1999/195/EC: Commission Decision of 1 July 1998 on aid granted and to be granted by Italy to Keller SpA and Keller Meccanica SpA (notified under document number C(1998) 2047) (Only the Italian text is authentic) (Text with EEA relevance)
Date: 1998-07-01
Institutions: European Commission
Subjects: Italy, State aid, aid to undertakings, interest rate subsidy, regional aid, vehicle on rails

12. 3. 1999

EN

Official Journal of the European Communities

L 63/55

COMMISSION

COMMISSION DECISION

of 1 July 1998

on aid granted and to be granted by Italy to Keller SpA and Keller Meccanica
SpA

(notified under document number C(1998) 2047)

(Only the Italian text is authentic)

(Text with EEA relevance)

(1999/195/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

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

Having regard to the Agreement on the European
Economic Area, and in particular Article 62(1)(a) thereof,

Having given notice to the parties concerned, in accord-
ance with the above Articles, to submit their comments,

Whereas:

among other measures, completion of existing orders as a
means of returning both companies to viability with a
view to finding a purchaser; alternatively, the companies
were to be wound up. Implementation of those measures
was delayed because of difficulties in finding the required
financing.

Of the financing obtained by the companies, Keller SpA
received an ITL 33 839 million soft loan from Irfis-Medi-
ocredito della Sicilia while Keller Meccanica SpA
obtained a ITL 6 500 million soft loan from Societ(cid:133)
Finanziaria Industriale Rinascita Sardegna-Sfirs SpA. Both
loans were granted at an interest rate lower than the
corresponding reference rate for Italy (11,35 % for 1995).

I

By letters dated 12 April 1996 and 2 May 1996, the Italian
Government notified the Commission of its intention to
grant State guarantees under Article 2a of Law 95/1979 to
Keller SpA and Keller Meccanica SpA, both declared
insolvent and under extraordinary administrative arrange-
ments since 1994.

Both companies were part of Gruppo Keller, which
manufactures rolling stock. Keller SpA, which was the
is based in Sicily and employs 294
parent company,
people. Keller Meccanica SpA, which is controlled by
Keller SpA, is based in Sardinia and employs 319 people.

II

On 10 February 1997, in view of the unsatisfactory in-
formation provided by the Italian authorities and the
serious doubts it had regarding the measures notified, the
Commission decided to initiate proceedings under Article
93(2) in respect of:

— the ITL 33 839 million soft loan granted by Irfis-
Mediocredito della Sicilia SpA to Keller SpA at an
annual interest rate of 4 %,

In accordance with Law 95/1979, an extraordinary admin-
istrator was appointed to draw up recovery programmes
for both companies; the programmes were approved by
ministerial decree on 22 December 1994 and envisaged,

— the ITL 6 500 million soft loan granted by Societ(cid:133)
Finanziaria Industriale Rinascita Sardegna-Sfirs SpA to
Keller Meccanica SpA at an annual interest rate of
5 %,

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— the proposed State guarantees to be given to Keller
SpA and Keller Meccanica SpA under Article 2a of
Law 95/1979 covering 50 % of the above loans.

At the time, the Commission could not consider the
measures included in the recovery programmes as restruc-
turing measures, since the conditions laid down in the
Community guidelines on State aid for rescuing and
restructuring firms in difficulty (1) were not met, in par-
ticular because of the absence of a feasible, coherent and
far-reaching plan to restore the firms’ long-term viability.
Moreover, both soft loans seemed to have been granted in
breach of the obligation, laid down in Article 93(3) of the
EC Treaty, to inform the Commission of any plans to
grant or alter aid.

III

By letter dated 5 March 1997, the Italian authorities were
informed of
the Commission’s decision to initiate
proceedings under Article 93(2) in respect of the above
measures. A copy of the letter was published in the Offi-
the European Communities (2). The
cial Journal of
Commission has not received any observations from third
parties in the course of the proceedings.

On 19 May 1997 the Italian authorities replied to the
initiation of proceedings, stating that:

— with regard to the aid granted to Keller SpA, the
Region of Sicily replied that the ITL 33 839 million
soft loan granted on 22 April 1996 was covered by
Regional
law 25/1993, which concerned an aid
law,
scheme approved by the Commission. That
which was notified to the Commission on 14 March
1995, was subsequently modified by Regional Law
20/1995, which extended the benefits of the 1993
scheme to companies under extraordinary adminis-
trative arrangements. Contrary to what the Commis-
sion had indicated when initiating proceedings, the
loan had not therefore been granted under Regional
Law 20/1995, but under Regional Law 25/1993. The
Sicilian authorities also communicated their intention
not to grant a State guarantee to Keller SpA,

— with regard to the aid granted to Keller Meccanica
SpA, the Region of Sardinia maintained that the ITL
6 500 million soft loan was covered by Regional Law
66/1976, which concerned another
aid scheme
approved by the Commission and adapted subse-
quently in order to update the criteria, laid down in
1976, so as to bring them into line with current
economic conditions. The Sardinian authorities made

no reference to the proposed State guarantee for
Keller Meccanica SpA,

— the Italian and Sardinian authorities explained that
the restructuring plans covered only the four-year
period allowed for the continuation of business under
Law 95/1979. Therefore, the plans were aimed solely
at securing completion of existing orders and the sale
of the companies to a third party on expiry of that
period, or their liquidation.

On 23 June 1997 a meeting was held with the Sardinian
authorities, who stressed that there were no de facto links
between Keller Meccanica SpA and Keller SpA. With
regard to the soft loan granted under Regional Law 66/
1976 to Keller Meccanica SpA, the Sardinian authorities
reiterated that the conditions under which the Commis-
sion in 1985 authorised the 1976 aid scheme had been
updated in line with the definition or SMEs given by the
Commission itself in the Community Guidelines on State
aid for SMEs (3).

At that meeting, the Sardinian authorities undertook to
notify the amendments made to Regional Law 66/1976
and to submit a restructuring plan for Keller Meccanica
SpA. They mentioned the possibility of not granting the
State guarantee to Keller Meccanica SpA.

On 27 January 1998, after several reminders from the
Commission, the Italian authorities sent additional infor-
mation regarding the two companies. In particular, they
confirmed that the State guarantees notified under Law
95/1979 would not be granted, that both companies were
implementing the recovery plans approved in 1994 and
that, since their sale to a third party had to be completed
by June 1998, the relevant procedure had already been
started. They thus took the view that it was no longer
necessary to send new restructuring plans to the Commis-
sion and announced the withdrawal of the notification
concerning the State guarantees under Article 2a of Law
95/1979.

The Italian authorities enclosed a document from the
Region of Sardinia stating that the amendments to the
1976 aid scheme, which covered the loan granted to
Keller Meccanica SpA, would be notified jointly with a
new amendment which had not yet been approved for
political reasons. Nevertheless, they repeated that the sole
aim of the amendments had been to update the criteria
laid down for the original 1976 scheme. There has so far
been no notification pursuant to Article 93(3) of the EC
Treaty; the Commission was simply ‘informed' of the
amendments in question by letter dated 27 January 1998.

(1) OJ C 368, 23. 12. 1994, p. 12.
(2) OJ C 140, 7. 5. 1997, p. 12.

(3) OJ C 213, 19. 8. 1992, p. 2.

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IV

under Regional Law 20/1995, which had not even been
adopted by the Region at the time.

A. State guarantee pursuant to Law 95/1979

The proposed guarantees to be given by the Italian
Treasury to Keller SpA and Keller Meccanica SpA under
Law 95/1979 have been notified to the Commission
pursuant to Article 93(3) of the EC Treaty. The Commis-
sion considers that the Italian authorities have complied
with the obligation laid down in that Article.

By letter dated 27 January 1998, the Italian authorities
confirmed to the Commission that the State guarantees
would not be granted and they therefore withdrew the
notification. Accordingly, the Commission has terminated
the proceedings under Article 93(2) in respect of those
guarantees.

B. ITL 33 839 million soft loan granted to Keller

SpA

themselves had

Italian authorities

When initiating proceedings, the Commission stated that
the
previously
confirmed that the loan had been granted on 22 April
1996 under Regional Law 20/1995, by which the Region
of Sicily extended the benefits of Articles 30 and 31 of
Regional Law 25/1993 to companies under extraordinary
administrative arrangements. The measures under Articles
30 and 31 of Regional Law 25/1993 were approved by the
Commission in 1994 (State aid C 12/92, ex-NN 113/A/93
— Italy). As Regional Law 20/1995 amended Regional
Law 25/1993, the Commission had considered it as part
of the original scheme still under examination (State aid
NN 113/A/93 — Italy).

As stated above, in their comments on the initiation of
proceedings the Italian authorities claimed that the ITL
33 839 million soft loan granted to Keller SpA had not
been granted under Regional Law 20/1995 but under
Regional Law 25/1993. In fact, the agreement between
Irfis-Mediocredito della Sicilia and Keller SpA, already
under extraordinary administrative arrangements, was
signed on 30 December 1994, i.e. one day before the
deadline fixed by the Commission in its 1994 decision on
the regional aid scheme provided for in Regional Law
25/1993 (itself amending Regional Law 119/1983).

According to the Italian authorities, in order to verify
whether the measure complies with the scheme, the date
to be taken into consideration is the date of legal comple-
tion of the act allowing payment and not the date of
actual payment of the soft loan. This interpretation was
confirmed by the Commission by letter dated 19 January
1995. Therefore, as only the former date has to be taken
into consideration, the soft loan cannot have been granted

As regards Regional Law 20/1995, the Italian authorities
consider that it does not provide for the granting of
additional State aid but simply confirms expressly that
companies under extraordinary administrative arrange-
ments may also benefit from the measures laid down in
Regional Law 25/1993. In other words, Regional Law
20/1995 simply clarifies the interpretation of Regional
Law 25/1993. The authorities add that Italian law does
not preclude companies under extraordinary adminis-
trative arrangements from obtaining new financing for
their current operations. In particular, neither Regional
Law 119/1983 nor Regional Law 25/1993 prohibits soft
loans for companies under extraordinary administrative
arrangements.

The Commission takes the view that the arguments put
forward by the Italian authorities contradict information
previously sent. By letter dated 20 September 1996
(forwarded to the Commission by letter of the Italian
Permanent Representative’s Office dated 12 December
1996), the Region of Sicily stated that Regional Law 20/
1995 extended the benefits of Regional Law 25/1993 to
companies under extraordinary administrative arrange-
ments. Moreover,
in a letter dated 21 April 1997
(forwarded to the Commission by letter of the Italian
Permanent Representative’s Office dated 19 May 1997),
the Region of Sicily stated that Regional Law 20/1995 was
designed to permit implementation of a previously agreed
operation.

Accordingly, Regional Law 25/1993 was not applicable to
companies under extraordinary administrative arrange-
ments pursuant to Article 2a of Law 95/1979. This is also
borne out by the fact that the Italian authorities decided
on 14 March 1995 to notify the Commission pursuant to
Article 93(3) of
the amendments
the EC Treaty of
provided for in Regional Law 25/1993.

In any case, the Commission considers that Regional Law
20/1995 could not have applied retroactively. The
Commission’s position was communicated to the Italian
authorities by letter of 2 May 1996, which confirmed that
‘the amendment introduced by Article 1 of Regional Law
20/1995, which provides for the extension of this scheme
to companies under extraordinary administrative arrange-
ments pursuant to Law 95/1979, constitutes alteration of
an existing scheme which, pursuant to Article 93(3) of the
EC Treaty, has to be notified to, and approved by the
Commission. For the time being, therefore, the company
Keller SpA cannot benefit from the aid scheme in ques-
tion (Regional Law 20/1995)'.

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In conclusion, the soft loan was granted to Keller SpA,
already under extraordinary administrative arrangements,
as part of a scheme that did not allow it to receive such
aid. The scheme in question authorised aid in the form of
soft loans covering up to 30 % of the total contract price
of orders already obtained by companies operating in
Sicily. Since this constituted operating aid, the Commis-
sion decided to limit its approval to the ITL 50 000
million budget available at the time and to loans to be
made before 31 December 1994.

as a dimensional criterion. In their view, the Commission,
when approving the measures provided for in Regional
Law 66/1976, had first fixed the maximum aid per person
(ECU 14 000 or ECU 18 000) and then took a basis of 100
employees, in order to determine the maximum aid per
firm, whatever the actual number of employees. In addi-
tion, a strict limit of 100 employees, as fixed by the
Commission, would not be consistent with the Commis-
sion’s own definition of an SME (250 employees), with the
result that a large number of SMEs would not qualify for
the measure in question.

In addition, the soft loan was granted before adoption of
the amendments authorising it and before the Commis-
sion could take up a position on those amendments. The
aid element involved in the soft loan has thus to be
considered illegal, as it was granted outside the scope of
an approved scheme and in breach of the obligation
imposed on Member States under Article 93(3) of the EC
Treaty to inform the Commission of any plan to grant or
to alter aid in sufficient time to enable it to submit its
comments. The Commission has therefore to consider the
aid in question as a new individual measure not covered
by the approved scheme. As the company is clearly in
difficulty and as
the Italian authorities defined the
proposed State guarantee for part of this loan as restruc-
turing aid, the loan must be assessed in the light of the
Community Guidelines on State aid for rescuing and
restructuring firms in difficulty.

C. ITL 6 500 million soft loan granted to Keller

Meccanica SpA

Similar conclusions as under point B apply to the ITL
6 500 million soft loan granted by Societ(cid:133) Finanziaria
Industriale Rinascita Sardegna-Sfirs SpA to Keller Mecca-
nica SpA.

When initiating proceedings, the Commission noted that
the soft loan did not meet the conditions on which the
Commission had based its approval of the aid scheme
(State aid C 4/85 — Italy),
in particular the size of
possible beneficiaries. The aid scheme, as approved by the
Commission,
stipulated that beneficiaries would be
limited to firms with up to ITL 7 000 million in fixed
assets and a maximum of 100 employees. According to
the information provided by the Italian authorities before
the proceedings were initiated, Keller Meccanica SpA had
319 employees and a total of ITL 53 466 million in fixed
assets.

In their comments on the initiation of proceedings, the
Italian authorities pointed out that the Commission was
wrong in identifying the maximum number of employees

The Italian authorities also claimed that what
the
Commission considered as subsequent amendments to
the scheme, whereby Keller Meccanica SpA became
eligible to receive aid under the scheme were simply an
updating of those criteria (fixed assets and aid per person).
As things stand, the original dimensional criterion of ITL
7 000 million in fixed assets is insufficient for even an
average-sized craft enterprise to qualify. Therefore, on
account of the steady loss of purchasing power of the lira,
the criteria have been cautiously revised upwards. It
should be noted that the extent of this revision falls short
of the decline in the value of the lira over the period 1980
to 1992 (calculated by ISTAT at 130,6 %).

the beneficiary companies

As regards the soft loan to Keller Meccanica SpA, the
Commission considers that the eligibility criteria were
clearly set out in its 1985 decision (State aid C 4/85 —
Italy). The letter sent to the Italian authorities informing
them of the Commission’s decision explicitly states that
‘the Commission has taken note of the limits set on the
(maximum 100
size of
employees and ITL 7 000 million in fixed assets)'. The
limit of 100 employees has thus to be understood as a
dimensional criterion and a maximum limit. Even if the
Italian authorities
the Commission’s
the notified
decision did not reflect
scheme, they did not challenge it before the Court of
Justice of
the European Communities within the
prescribed time limit. The decision is therefore final and
irrevocable.

the meaning of

thought

that

Since the approved scheme did not provide for a mech-
anism to adjust the aid criteria and the eligibility of
beneficiaries, the subsequent amendments were substan-
tial and should have been notified to the Commission
pursuant to Article 93(3) of the EC Treaty. As there was
no such notification, the soft loan already granted to
Keller Meccanica cannot be deemed to be covered by the

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Commission’s approval of the original scheme. The infor-
mation provided by the Italian authorities does not justify
any change in the position the Commission took when
initiating proceedings. The loan does not meet the condi-
tions on which the Commission based its approval of the
aid scheme, in particular the size of possible beneficiaries.

As the ITL 6 500 million soft loan to Keller Meccanica
SpA was granted outside the scope of an approved
scheme, the Commission has to consider it as a new
individual measure not covered by the approved scheme.
Furthermore, as the company is clearly in difficulty, the
loan must be assessed in the light of the Community
Guidelines on State aid for rescuing and restructuring
firms in difficulty.

V

The interest rebate on the soft loans to Keller SpA and
Keller Meccanica SpA must be considered State aid
within the meaning of Article 92(1) of the EC Treaty.

It should be added that in the course of the proceedings
the Italian authorities have never contested that in both
cases the interest rebate constitutes aid. They did not
request any specific derogations but simply observed that
both soft loans were granted under regional aid schemes
approved by the Commission.

The Community Guidelines on State aid for rescuing and
restructuring firms in difficulty stipulate that, by its very
nature, such aid distorts competition and affects trade
between Member States, as is also confirmed by the situa-
tion in the sector in which the two companies operate.

The rolling stock sector includes the manufacture of
railway and urban rail transport equipment (1). After a
period of stagnation in the mid to late 1980s, there was a
rapid growth in demand from 1991 until 1994. After a
slight decline in both production and consumption in
1994 (4,7 % and 1,7 % respectively), production plum-
meted by 16,5 % and consumption by 13,9 %, both
falling below their 1992 levels.

Demand in the sector is concentrated among a small
railway
number of customers: national and regional
companies, urban transport companies, private rental and

(1) Panorama of EU Industry 97, European Commission.

leasing companies and industries with their own rolling
stock. The demand for rolling stock is dependent on
long-term transport and infrastructure policies, which are
in turn influenced by the political and economic climate.

As the market comprises a rather small number of
customers with large projects which arise infrequently
and generally last several years, competition between
suppliers remains fierce. For rolling stock manufacturers
these time lags make each contract crucial. The experi-
ence acquired and the economies of scale obtained by
winning several contracts is critical in determining the
strength of the manufacturer’s next bid for a contract.

Decades of cross-reliance between railways and suppliers
have created excess production capacity which has been
only partially absorbed by exports to non-EU countries.
In the past, there have been few cross-border orders from
countries with indigenous rolling stock manufacturers,
with the exception of the Netherlands, Spain and, more
recently,
the United Kingdom. Access by individual
suppliers to new national markets tends to have been
achieved through the process of acquisition or part-
ownership or via a consortium.

Implementation of Council Directive 90/531/EEC on
in previously excluded markets,
public procurement
including transports (2), as last amended by Directive 94/
22/EC (3), has created new business opportunities for
European suppliers after years of restricted access to
national markets. Also, with greater separation of
the
management of railway infrastructure from the operation
transport services, as provided for in Council
of rail
Directive 91/440/EEC on the development of
the
Community’s railways (4), there should be an increasing
trend towards cross-border purchasing.

Intra-Community trade in rolling stocks (5) amounted to
some ECU 1,5 billion in 1993, ECU 2,6 billion in 1994,
ECU 1,4 billion in 1995 and ECU 1,2 billion in 1996.
Italy’s share of those totals was as follows:

1993

1994

1995

1996

(%)

Imports

2,36

1,74

4,33

9,33

Exports

14,84

4,17

6,28

10

It should be noted that, according to the Italian authori-
ties, Keller SpA exported to Germany rolling stock worth
ITL 7 414 million in 1991, ITL 18 968 million in 1992
and ITL 6 820 million in 1993.

(2) OJ L 297, 29. 10. 1990, p. 1.
(3) OJ L 164, 30. 6. 1994, p. 3.
(4) OJ L 237, 24. 8. 1991, p. 25.
(5) Eurostat, intra-European Union statistics.

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VI

restructuring. Even if

The Italian authorities have described the proposed State
guarantee for part of the soft loans to Keller SpA and
Keller Meccanica SpA as restructuring aid. The loans
themselves have therefore also to be considered as finan-
cial aid for
the aid elements
involved in the loans were regarded as rescue aid, they
could not be authorised under the Community Guide-
lines on State aid for rescuing and restructuring firms in
difficulty. This is because they do not meet all the condi-
tions laid down in the Guidelines; in particular, they have
not been granted for the time needed to devise the neces-
sary and feasible recovery plan. Only in cases where the
Commission is still examining the restructuring plan
when the period for which rescue aid has been authorised
expires can it consider favourably an extension of the
rescue aid until it has completed its examination.

In this case, the aid is designed to help the companies to
complete their existing orders, and both the periods fore-
cast for these completions (31 to 39 months) and the
duration of the loans go well beyond the six months for
which rescue aid is normally approved. Moreover, as is
explained below, the plans submitted are concerned only
with completing the orders and cannot be viewed as
restructuring plans capable of restoring the firms’ long-
term viability.

The Community Guidelines on State aid for rescuing and
restructuring firms in difficulty stipulate that restructuring
aid can, generally speaking, be allowed only in circum-
stances in which it can be demonstrated that the approval
of restructuring aid is in the Community interest. This is
only possible when strict criteria are fulfilled and account
taken of the possible distortive effect of the aid.

For the Commission to approve aid, the restructuring
plan must satisfy all the following general conditions:

— it must restore the long-term viability of the firm
within a reasonable timescale and on the basis of
realistic assumptions as to future operating conditions.
Consequently, restructuring aid must be linked to a
viable restructuring/recovery programme submitted in
all relevant details to the Commission,

— it must avoid undue distortions of competition caused

by the aid,

— the aid must be in proportion to the restructuring

costs and benefits,

— it must be fully implemented and detailed annual

reports must be sent to the Commission.

in hand. All

the Italian authorities

In this case, as regards both Keller SpA and Keller Mecca-
nica SpA,
submitted recovery
programmes aimed at completing existing orders so as to
return both companies to economic and financial viabi-
lity. In addition, it was not impossible that new orders
would be accepted depending on progress in completing
orders
the measures envisaged in the
recovery programmes, including those concerning renova-
tion of the production plants and modernisation of the
machinery, are geared to that end. The financial plan
presented to the Commission by Keller SpA forecast a
profit of ITL 1 805 million after the orders have been
completed. In the case of Keller Meccanica SpA, the
profit forecast is ITL 8 300 million.

At
the time the proceedings were initiated, neither
company had any new orders. The Commission could not
conclude that the restructuring plans for the firms would
render them economically and financially viable in the
long
existing orders were
even if
completed, the forecast profits would not be sufficient to
cover the companies’ past losses.

term because,

In their comments on the initiation of proceedings, the
Italian authorities outlined the special nature of the provi-
sions of Law 95/1979, pointing out that the purpose of
extraordinary administrative arrangements is to allow the
insolvent company to continue its activities where there is
a possibility of recovery with a view to transferring the
viable assets to a private third party as soon as possible. It
is therefore clear that the recovery programme cannot
cover a period longer than the duration of the extraor-
four
dinary administrative arrangements (maximum of
years). Any decision on the future of
the companies
beyond that period must be taken by the private
purchaser. In addition, the Sardinian authorities explained
that, under the extraordinary administrative arrangements,
the initiatives of the administrator in the case of Keller
Meccanica SpA are not structural in nature but are aimed
at the completion of orders.

In their last letter, dated 27 January 1998, the Italian
authorities
they had
informed the Commission that
started the procedure for selling the plant of both Keller
SpA and Keller Meccanica SpA and that this new element
made it unnecessary to forward restructuring plans.

On the basis of the above information, the Commission
cannot alter its preliminary conclusions that the ‘recovery
programme' established by the extraordinary adminis-
trator for both Keller SpA and Keller Meccanica SpA
under Law 95/1979 constitutes simply a financial plan
aimed at the completion of orders in hand at the time the
law was applied.

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The recovery programme cannot be regarded as a restruc-
turing plan within the meaning of
the Community
Guidelines on State aid for rescuing and restructuring
firms in difficulty because it does not constitute a feasible,
coherent and far-reaching plan to restore the firm’s long-
term economic and financial viability. To fulfil the viab-
ility criterion, the restructuring plan must be considered
capable of enabling the company to cover all its costs,
including depreciation and tax charges, and generating a
minimum return on capital so that, after completing its
restructuring, the firm will not require any further injec-
tion of State aid and will be able to compete in the
market on its own merits.

Clearly, this is not the case here. The aim of the measure
is to keep both companies in operation for a limited
transitional period while a private purchaser is found. The
Italian authorities even admit that any initiative to ensure
the firms’ future viability will have to be taken by the
the extra-
potential private purchaser after expiry of
ordinary administrative arrangements. It must therefore
be concluded that the first and most important condition
laid down in the Community Guidelines (namely, a
restructuring plan to restore
long-term
economic and financial viability) is not met.

firms’

the

The requirement that the aid should not unduly distort
competition is not met either since, during the trans-
itional period, both companies are being kept in opera-
tion artificially to the detriment of non-aided competitors
in the sector. In addition, it is not impossible that the
companies will obtain new orders.

Consequently, the aid elements in the ITL 33 839 million
soft loan granted to Keller SpA and the ITL 6 500 million
soft loan granted to Keller Meccanica SpA do not qualify
for the derogation under Article 92(3)(c), which is the only
basis for exempting aid for rescuing and restructuring
firms in difficulty. The derogation under Article 92(3)(a) is
not applicable because the aid is not aimed at promoting
the economic development of areas where the standard of
living is abnormally low.

It should be added that, if both companies had been
privatised at the end of the four-year period of extra-
ordinary administrative arrangements,
the Commission
would have reached the same conclusions for the reasons
already explained. This would not have obviated the need

for the Commission to adopt a position on the measures
taken during the transitional period of the extraordinary
administrative arrangements and which have to be
assessed on their own merits,
independently of any
possible sale.

affect

arrangements

Nor does the fact that both companies are subject to
extraordinary administrative
the
Commission’s conclusions. In a previous State aid case
(State aid C 8/96 — Ferdofin Srl (1), the Commission took
the view that aid measures granted to Ferdofin under Law
95/1979 constituted State aid since measures under that
law are not aimed at all companies, but only the largest
ones (more than 300 employees) and the procedure itself
is subject to the discretion of the public authorities. In the
absence of a genuine restructuring plan, the Commission
terminated the case by ordering the aid granted to
Ferdofin by the Italian authorities to be repaid. In line
the Commission cannot adopt a
with this decision,
different position in cases with similar characteristics,
such as the present one.

VII

The aid elements may be calculated as the difference
between the interest rates charged to the companies and
the reference rate used to calculate the net grant equi-
valent of regional aid in Italy in 1995, i.e. 11,35 %. This
gives an aid element of ITL 4 288 million for the soft
loan granted to Keller SpA and one of ITL 903 million
for the soft loan granted to Keller Meccanica SpA.

It must therefore be concluded that the interest rebate
amounting to ITL 4 288 million for the soft loan granted
to Keller SpA and ITL 903 million for the soft loan
granted to Keller Meccanica SpA must be declared illegal
and incompatible with the common market.

Where aid granted illegally is found to be incompatible
with the common market, Article 93(2) of the EC Treaty
allows the Commission to require the Member State to
recover it from the recipient, as the Court of Justice has
confirmed in its judgments in Cases 70/72 Commission v.
Germany (2), 310/85 Deufil v. Commission (3) and C-5/
89 Commission v. Germany (4).

The Italian authorities are therefore requested to take the
necessary steps to recover the illegal and incompatible
aid,

HAS ADOPTED THIS DECISION:

Article 1

The conditions under which soft loans of ITL 33 839
million and ITL 6 500 million were granted to Keller
SpA and Keller Meccanica SpA are not in accordance

(1) OJ L 306, 11. 11. 1997, p. 25.
(2)
(3)
(4)

[1973] ECR 813.
[1987] ECR 901.
[1990] ECR I-3437.

L 63/62

EN

Official Journal of the European Communities

12. 3. 1999

with the conditions laid down in the regional aid schemes
approved by the Commission. Furthermore,
the loans
were granted before the Commission had submitted its
to those
comments on the
subsequent
the EC
in accordance with Article 93(3) of
schemes,
Treaty.

alterations

The amounts to be repaid shall bear interest from the date
on which the aid was granted until the date on which it is
effectively repaid. The interest shall be calculated on the
basis of the reference rate used to calculate the net grant
equivalent of regional aid applicable in Italy on the date
of repayment.

Article 2

Article 4

The aid in the form of interest rebates amounting to ITL
4 288 million for Keller SpA and to ITL 903 million for
Keller Meccanica SpA is illegal.

Such aid does not qualify for any of the exemptions laid
down in Article 92(2) and (3) of the EC Treaty or Article
61(2) and (3) of the EEA Agreement and is therefore
incompatible with the common market within the
meaning of Article 92(1) of the EC Treaty and Article 61
(1) of the EEA Agreement.

Italy shall inform the Commission within two months of
the date of notification of this decision of the measures it
has taken to comply with it.

Article 5

This Decision is addressed to the Republic of Italy.

Article 3

Done at Brussels, 1 July 1998.

Italy shall take whatever steps are necessary to recover the
illegal aid referred to in Article 2. Repayment shall be
made in accordance with the procedures and provisions of
Italian law.

For the Commission

Karel VAN MIERT

Member of the Commission