration
of suspension of payments and the conclusion of the agreements, that constitutes State aid. That advantage results from the
failure by the competent authorities to initiate separate forced collection procedures to prevent the two undertakings from
continuing to operate, in particular after the agreements were entered into, without fulfilling their tax and social security
obligations and, specifically, without honouring post-suspension debts not included in the waivers and schedule laid down
in the agreements. At point 53 of the grounds of the contested decision it is stated that, by taking that attitude, the public
creditors did not act as a private creditor trying to recover at least a marginal amount of unpaid taxes and social contributions.
Accordingly, since it is based on a misreading of the contested decision, the first plea put forward by the Spanish Government
must be dismissed.
Plea alleging an error of fact
Arguments of the parties
The Spanish Government claims in essence that the contested decision is vitiated by an error of fact, since the Commission
considered that the Spanish authorities had remained inactive after the suspension of payments by GEA and VANOSA was declared
in November 1997.
Contrary to what is stated in the contested decision, both the social security and tax authorities used all the means available
to them, in particular separate forced collection procedures, for the purpose of ensuring the recovery of debts which arose
after the conclusion of the waiver and rescheduling agreements. The Spanish Government refers to the measures mentioned in
paragraph 10 of the present judgment.
The Commission, on the other hand, contends that the Spanish authorities did not show sufficient diligence when confronted
with non-compliance on the part of the undertakings in question with their tax and social security obligations. The social
security and tax authorities remained inactive after entering into the waiver and rescheduling agreements in 1998, which resulted
in a considerable increase in subsequent debt.
Findings of the Court
The legality of a decision concerning State aid is to be assessed in the light of the information available to the Commission
when the decision was adopted (see, inter alia, Case 234/84
Belgium
v
Commission
[1986] ECR 2263, paragraph 16, and Case C-241/94
France
v
Commission
[1996] ECR I-4551, paragraph 33).
With regard to the basis for the contested decision, as was stated in paragraph 26 of this judgment, the Commission takes
the view that State aid arises from the fact that the Spanish authorities did not initiate separate forced collection procedures
and did not act as private creditors trying to recover at least a marginal amount of the debts owed to them.
However, it is clear from the correspondence between the parties during the administrative procedure that the Spanish authorities
had indicated that steps had been taken during the period from January 1997 to January 2001 to recover part of the public
claims against GEA and VANOSA and to make the latter comply with their obligations. It is true that the information supplied
to the Commission during the administrative procedure was less complete than that submitted by the Spanish Government in these
proceedings and was at times imprecise, but it did not allow the Commission to conclude that the measures available under
Spanish law (separate forced collection procedures) to prevent firms from continuing to operate without fulfilling their tax
and social security obligations had not been applied at all and that the public creditors had therefore not acted as private
creditors trying to recover at least a marginal amount of the debts owed to them.
It is true that the Spanish authorities, in their reply to a request for information from the Commission, which the latter
received on 5 July 2001, merely mentioned that the social security authorities had seized property belonging to GEA and VANOSA,
without specifying the date on which those seizures took place or supplying information on possible action by the tax authorities.
It was on that basis that, in its letter informing them of its decision to initiate the procedure laid down in Article 88(2)
EC, the Commission pointed out to those authorities that they had not indicated that they had availed themselves of certain
legal means available under national law such as the initiation of insolvency proceedings or separate forced collection procedures
in order to put an end to the failure by the undertakings to fulfil their social security and tax obligations.
In their observations in reply, which the Commission received on 4 December 2001, the Spanish authorities stated that since
GEA and VANOSA had not complied with the agreements of 14 April 1998, the tax authorities had cancelled them on 7 February
2001 and a certain number of forced collection measures had been set in motion again. In that regard, they cited the attachment
of debts owed by customers, trade marks and shares of subsidiaries and seizure of properties. They also pointed out that a
first charge had been taken over a property. That information can be understood as meaning that the forced collection procedures
referred to were set in motion again only after the period covered by the contested decision, which ended in January 2001.
The Spanish authorities also referred, however, to a report and to social security documentation annexed to their reply, including,
inter alia, a statement of properties seized, and bank accounts and debts owed to the two undertakings by other undertakings
or the Treasury that had been attached. Consideration of that statement makes clear that several attempts to seize property
that had been initiated between 1993 and 1996 were set in motion again between October 1997 and November 1998, that on 1 February
2001 the attachment of a bank account of GEA was notified to the bank concerned, which presupposes that this measure was being
prepared in the preceding weeks, and that on 9 April 2001 a debt owed by the public treasury was also attached.
In the light of that information, the Commission could not consider that in general ‘[the Kingdom of Spain failed] to take
measures available under Spanish law (separate forced collection procedures) to prevent firms from continuing to operate without
fulfilling their tax and social security obligations’ and to deduce therefrom that ‘nothing in the State’s behaviour suggests
that it acted as a private creditor trying to recover at least a marginal amount of unpaid taxes and social contributions’.
Without prejudice to the question of whether or not State aid is involved in the present case, it must therefore be held that
the conclusion in the contested decision that the ‘persistent non-payment of taxes and social security contributions by [GEA]
and VANOSA following the suspension of payments in November 1997 until January 2001 [constitutes State aid] incompatible with
the common market’ is based on factually erroneous premisses. Accordingly, the contested decision must be annulled, without
there being any need to examine the other pleas in law or arguments put forward by the Spanish Government.
Costs
Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been
applied for in the successful party’s pleadings. Since the Spanish Government has asked that the Commission be ordered to
pay the costs and the latter has failed in its submissions, it must be ordered to pay the costs.
On those grounds, the Court (Second Chamber) hereby:
1.
Annuls Commission Decision 2002/935/EC of 14 May 2002 on the State aid granted to Grupo de Empresas Álvarez.
2.
Orders the Commission of the European Communities to pay the costs.
Signatures.
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Language of the case: Spanish.