98/157/EC: Commission Decision of 5 November 1997 concerning aid Spain proposes to grant to Astilleros Zamacona SA in respect of five tugboats (Only the Spanish text is authentic) (Text with EEA relevance)
Date: 1997-11-05
Institutions: European Commission
Subjects: Spain, State aid, control of State aid, infringement of EU law, shipbuilding

L 50/38

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Official Journal of the European Communities

20. 2. 98

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 5 November 1997

concerning aid Spain proposes to grant to Astilleros Zamacona SA in respect of
five tugboats

(Only the Spanish text is authentic)

(Text with EEA relevance)

(98/157/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

question (that is to say, up to the aid ceiling applicable in
1991).

Having regard to the Treaty establishing the European
Community, and in particular the first subparagraph of
Article 93(2) thereof,

Having regard to Council Directive 90/684/EEC of 21
December 1990 on aid to shipbuilding (1), as amended by
Directive 94/73/EC (2), and in particular Article 4(3)
thereof,

Having given the parties concerned notice to submit
their comments in accordance with Article 93(2) and
having regard to their comments,

Whereas:

I

On 20 November 1996 the Commission decided to open
a procedure pursuant to Article 93(2) of the Treaty to
investigate a request by the Spanish authorities to extend
the three-year delivery limit pursuant to Article 4(3) of
Directive 90/684/EEC in respect of
tugboats
contracted in December 1991 by Astilleros Zamacona SA
(hereinafter referred to as ‘Zamacona'), a small shipyard
in Bilbao. If this request were accepted the yard would be
allowed to receive 9 % aid per contract for the vessels in

five

Pursuant to Article 4(3) of the shipbuilding aid Directive
the aid ceiling applicable to a contract is that in force
when the contract is signed, except where the ship is
delivered more than three years after the signing of the
final contract. In such cases the ceiling is that in force
three years before the date of delivery of the ship. Since
the vessels in this case were not delivered until 1995/96
the applicable aid ceiling in this case would therefore
normally be 4,5 %.

The second paragraph of Article 4(3) of the Directive,
however, states that the Commission may grant an exten-
sion of the three-year delivery limit when this is found
justified by the technical complexity of the project or by
delays
a
substantial
in the working
programme of a yard.

resulting from unexpected disruptions of

and defensible nature

Since the Commission had doubts whether these condi-
tions were fulfilled it decided to open the procedure.

The decision to initiate the Article 93(2) procedure was
communicated to the Spanish Government by the
Commission’s letter SG(96) D/10713 dated 6 December
1996. That letter was published in the Official Journal
the European Communities (3) as notice to other
of
Member States and interested third parties to submit their
comments.

(1) OJ L 380, 31. 12. 1990, p. 27.
(2) OJ L 351, 31. 12. 1994, p. 10.

(3) OJ C 58, 25. 2. 1997, p. 8.

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Official Journal of the European Communities

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II

the procedure the Spanish
Within the framework of
authorities
submitted comments by letter dated 24
January 1997. This material was supplemented by further
information supplied at two informal meetings between
the Commission and the yard representatives, held on 10
April 1997 and 28 May 1997, and through subsequent
bilateral contacts.

from the
The Commission also received comments
Governments of two Member States (Denmark and the
United Kingdom), both of which shared the Commis-
sion’s doubts that the proposed extension of the delivery
the
date was compatible with Directive 90/684/EEC,
United Kingdom in particular pointing out that it has a
number of yards located in sensitive regional areas that
are engaged in the construction of tugs and are in direct
competition with Spanish yards such as Zamacona. The
comments were communicated to the Spanish Govern-
ment by Commission letter dated 21 April 1997, inviting
it
to submit observations. Those observations were
received by letter dated 12 May 1997.

III

In their comments the Spanish authorities reiterated their
view that, on the basis of the information previously
supplied, the circumstances affecting Zamacona should
be regarded as constituting ‘unexpected disruptions of a
substantial
in the working
programme of the yard'. In particular, various points were
made setting out the grounds in support of this conten-
tion, which can be summarised as follows.

and defensible nature

(a) Changes to port legislation

Law 27/1992 of 24 November 1992 on State ports and
the merchant navy, which introduced a new regulatory
framework which altered the arrangements
for port
services including pilotage, had not been foreseen when
the five tug contracts were signed in December 1991.

The spirit of
the new law took precedence over the
commercial decisions taken by the owners a year before
its entry into force. This resulted in changes of ownership
of four of the vessels, joint operating arrangements, etc.
In addition, since the legislation placed emphasis on
safety, changes were made to vessel specifications as
follows: building cavity walls in the engine rooms, new

for

fuel

layout
in auxiliary
engines, improved firefighting capability and changes to
funnels and bridges to improve visibility.

increased power

tanks,

According to the Spanish authorities
the disruption
arising from the entry into force of the law was of a
substantial and defensible nature.

(b) Construction of a new fitting-out wharf

According to the Spanish authorities, the construction of
the new wharf by the Port of Bilbao Authority (the owner
the land on which Zamacona operates) caused an
of
unexpected disruption of Zamacona’s work programme.
The yard maintains that although the provisions of an
agreement with the authority dated 10 October 1991 did
not include precise deadlines for the completion of the
works or the full extent of their nature, it received verbal
assurances that the work would be completed by 30 April
1992; yet, in the event, the work did not start until 19
May 1992 and was not completed until 4 May 1993.
Moreover, the new wharf was not ready to be put into full
use until June 1994, once the yard had carried out
further works and commissioned the necessary facilities
(power, water, gas
firefighting facilities,
tanks, crane,
workshops, etc.).

As regards the impact of
the work on Zamacona’s
programme, the work entailed building containing walls
around an area adjoining Zamacona’s facilities; after
completion filling in the area; demolishing a breakwater
within whose perimeter the yard’s fitting-out area was
previously situated; and constructing the new wharf. The
construction of the containing walls and filling-in meant
that 40 to 50 lorries a day had to go through the yard,
thereby slowing down shipbuilding work. In addition, the
old fitting-out wharf and main slipway had to be manned
until the new wharf was built, since they gave access to
the working area.
the worksite and were part of
According to Zamacona this meant
two vessels
already under construction had to be built in difficult
conditions, the remaining vessels having to be built on
dry land, in the repair shed.

that

The adverse effect on the productivity of Zamacona is, in
the view of the Spanish authroities demonstrated by an
analysis of the main features of Zamacona’s activities
since 1988 as shown in the following table:

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Official Journal of the European Communities

20. 2. 98

Previous
period

1988

1989

1990

1991

1992

1993

1994

1995

Contracts entered into
force

6

4

3

Cumulative total

5

11

15

Keels laid

Cumulative total

Launches

Cumulative total

Deliveries

Cumulative total

Workforce

4

4

4

4

4

4

5

9

6

10

5

9

18

5

14

6

16

5

14

15

33

6

20

4

20

3

17

54

3

36

4

24

5

25

7

24

50

1

37

5

29

6

31

4

28

74

11

48

8

37

6

37

7

35

76

8

56

12

49

11

48

12

47

82

Turnover (ESP million)

1 695

2 176

2 013

2 840

3 941

Turnover per person
(ESP million)

31,39

43,52

27,20

37,37

48,06

According to the Spanish authorities, these data show
that:

(cid:190) the lowest number of contracts was in 1993,

(cid:190) work represented by the order books for 1992 and
1993 could not be completed satisfactorily, keel-
laying and deliveries suffering a fall in both absolute
and relative terms,

(cid:190) in 1994 once the work had been completed output

rose to a satisfactory level.

Similarly, the data provided on the basis of turnover,
workforce and turnover per person are said to show that
growth recorded in 1991 and 1992 slowed down in 1993
(notwithstanding the takeover of the Ardeag yard (cid:190) on
which see point (c) below) but resumed in 1994.

(c) Takeover of the Ardeag yard

The Spanish authorities have explained that Zamacona’s
action programme for 1991 to 1993 was approved by the
Ministry of Industry on 18 March 1992. Subsequently
within the framework of the wider restructuring of the
Spanish shipbuilding industry Zamacona took over the
Ardeag yard including its order book and workforce as
from 1 January 1993. As a result, Zamacona submitted a
revised plan in December 1992 which obtained Ministry
approval on 10 March 1993.

The Spanish authorities acknowledge that the takeover
does not per se justify the delay in delivery of the five
tugs but they maintain that when seen in conjunction

with all the other circumstances at that time the situation
led to unexpected disruption of a substantial and defen-
sible nature. The disruption was unexpected since the
takeover was not foreseen when the five tug contracts
were signed, and defensible since the takeover resulted in
a net capacity reduction in the two yards,
thus con-
tributing towards the necessary structural adjustment of
the sector. So far as the extent of
the disruption is
concerned, according to the Spanish authorities this was
substantial since the transfer of Ardeag’s order book,
including work in progress,
resulted in extra work
causing delays
to Zamacona’s original production
programme. Zamacona maintains that it was obliged to
give the Ardeag contracts priority and that
the extra
workload represented, according to its estimates, a total of
78 846 man/hours of work (two completions, two new
buildings from scratch, and assorted repair and conver-
sion work to be carried out in 1993 and 1994), which
Zamacona had calculated as equivalent to just over 10
months’ work on the basis of the monthly average level
of effective man/hours in the period 1993 to 1995.

According to the Spanish authorities, the fact that the
takeover was a voluntary decision is irrelevant for the
purposes of determining whether there was an unex-
substantial and defensible disruption in the
pected,
Zamacona work programme, since the second subpara-
graph of Article 4(3) of Directive 90/684/EEC does not
stipulate that the circumstances of the disruption must be
external to the yard concerned.

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Official Journal of the European Communities

L 50/41

IV

application for an extension, which was allowed on the
grounds of the technical complexity of the shipbuilding
project.

It should be recalled that the first subparagraph of Article
4(3) of Directive 90/684/EEC states that the aid ceiling
applicable to a contract is to be that in force at the date
of signature of the final contract. However, this rule does
not apply in respect of any ship delivered more than
three years from the date of signing of the final contract;
in such cases, the ceiling applicable to that contract is
that in force three years before the date of delivery of the
ship. The aim of the latter provision is to prevent yards
from circumventing the effect of the progressive reduc-
tion in the aid ceiling by taking on orders at a higher aid
level at
to
commencement of a reduction, with no realistic prospect
of the ships being completed within a reasonable time-
frame.

the calendar year

the end of

just prior

In this case, the vessels had a contract value of less than
ECU 10 million. In December 1991, when the contracts
were signed, the aid ceiling applicable was 9 %. However,
as will be seen below, the vessels were not delivered until
the second half of 1995 or early 1996, so that the three-
year delivery limit was exceeded by periods ranging from
seven to 14 months. Accordingly, the aid ceiling applic-
able to these contracts should be that in force three years
before the date of delivery of
the tugs, namely that
prevailing in 1992/93, which was 4,5 %.

The second subparagraph of Article 4(3) of the Directive,
however, provides that the Commission may grant an
extension of the three-year delivery limit when this is
found justified by the technical complexity of the ship-
building project or by delays resulting from unexpected
disruptions of a substantial and defensible nature in the
working programme of a yard. The request of the Spanish
authorities is based on the latter grounds. The Spanish
authorities maintain that granting this request would not
breach conditions of completion in the shipbuilding
sector. However, this would allow Zamacona to receive a
higher level of aid than it would otherwise have been
entitled to receive and thus to obtain an advantage over
other yards. Furthermore, granting the request would set
an important precedent, since to date the Commission
has interpreted the second subparagraph of Article 4(3) of
the Directive restrictively and has only approved one

V

On the basis of an analysis of the contract documenta-
tion, the facts in this case appear to be as follows. The
five contracts were signed in December 1991 (together
with 11 other contracts, only one of which ever came
into effect). The deadline for entry into force (clause 18 of
the contracts) was deferred until various dates ranging
from 30 April 1992 to 30 December 1992 and was
contingent on a first down-payment by the owner. Clause
10 of the contracts specified that the construction period
would be 14 months from the date of entry into force
(except
in the case of contact No 300, where the
construction deadline was 14 to 16 months), unless the
yard informed the owners that these dates could not be
(force
met
majeure). Clause 18 of all
from
contract No 300 also specified that if the contracts had
not entered into force by the due date they would be
void.

reasons outside Zamacona’s control
the contracts apart

for

On 25 November 1992 two contracts (Nos 318 and 319)
were amended so as to extend the deadline for entry into
force until 31 July 1994 at the latest (prolonging the
original deadline by a further 19 months). Addenda to
contracts Nos 318 and 319 were signed on 20 December
1993 to amend the vessels’ specifications (in both cases
resulting in a small decrease in the contract price), and
on 5 March 1994 to put the contracts into force. Addenda
to contracts Nos 300 and 301 were signed on 10 May
1994 to revise the vessels’ specifications (increasing the
contract price by nearly 30 %) and to put the contracts
into force. (A further addendum to contract No 301 was
apparently signed on 28 April 1995; details are not
known). An addendum to contract No 320 was signed on
20 March 1994 revising the vessel specifications (slightly
increasing the contract price) and putting the contract
into effect.

Finally, in 1994, after the entry into force, four of the five
contracts were transferred to other shipowners.

These developments can be summarised in the following table:

No

Date of
contract

Original entry into
force

Modifica-
tion of
contract

Adden-
dum
No 1

New entry into force

Adden-
dum
No 2

Date of actual entry
into force

Transfer of
contract

300 16.12.91 30.4.92 subject

to
first payment by
owner

10.5.94

10.5.94

10.5.94

12.5.94

Actual
date of
delivery

19.10.95

Deadline
for
construc-
tion

14 to
16
months

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Official Journal of the European Communities

20. 2. 98

No

Date of
contract

Original entry into
force

Modifica-
tion of
contract

Adden-
dum
No 1

New entry into force

Adden-
dum
No 2

Date of actual entry
into force

Transfer of
contract

Deadline
for
construc-
tion

Actual
date of
delivery

301 30.12.91 30.11.92, subject to
first payment and
written
confirma-
tion by owner

10.5.94

10.5.94

28.4.95

10.5.94

22.12.94

14
months

14.5.96

318 27.12.91 30.12.92, subject to
first payment and
written
confirma-
tion by owner

subject
to
25.11.92 20.12.93 31.7.94,
written
confirma-
tion and first pay-
ment by owner

5.3.94

5. 3.94

14
months

11.7.95

319 27.12.91 30.12.92, subject to
first payment and
written
confirma-
tion by owner

320 27.12.91 30.12.92, subject to
first payment and
written
confirma-
tion by owner

25.11.92 20.12.93 31.7.94

5.3.94

5.3.94, with Ad-
dendum No 2

6.3.94

14
months

26.7.95

20.3.94

20.3.94, with pay-
ment on signature
of addendum

20.3.94

12.4.94

14
months

19.10.95

It will be seen from this that the three-year delivery limit
pursuant to Article 4(3) of Directive 90/684/EEC was
exceeded by periods ranging from seven to 14 months;
moreover, the originally forecast delivery dates under the
contracts were exceeded as follows:

VI

(cid:190) No 300: 2 years and 2 months,

(cid:190) No 301: 2 years and 4 months,

(cid:190) No 318: 1 year and 4 months,

(cid:190) No 319: 1 year and 5 months,

(cid:190) No 320: 1 year and 7 months.

Turning now to the arguments put
forward by the
Spanish authorities in support of the requested extension,
the wording of the second subparagraph of Article 4(3) of
Directive 90/684/EEC requires the Commission to deter-
mine whether or not the delay in delivery of the vessels
at issue was caused by an unexpected disruption in the
working programme of the yard that was substantial and
defensible. None of the arguments put forward by the
Spanish authorities show that this condition has been
fulfilled.

amendments,

In view of the delays in the entry into force and the other
is highly questionable
it
substantial
whether any of the 1991 contracts can be regarded as
definitive and thus qualifying as final contracts for the
purposes of the first subparagraph of Article 4(3) of the
Directive, which refers to the applicable aid ceiling being
that ‘in force at the date of signature of the final contract'
(emphasis added). These doubts apply particularly to
contracts Nos 301 and 320, which it appears should have
become void under the terms of the original contracts
when the owners failed to fulfil their obligations under
clause 18 relating to entry into force; and to contracts
Nos 300 and 301, which increased significantly in price.

The above facts alone provide sufficient grounds for
concluding that the relevant conditions for an extension
of the delivery date pursuant to Article 4(3) of the Dir-
ective have not been met.

The changes to port legislation seem to have been an
unexpected development that was unforeseen when the
contracts were signed in December 1991. However, no
evidence has been presented to show that this unex-
pected event constituted a disruption to the working
programme of Zamacona that led to the delivery of the
vessels being delayed. The new legislation served only to
the shipowners, causing them
create uncertainty for
themselves to delay putting the contracts into effect. The
owners also decided to make significant modifications to
the vessel design and specifications, not only to take
account of the new legal framework, but also (as was
noted in the opening of the procedure) to take account of
the devaluation of the peseta (which had increased the
costs, such as those of the German propulsion engines
originally specified, which were replaced with cheaper

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L 50/43

engines), which, together with the need to arrange the
necessary financing, further added to the delays in the
owners’ final implementation of the contracts. It is clear
that it was this that delayed the delivery of the vessels,
not a disruption in Zamacona’s work programme.

As regards the construction of the new fitting-out wharf,
this does not seem to have been an unexpected event at
the time when the contracts were signed in December
1991, since it appears that prior to that date the Port of
Bilbao had approved a project to remodel its facilities
that would have involved the disappearance of Zamaco-
na’s wharfage line, used for the fitting-out and repair of
vessels. This raised serious doubts about the very ex-
istence of the yard until an agreement was signed in
October of that year when the Port of Bilbao authority
and Zamacona agreed that the demolished wharf should
be replaced with a new one.

So far as the extent of the disruption is concerned, the
works clearly had an adverse effect on Zamacona’s activ-
ities throughout 1992 and until May 1993, although it
should be noted that keel laying, launches and deliveries
do not appear to have been significantly below previous
levels despite the yard’s assertions to the contrary.

However there is no evidence that the disruption caused
any delay in the delivery of the tugs. In particular, there
is no evidence that Zamacona, for example pursuant to
clause 10 of the contracts, informed the owners that it
had to postpone delivery of the vessels because of the
disruption to its work programme. This is not surprising,
since the contracts did not enter into force until March or
May 1994 (cid:190) nearly one year after the work had been
completed and just before Zamacona completed the
commissioning of the new wharf.

Finally, as regards the takeover of the Ardeag yard as
from 1 January 1993, this was not foreseeable when the
contracts were signed in December 1991 and was there-
fore an unexpected development. The effect on Zama-
cona,
in terms of absorbing the extra workforce and
taking over the Ardeag order book, was also substantial.
However, despite the Spanish arguments to the contrary,
it is relevant to note that the takeover was a commercial
decision taken by the yard (which also allowed it to
benefit from investment aids totalling ESP 559 million)
and the consequences in terms of increasing and possibly
disrupting Zamacona’s existing work programme would
not be unexpected in the circumstances.

the construction of

on the two complete new buildings represented over
41 000 hours, or over 50 %). Zamacona estimates that
this corresponded to about 10 months’ work for the yard.
However, it is difficult to follow these calculations since
there are inconsistencies with the data provided in rela-
tion to the effects of
the new
fitting-out wharf (which appear to include data for ex-
Ardeag workforce and contracts and show that only one
new building contract came into force in 1993). Even if
the estimated figure of 10 months extra work is accepted,
this would not justify the delay in the original delivery
dates for the vessels at issue, which greatly exceeded 10
months. More importantly, as with the new fitting-out
wharf, no evidence has been put forward to substantiate
Zamacona’s claims that the disruption arising from the
takeover caused it to delay delivery of the vesels in ques-
tion. This serves to underline the point that the reason
for the delay in the delivery of the vessels was the owners’
decision to delay the entry into force of the contracts.

VII

In the light of the above it must be concluded that there
are serious doubts whether contracts Nos 300, 301, 318,
319 and 320 signed in December 1991 were final
contracts. It must also be concluded that the delay in the
delivery of the five tugs covered by these contracts was
not due to any unexpected disruption in Zamacona’s
working programme of a substantial and defensible
nature. Accordingly, the conditions of the second sub-
paragraph of Article 4(3) of Directive 90/684/EEC have
not been fulfilled and the level of aid granted for these
five tugs must not exceed the level of the aid ceiling
the
preveiling three years prior to actual delivery of
vessels, namely 4,5 %. To decide otherwise would create
a dangerous precedent with serious implications for the
inspection of State aid in the shipbuilding sector.

Since the Spanish authorities have given assurances that
no aid above 4,5 % has yet been granted for the contracts
in question there is not need to order reimbursement,

HAS ADOPTED THIS DECISION:

Article 1

As regards the extent of that impact, the Spanish authori-
ties themselves appear to recognise that this was not such
as to justify the delay in the delivery of the five tugs.
According to the yard, extra work generated by the
takeover amounted to 78 846 man/hours (of which work

The proposal of Spain to grant aid in the form of a direct
grant to Astilleros Zamacona SA of up to 9 % of the
contract value before aid for five tugboat contracts (Nos
300, 301, 318, 319 and 320) signed in December 1991 is
incompatible with the common market, since the aid
does not comply with Article 4(3) of Directive 90/
684/EEC.

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20. 2. 98

Article 2

Spain shall reduce the level of aid proposed for the five contracts in question so as to
ensure that the level of aid in respect of each vessel does not exceed 4,5 % of the contract
value before aid, in accordance with the common maximum ceiling for 1992 and 1993 as
fixed by the Commission in accordance with the provisions of Article 4(2), (3) and (4) of
Directive 90/684/EEC.

Spain shall inform the Commission, within two months of notification of this Decision, of
the measures taken to comply therewith.

Article 3

This Decision is addressed to the Kingdom of Spain.

Article 4

Done at Brussels, 5 November 1997.

For the Commission

Karel VAN MIERT

Member of the Commission