1999/88/EC: Commission Decision of 14 July 1998 concerning State aid in favour of 'Porcelanas del Norte SAL (Ponsal)/Comercial Europea de Porcelanas SAL (Comepor)' (notified under document number C(1998) 2364) (Only the Spanish text is authentic) (Text with EEA relevance)
Date: 1998-07-14
Institutions: European Commission
Subjects: Spain, State aid, aid to undertakings, ceramics, household article, infringement of EU law

L 29/28

EN

Official Journal of the European Communities

3. 2. 1999

COMMISSION

COMMISSION DECISION

of 14 July 1998

concerning State aid in favour of ‘Porcelanas del Norte SAL (Ponsal)/Comercial
Europea de Porcelanas SAL (Comepor)'

(notified under document number C(1998) 2364)

(Only the Spanish text is authentic)

(Text with EEA relevance)

(1999/88/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 given notice in accordance with Article 93 of the
Treaty to interested parties to submit their comments,

Whereas:

I

On 30 April 1997 the Commission, having received
several complaints since the beginning of 1995 and
having sent Spain a letter of formal notice on 30 April
1996, decided to initiate proceedings under Article 93(2)
in respect of the aid granted to Porcelanas del Norte SAL
(Ponsal).

Ponsal, which is a producer of porcelain, tableware and
ornamental ceramics, was set up in 1957 in Pamplona
(Navarre). In the mid-1980s it encountered financial diffi-
culties, which lasted for many years. To remedy this situ-
ation, it drew up a restructuring plan in 1994, which
provided in particular for the firm to move from the
centre to the outskirts of Pamplona and for the modern-
isation of its plant through investment in new machinery.

Under the restructuring, Ponsal had received from the
Government of Navarre considerable amounts of aid
which, however, had not been previously notified to the
Commission. According to press reports submitted by the
complainants, the aid consisted of a bank guarantee (ESP

l 200 million), a job-creation grant (ESP 100 million), a
20 % investment subsidy for investment in fixed assets
and a waiver of tax and social security contributions by
the public authorities (ESP 3 100 million).

In March 1995, in response to a preliminary request for
information, the Spanish authorities confirmed in writing
that the Government of Navarre had indeed granted aid
in order to support the restructuring of Ponsal. The aid,
however, had been granted under Regional Law (Ley
Foral) 1/1985 of March 1985, which introduced a scheme
for rescuing and restructuring firms in difficulty and
which preceded Spain’s accession to the Community. The
scheme had been notified to the Commission as existing
aid in March and May 1986. The Commission had not
objected to it so far.

Since the Commission had serious doubts about whether
to accept this reply or not, in particular with regard to the
defence that the aid was based on an existing aid scheme,
and since further requests for detailed information were
it decided on 30 April 1996 to
answered reluctantly,
require Spain to demonstrate that the aid to Ponsal was
part of an existing aid scheme.

In their reply of July 1996,
the Spanish authorities
managed to provide the evidence requested. Among the
different aid measures referred to by the complainants,
however, only the guarantee of ESP 1 200 million was
covered by Regional Law 1/1985. For the other aid meas-
ures under investigation, no justification could be found
within the scheme.

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Official Journal of the European Communities

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In addition, the Commission discovered that, according to
the Spanish authorities’ reply, certain corporate bodies
were linked to Ponsal and with the aid which was
supposed to have been granted to the firm (originally
Ponsal, but subsequently Comercial Europa de Porcelanas
SAL (Comepor)) and that, in this context, it was not clear
why the company name had been changed.

By letter dated 26 July 1996, the Spanish authorities were
therefore again requested to comment on the inconsisten-
cies concerning Ponsal.

reply of 10 October 1996,

In their
the authorities
confirmed that, in order to overcome Ponsal’s delicate
economic situation, the restructuring plan of 1994 had
also provided for the introduction, in accordance with
suspension of payments
Spanish bankruptcy law, of
proceedings, under which Ponsal’s public creditors had
waived ESP 3 100 million in claims by the Government
of Navarre and the social security authorities out of a total
debt owed to the public authorities of ESP 4 350 million.
After Ponsal had been wound up, a new company,
Comepor, was founded, which continued Ponsal’s busi-
ness.

In addition, the Spanish authorities pointed out that, in
connection with the firm’s move from the centre to the
outskirts of Pamplona, they had granted further aid to the
new firm Comepor, namely an investment premium of
ESP 570 million covering 20 % of the total new invest-
ment and a grant of ESP 500 000 per job created (up to
250 jobs).

According to the Spanish authorities, the new aid, previ-
ously unknown to the Commission, was not notifiable
since it was covered by another existing aid scheme, the
Law of 23 June 1982, whose purpose is to promote
investment. This aid scheme was communicated to the
Commission shortly after Spain joined the Community,
in March and May 1986, and the Commission had not
objected to it so far.

In the meantime, the Commission received press reports
according to which Comepor had received additional aid
of ESP 750 million.

The Commission carefully examined all
information
provided by the Spanish authorities in the light of the
Community rules on State aid. It reached the conclusion
that most of the aid measures quoted by the Spanish
authorities were indeed covered by existing aid schemes.

However, regarding the aid of ESP 500 000 per job
created, which was supposedly based on the June 1982
investment promotion scheme, the Commission found

that the scheme laid down a maximum grant of ESP
400 000 per job created and that the Navarre authorities
had exceeded the ceiling.

In addition, the Commission had serious doubts about the
implementation of the Ponsal suspension of payments
proceedings, in particular regarding the waiver of ESP
3 100 million in public claims. It could not be ruled out
that the company had been liquidated simply in order to
allow new industrial projects, using new aid and the assets
of the previous (non-viable) company.

Finally, the Spanish authorities did not notify or explain
the new aid of ESP 750 million which, according to the
press reports, had been granted to the company.

The Commission therefore decided on 30 April 1997 to
initiate Article 93(2) proceedings in respect of:

(a)

the ESP 3 100 million waived by the public author-
ities under the suspension of payments proceedings;

(b) the investment grants for job-creation, in so far as they
exceeded the ceiling laid down in the Navarre aid
scheme of June 1982;

(c) the additional aid of ESP 750 million for which the
Commission had not received any official information
from the Spanish authorities.

II

By letter dated l July 1997 the Spanish authorities replied
to the Commission’s Decision to initiate Article 93(2)
proceedings.

They first indicated that the new plant was located at
Cordovilla in the municipality of Cendea de Galar, which,
according to the regional aid map for Spain accepted by
the Spanish authorities in their letter dated 26 September
1995, was part of an Objective 2 area.

They then emphasised the dramatic financial situation of
Ponsal before the restructuring plan had been drawn up.
They claimed that, before the suspension of payments
proceedings were implemented, Ponsal’s assets were ESP
1 720 million but its debts ESP 5 091 million.

According to the Spanish authorities, the suspension of
payments proceedings, under which the public authorities
waived claims amounting to ESP 3 100 million, was the
only one of the various methods of liquidation provided
for in Spanish law which made it possible:

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3. 2. 1999

— to take on Ponsal’s workers in the new firm Comepor,

— for the liquidated firm to achieve reasonable prices for
its assets which reflected their real value, and

— for the public creditors to be reimbursed at least in
(otherwise these claims would not have been

part
met).

The Spanish authorities, however, did not support those
arguments with any comparative cost calculations for the
different methods of liquidation.

As regards the grant of ESP 500 000 per job created, the
Spanish authorities pointed out that the amount of aid
provided for in the Regional Law of June 1982 had been
amended on two occasions. It had first been increased to
ESP 750 000 by Regional Law 6/1985 of April 1985, and
then reduced again to ESP 500 000 by Regional Law
15/1986 of November 1986. The two Regional Laws had
not been notified to the Commission, since they consti-
tuted existing aid for which there was no such require-
ment.

As regards the new aid of ESP 750 million, the Spanish
authorities stated that this was a loan which had been
granted to the new firm, Comepor, by the State-owned
corporation Navarra de Financiaci(cid:155)n y Control SA
(Nafinco). The loan had been granted under market
conditions
collateral
(Comepor, backed by the firm’s shares). It was necessary
to keep the firm in business, as
the restructuring
programme of 1994 had failed and the firm was still
making a loss.

rate: 6,86 %)

(interest

against

Lastly, the Spanish authorities stated that, due to the
failure of the first restructuring, a new restructuring plan
would most probably be drawn up, which, once finalised,
would immediately be submitted to the Commission. In
any case, the new restructuring would require additional
State aid, which would be notified to the Commission
beforehand.

III

By letter dated 21 October 1997 the Commission
forwarded to the Spanish authorities for comment the
observations of third parties (namely the Liaison Office of
the European Ceramics Industries, Cerame-Unie, and a
Spanish competitor of Ponsal), which it had received
following publication of the initiation of proceedings in
the Official Journal of the European Communities of 9
August 1997.

(a) Cerame-Unie focused on the negative impact of the
aid on the ceramics industry, where there was huge
overcapacity. Many firms in the sector had invested in
restructuring
distribution
processes over the last 10 years. These firms were
suffering from unfair competition from Ponsal/

production and

their

Comepor, which, instead of carrying out real restruc-
turing measures, had tried to face the situation with
the help of State aid and was therefore able to sell its
products below market price.

(b) The Spanish competitor began by questioning the
line taken by the Spanish authorities, namely that the
aid granted to Ponsal/Comepor was based on existing
schemes, and rejected the Spanish authorities’ view on
this matter. It
the investment
then asserted that
premium granted to Comepor when the firm moved
should not have been granted, since the new plant was
not located in a depressed area as defined in Article
it emphasised the financial diffi-
92(3). Moreover,
culties it had got into as a result of the aid granted to
Ponsal/Comepor. This enabled the latter to pursue an
unfair pricing policy, with which it, the competitor,
could not compete, since it received no State aid at all.

IV

By letter dated 21 November 1997, the Spanish author-
ities replied to the third parties’ observations.

In response to Cerame-Unie’s observations, the Spanish
authorities denied that the aid to Ponsal/Comepor could
have had a negative impact on the European ceramics
market. Ponsal/Comepor’s exports accounted for only
0,004 % of total intra-Community exports and concerned
only the low-price segment, in which the company did
not compete with other European Union producers but
only with outside manufacturers.

allegations,

Regarding the Spanish competitor’s
the
Spanish authorities replied that there could be no connec-
tion between the competitor’s economic problems and
the aid to Ponsal/Comepor. The competitor’s problems
had already arisen in 1992/93, whereas Ponsal/Comepor
had not received any aid until 1994. In addition, the
competitor operated in a market sector (catering china)
which was different to that of Ponsal (household china).

V

Following a further exchange of correspondence and a
series of bilateral meetings,
the Spanish authorities
submitted, by letter dated 8 April 1998, an extensive
statement (including numerous enclosures in support of
their various arguments) concerning the firm’s current
financial situation and the different measures in respect of
which the Commission had initiated the Article 93(2)
proceedings.

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First of all, they confirmed that the 1994 restructuring
plan had failed completely and that now, departing from
their original plans to try a second restructuring, they
were discussing whether to liquidate the firm in its
entirety, since it had proved impossible to restore it to
viability. The liquidation would be carried out in full
compliance with the Spanish bankruptcy law applicable
in such cases. No new aid would be granted in support of
the liquidation process or in connection with a possible
sale of the firm’s assets.

As regards the waiver of the ESP 3 100 million of public
claims under the Ponsal suspension of payments proceed-
ings in 1994 to 1995, the Spanish authorities first pointed
out, and then submitted proof, that they had acted in full
compliance with Spanish bankruptcy law. They then reit-
erated that the waiver was the only one of the various
methods of liquidation in Spanish law which allowed the
public creditors to be reimbursed, at least in part (ESP
l 200 million out of a total of ESP 4 300 million). These
claims would otherwise not have been recovered. As
evidence, the authorities produced the financial results
which the public creditors would have obtained if they
had followed the other methods allowed by Spanish law.
Thus, if they had requested bankruptcy proceedings, they
would only have recovered a maximum of ESP 600
million, since, under Spanish bankruptcy law, the work-
ers’ claims of ESP 1 000 million would have had priority
and the costs of the bankruptcy proceedings would have
exceeded ESP 200 million. In the event of a simple
liquidation of
the firm’s assets without bankruptcy
proceedings, the assets would have been sold without
detailed supervision, which, as experience shows, brings a
much lower return than regular liquidation proceedings.

Regarding the ESP 500 000 subsidy per job created, the
Spanish authorities submitted copies of the two legal acts
by which the original legal basis for these grants, the
Regional Law of 1982, was amended. These amendments
confirmed that the amount of aid per job created had first
been increased to ESP 750 000 by Regional Law 6/1985
of April 1985 and then reduced again to ESP 500 000 by
Regional Law 15/1986 of November 1986. Both legal acts
referred to the original basis of 1982 and did not contain
any other amendment of it.

As for the new aid of ESP 750 million, the Spanish
authorities repeated that this was a loan which had been
granted to the new firm Comepor by the State-owned
corporation Navarra de Financiaci(cid:155)n y Control SA
(Nafinco). The loan was granted under market conditions
(interest rate: 6,86 %) against collateral (Comepor, backed
the restructuring
by the firm’s shares)

in support of

process and to allow the firm to continue its activities in
spite of the difficult financial situation. Nevertheless, the
Spanish authorities admitted in the same letter of 8 April
1998 that the collateral was not sufficient since, given the
firm’s continued losses, the value of its shares was nil.

VI

The Article 93(2) proceedings have clarified the situation
of Ponsal and the circumstances under which the firm
received public financial support. A number of conclu-
sions can be drawn about the measures in respect of
which the Article 93(2) proceedings were initiated. Thus:

(a) The Spanish authorities showed that the waiver of ESP
3 100 million on the occasion of Ponsal’s liquidation
does not constitute State aid within the meaning of
Article 92(1) of the EC Treaty. The alternative calcula-
tions submitted by the Spanish authorities confirm
that,
liquidation
provided for in Spanish law had been followed, the
losses would have been higher. The authorities also
showed that Spanish bankruptcy law had been fully
complied with.

the other methods of

if one of

(b) The grant of ESP 500 000 per job created certainly
constitutes aid within the meaning of Article 92(1) of
the EC Treaty. The Spanish authorities, however,
proved that these payments were based on existing aid
schemes within the meaning of Article 93(1) of the
EC Treaty and were therefore not notifiable under
Article 93(3) of the EC Treaty. The amendments to
the Regional Law of 1982, i.e. Regional Law 6/1985 of
April 1985 and Regional Law 15/1986 of November
1986, which had been communicated by the author-
ities, both make reference to their respective prece-
dents. The scheme by which the aid ceiling was
increased to ESP 750 000 per job created pre-dated
Spain’s accession to the Community and was thus
existing aid. The Regional Law by which the ceiling
was reduced again to ESP 500 000 was not notifiable
either, since it concerned only the reduction of an
existing, and hence authorised, aid ceiling and did not
alter the substance of the original 1982 aid scheme.

this

(c) Regarding the ESP 750 million loan,

support constitutes aid for

it has to be
stated that
the
purposes of Article 92(1) of the Treaty. Even though
this credit was awarded under market conditions as far
as interest rates are concerned, the security for it was
by no means sufficient. The value of the collateral —
the value of the Comepor shares — was nil, as the

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the
Spanish authorities themselves admit. Thus,
private-investor principle is applied,
it has to be
concluded that no private bank would have granted
such a loan to a firm in Comepor’s situation under the
same conditions as the public authorities.

if

The aid could distort competition and affect trade
between Member States. There is a vigorous trade in
goods in the tableware industry between Spain and
other Member States. According to data provided by
in 1996 Spain exported 7 131 tonnes of
Eurostat,
tableware products
to other
(ECU 28,7 million)
Member States and imported 8 239 tonnes (ECU 26,8
million). In 1997 the figures were 6 986 tonnes (ECU
29 million) and 9 072 tonnes (ECU 35,1 million)
respectively. Comepor, although having a rather
limited market share, participates in this market. This
is clearly demonstrated by the third parties’ reactions.
Thus, the aid granted to Comepor certainly improved
the firm’s position in the common market vis-(cid:133)-vis
other competitors, which do not receive any State
support.

Since the aid was not based on an approved aid
scheme it was notifiable individually in accordance
with Article 93(3) of the Treaty. Spain did not comply
with this requirement. Consequently, the granting of
the aid was definitely illegal.

Furthermore, it is not possible in this case to apply
the exceptions laid down in Article 92(2) of the Treaty
when one considers the features of the aid and the fact
that no attempt was made to satisfy the conditions for
such application.

In addition, it has to be pointed out that Comepor is
not situated in an area eligible for regional aid under
Article 92(3)(a) of the EC Treaty.

Nor was the purpose of the credit to facilitate the
economic development of a depressed area within the
meaning of Article 92(3)(c) of the EC Treaty but to
help a firm in economic difficulties to continue its
activities in the sector.

Lastly, the loan does not comply with the derogation
set out in Article 92(3)(c) of the EC Treaty, read in
conjunction with the Community guidelines on State
aid for
rescuing and restructuring firms in diffi-
culty (1).

As regards the classification of the ESP 750 million
loan as rescue aid, it must be pointed out that, when it
obtained the loan, Comepor was certainly a firm in

(1) OJ C 368, 23. 12. 1994, p. 12.

difficulty, unable to recover through its own resources.
According to the said guidelines, rescue aid may take
the form of assistance with liquidity, by way of loan
guarantees or
loans bearing normal commercial
interest rates (point 3.1). The ESP 750 million loan,
whose interest rate was in keeping with market condi-
tions, meets this criterion. The Spanish authorities,
however, did not provide any evidence that, at the
time when the loan was granted, there was any link
between the loan and the possible restructuring meas-
ures, which, under point 3.1 of the guidelines, is a
compulsory requirement for the approval of rescue
aid. Thus, during the proceedings, it became clear that
the aid was aimed only at maintaining the status quo
and putting off the inevitable; in the meantime, the
unresolved industrial and social problems were trans-
ferred to other, more efficient producers and other
Member States, whilst no support was given to a
restructuring process which should have been under-
taken when the rescue aid was granted.

During the proceedings the Spanish authorities could
not show that the loan they had granted fulfilled all
loan cannot be
these
approved, since it does not fulfil the criteria set out
above.

requirements. Thus,

the

The ESP 750 million loan to Comepor cannot be
described as restructuring aid either, since it was not
linked in any way to the restructuring measures
provided for in the 1994 restructuring plan but was
paid because the restructuring had completely failed
and the firm continued to suffer financial difficulties.
the
In addition,
Spanish authorities themselves admitted that it was
impossible to restore the firm to viability.

it should not be forgotten that

Furthermore, the aid was likely to distort competition
unduly. According to the information available to the
Commission (Panorama of EU Industry 1997), there is
excess capacity in the ceramic goods industry. The
sector was hit by a significant decline in consumption
in 1992 and 1993 (3,2 % a year), which could not be
made good in subsequent years. Thus, the large gap
between production capacity (value: ECU 15 163
million in 1993) and demand (value: ECU 12 834
million in 1993) in the past will not decline in future
(estimated value of production in 1998: ECU 19 470
million; estimated value of consumption in 1998:
ECU 15 650 million). In view of this trend, the loan
granted to Comepor could seriously harm the firm’s
competitors.

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Taking all the abovementioned facts into account, the
Commission is forced to conclude that the loan of
ESP 750 million granted to Comepor by Navarra
constitutes aid to which none of the derogations in
Article 92(3) applies.

VII

Where aid is deemed incompatible with the common
market, the Commission requires the Member State to
reclaim it from the recipient (Commission communica-
tion of 24 November 1983 (2); see also the judgments of
the Court of Justice in Case 70/72 Commission v.
Germany (3) and Case 310/85 Deufil v. Commission (4)).
This holds good for the aid granted to Comepor which is
the subject of this Decision; that aid must therefore be
refunded. This requirement is not altered by the fact that
Comepor is to be liquidated and disappear from the
market. The recovery of the aid is not regarded as impos-
sible, since Comepor’s assets will be sold and the creditors
will be paid out of the profits of that sale.

The aid will be refunded in accordance with Spanish law,
including the provisions concerning interest due for late
payment of amounts owing to the Government, which
interest will run from the date when the aid was granted
(letter from the Commission to the Member States SG
(91) D/4577 of 4 March 1991; see also the judgment of
the Court of Justice in Case C-142/87 Belgium v.
Commission (5)).

In accordance with the decisions of the Court of Justice,
the recovery of aid means that the said provisions are to
be applied in such a way that the recovery required by
Community law is not rendered impossible in practice.
Any procedural or other difficulties in regard to the
implementation of the measure cannot have any influ-
ence on its lawfulness (6),

HAS ADOPTED THIS DECISION:

Article 1

The loan of ESP 750 million provided by the State-owned
corporation Navarra de Financiaci(cid:155)n y Control SA to
Comercial Europa de Porcelanas SAL is illegal, since it

was granted in breach of the Spanish authorities’ obliga-
tion to inform the Commission,
in sufficient time to
enable it to submit its comments, of any plans to grant or
alter aid, as is laid down in Article 93(3) of the EC Treaty.

The aid is considered incompatible with the common
market within the meaning of Article 92(1) of the Treaty
as it does not meet the conditions for any of the deroga-
tions contained in Article 92(2) and (3) of the Treaty to
apply.

Article 2

Spain shall ensure that the aid referred to in Article 1 is
revoked and recovered in full, including interest, within
two months of the date of notification of this Decision.

The aid shall be recovered in accordance with the proce-
dures and provisions of Spanish law and shall include
interest, from the date of its award until the date it is
actually repaid, at a rate equal to the percentage value on
that date of the reference rate used for the calculation of
the net grant equivalent of regional aid in Spain.

These provisions shall apply in such a way that
the
recovery required by Community law is not rendered
impossible in practice. Any procedural or other diffi-
culties with regard to the implementation of the measure
shall not have any influence on its effectiveness.

Article 3

The Spanish Government shall inform the Commission,
within two months of notification of this Decision, of the
measures taken to comply with it.

Article 4

This Decision is addressed to the Kingdom of Spain.

Done at Brussels, 14 July 1998.

For the Commission

Karel VAN MIERT

Member of the Commission

(2) OJ C 318, 24. 11. 1983, p. 3.
(3)
(4)
(5)
(6) See footnote 5, paragraphs 58 to 63.

[1973] ECR, p. 813.
[1987] ECR, p. 901.
[1990] ECR, I-959.