1999/720/EC, ECSC: Commission Decision of 8 July 1999 on State aid granted by Germany to Gröditzer Stahlwerke GmbH and its subsidiary Walzwerk Burg GmbH (notified under document number C(1999) 2264) (Text with EEA relevance) (Only the German text is authentic)
Date: 1999-07-08
Institutions: European Commission
Subjects: Germany, State aid, aid to industry, investment aid, iron and steel industry, privatisation

13.11.1999

EN

Official Journal of the European Communities

L 292/27

COMMISSION DECISION

of 8 July 1999

on State aid granted by Germany to Gr(cid:246)ditzer Stahlwerke GmbH and its subsidiary Walzwerk
Burg GmbH

(notified under document number C(1999) 2264)

(Only the German text is authentic)

(Text with EEA relevance)

(1999/720/EC, ECSC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Community, and in particular Article 88(2) thereof,

Having regard to the Treaty establishing the European Coal
and Steel Community, and in particular Article 4(c) thereof,

Having regard to the Agreement on the European Economic
Area, and in particular Protocol 14 thereto,

Having regard to Commission Decisions No 3855/91/ECSC of
27 November 1991 (1) and No 2496/96/ECSC of 18 December
1996 (2) establishing Community rules for state aid to the steel
industry,

2496/96/ECSC in respect of the state aid involved. The
Commission decision to initiate the procedure which
the European
was published in the Official
Communities (3). The Commission
to
interested parties to submit
their comments on the
measures.

Journal of
gave

notice

(3) Germany

supplied

the Commission with further
information and papers by letters dated 23 September
and 13 November 1997; 24 July, 14 August and 14
October 1998; and 7 and 20 January, 1 February and
29 March 1999. Meetings between the Commission and
Germany took place in January 1998, on 1 December
1998, and on 11 March and 23 and 29 April 1999.

(4) The Commission has

from
interested parties; it forwarded these to Germany, and
Germany commented by letter dated 27 April 1998.

received observations

Having given notice to the parties concerned to submit their
comments in accordance with the abovementioned provisions,
and having regard to those comments,

2. Detailed description of the measures

2.1. Notification

Whereas:

(5)

1. Procedure

(1) By letter dated 6 June 1997 Germany notified the
Commission, under Article 88(3) of the EC Treaty, of
the financing measures that preceded and accompanied
the privatisation of Gr(cid:246)ditzer
Stahlwerke GmbH
(Gr(cid:246)ditzer) and its subsidiary Walzwerk Burg GmbH
(Burg).

(2) By letter dated 5 August 1997 the Commission
informed Germany that it had decided to initiate the
procedure laid down in Article 6(5) of Decision No

loans

guaranteed by

In the notification of 6 June 1997 Germany stated that
in the years 1992 to 1996 Gr(cid:246)ditzer received financing
amounting to DEM 263,7 million. This was made up of
DEM 207,3 million in shareholder loans provided by
the successive public shareholders in the company, DEM
53,4 million in bank
the
Treuhandanstalt privatisation agency and its successor
f(cid:252)r Vereinigungsbedingte Sonder-
the Bundesanstalt
aufgaben (BvS), and DEM 3 million as an outright grant.
A further DEM 8,4 million was paid to Gr(cid:246)ditzer
separately under the joint Federal Government/L(cid:228)nder
regional development scheme, the Gemeinschaftsaufgabe
regionalen Wirtschaftsstruktur. Germany
Verbesserung der
also informed the Commission that
the last public
shareholder, Beteiligungs-Management-Gesellschaft mbH
(BMGB), had sold Gr(cid:246)ditzer and its wholly owned
subsidiary
GmbH
(Georgsmarienh(cid:252)tte) on 1 January 1997. The sale of
Gr(cid:246)ditzer and Burg had cost BMGB a total of DEM 393
the
million, mainly as a result of

Georgsmarienh(cid:252)tte

the waiver of

Burg

to

(1) OJ L 362, 31.12.1991, p. 57.
(2) OJ L 338, 28.12.1996, p. 42.

(3) OJ C 395, 31.12.1997, p. 5.

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shareholder loans and the redemption of bank loans.
Germany stated that Georgsmarienh(cid:252)tte had submitted
the best offer, taking into account its commitments in
respect of
transfer of
technology.

investment

and the

jobs,

2.2. The initiation of the procedure

(6) The Commission decided to initiate the procedure laid
down in Decision No 2496/96/ECSC (the sixth Steel Aid
Code). A letter was sent to Germany on 5 August 1997,
and was published in the Official Journal of the European
Communities (4).

(7)

In the letter initiating the procedure the Commission
argued that it had to be assumed at that stage that the
shareholder loans of DEM 207,3 million constituted aid,
as they were free of
interest and the company had
provided no security; the guaranteed bank loans of DEM
53,4 million likewise appeared to constitute aid, as the
premium was only 0,5 %. The compatibility of the DEM
8,4 million in regional aid had also to be examined.
Turning to the privatisation itself,
the Commission
doubted whether the sale, at a negative price, was in
accordance with the private investor principle. On the
figures available it appeared that it would have been less
costly to wind up the company. Nor was it clear that
the privatisation procedure had been open, transparent
and unconditional. Lastly, the privatisation agreement
appeared to commit BMGB to providing investment aid
for Gr(cid:246)ditzer.

2.3. Total state resources transferred prior to

privatisation

(8) On the basis of

the notification and the additional
information that Germany has provided in the course of
the Commission has established that
the procedure,
Gr(cid:246)ditzer received the following financing prior to its
privatisation:

(million DEM)

Shareholder
loans

Guaranteed
bank loans

Outright-
grants

Total

Investment
measures

Social
measures

Operational
measures

43,5

53,4

12,5

109,4

30,0

133,8

(cid:151)

(cid:151)

31,3

61,3

(cid:151)

133,8

207,3

53,4

43,8

304,5

(4) See footnote 3.

The (cid:145)outright grants(cid:146) column includes not only the DEM
3 million notified and the DEM 8,4 million in regional
aid, but also DEM 28,3 million for social measures and
DEM 4,1 million in tax incentives:
these sums were
identified by Germany in the course of the procedure.

(9) The figures break down as follows.

2.3.1. Investment measures

(10) Gr(cid:246)ditzer received a total transfer of state resources of
DEM 109,4 million towards an investment programme
costing DEM 110,2 million. Details of the investment
programme have been supplied to the Commission;
taking the company’s business as a
they show that
whole there was investment every year from 1992 to
1996. The sum of DEM 109,4 million is made up of
three items:

(a) DEM 43,5 million was in the form of shareholder
interest, and no

loans;
schedule was drawn up for their repayment;

these loans were free of

(b) DEM 53,4 million was

loans
provided by banks that were 100 % guaranteed by
the successive public shareholders in Gr(cid:246)ditzer;

in the form of

(c) outright grants amounted to DEM 8,4 million in
regional aid and DEM 4,1 million in tax incentives
for investment under the applicable legislation, the
Investment Allowances Act (Investitionszulagengesetz).

the

shareholder

legal basis of

As
loans and
the
guarantees, Germany has cited the general restructuring
the German
obligation imposed by Article 25 of
Unification Treaty and paragraphs 2 to 6 of
the
Treuhand Act.

(11) As regards the expenditure to which this investment aid
related, Germany has informed the Commission that
DEM 13,3 million was invested in steelmaking, while
DEM 96,9 million was invested in production facilities
the ECSC Treaty. The
falling outside the scope of
various investments were described in detail
in the
decision to initiate the procedure.

2.3.2. Social measures

(12) Social measures

totalled DEM 61,3 million. This

comprised the following.

(a) DEM 26,1 million was paid towards a social plan
retirement

redundancy

comprising

early

and

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Official Journal of the European Communities

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schemes and an employment pool. These costs
would as a rule have been borne by the company,
but in view of Gr(cid:246)ditzer’s financial difficulties they
were covered by shareholder loans provided by
EREL Verwaltungs GmbH & Co management KG
(EREL).

(b) BMGB paid Gr(cid:246)ditzer a sum of DEM 28,3 million
to cover the costs of other social measures on top
of the social plan. The main such measures were a
reduction of working hours
and training for
redundant staff. According to Germany, the various
public shareholders financed such measures for all
the East German companies for which they were
responsible.

(c) DEM 6,9 million was

to finance employment
measures under paragraph 249 of the Employment
Promotion Act (Arbeitsf(cid:246)rderungsgesetz). Under that
Act a scheme was set up to employ redundant or
dismissed staff of current and former Treuhand
companies in environmental clean-up activities. As
a rule the public authorities and the companies
concerned each contributed to the cost of such
measures; the figure of DEM 3 million which had
been quoted
to
Gr(cid:246)ditzer, which owing to its financial difficulties it
was unable to pay.

embodied

falling

share

the

2.3.3. Operational measures

(13) Shareholder loans of DEM 133,8 million were used to
cover operational measures. The notification stated that
aid for operational measures amounted to DEM 166,8
million, but
the procedure it has
become clear that out of that figure DEM 33 million
was in fact used for social measures; these are the sums
referred to in recital 12 at points (a) and (c).

in the course of

(14) On 14 August 1998 Germany submitted to the
Commission a report prepared by KPMG (5). The report
allocated the DEM 133,8 million between Gr(cid:246)ditzer’s
different product
areas on an ex post basis, by
establishing the cash-flow requirement of each of them
the years 1991 to 1996.
(the EBDIT-Ergebnis)
KPMG’s findings were based on Gr(cid:246)ditzer’s internal
bookkeeping system. The German Government has
endorsed KPMG’s conclusions.

for

the forge,
the ring-rolling mill and the foundry.
Total losses here amounted to DEM 62 million, but
this was partially offset by an operating profit of
DEM 13 million at the steelmaking plant.

(b) DEM 18 million was for overheads.

(c) DEM 40 million was needed to comply with
contractual obligations and to settle claims which
arose mainly from decisions to stop investment
programmes originating in the GDR period.

(d) DEM 17 million was for site clean-up and clearance

operations.

(e) DEM 9 million covered miscellaneous costs.

(16) Out of the sums referred to at points (b) to (e) in recital
15, KPMG assigned a total of DEM 3,6 million to the
steelmaking plant. It assigned the rest to the non-ECSC
sectors.

2.4. Financial measures in connection with the

privatisation

(17) Gr(cid:246)ditzer

and its

subsidiary Burg were

sold to
Georgsmarienh(cid:252)tte on 1 January 1997. According to
the notification the total cost or negative purchase price
of the privatisation was DEM 393 million. The main
costs were
the
non-recovery of subsidies, and the redemption of the
guaranteed bank loans (see recital 5).

the waiver of

shareholder

loans,

(18) However,

the total cost also included new funds

provided by the seller, the publicly owned BMGB:

(a) DEM 37,5 million was provided

(cid:145)equity
assistance(cid:146)
(Eigenkapitalhilfe). According to the
notification, this was to be used to finance a DEM
43,5 million investment programme in 1997 and
1998. But according to the privatisation agreement
it was to be used for operating purposes.

as

(15) KPMG divided the money between the operational

measures as follows.

(a) DEM 49 million covered the accrued operating
losses of three of Gr(cid:246)ditzer’s four divisions, namely

(5)

(cid:145)Stellungnahme zur Finanzmittelverwendung f(cid:252)r die Jahre 1991 bis
1996 der Gr(cid:246)ditzer Stahlwerke GmbH, Gr(cid:246)ditz(cid:146).

(b) DEM 20,8 million was to be paid as (cid:145)bridging
finance(cid:146) (Zusch(cid:252)ssen zur Zwischenfinanzierung), to
be offset against regional aid; DEM 16,3 million of
this was for Gr(cid:246)ditzer and DEM 4,5 million for
Burg. Between its privatisation and 10 January
1999 Gr(cid:246)ditzer received regional aid amounting to
DEM 13 million. Under the privatisation agreement
Gr(cid:246)ditzer remains entitled to the remainder of the
DEM 16,3 million, that is to say DEM 3,3 million.

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2.5. Burg

(19) Burg is a separate company that operates

in the
non-ECSC sector. It was sold to Gr(cid:246)ditzer by its public
it had
shareholder EREL at the time of privatisation;
never previously been a Gr(cid:246)ditzer subsidiary.

3. Comments from interested parties

(24) Burg has therefore to be considered under

the EC
Treaty. Germany has submitted that given Burg’s size
the financial measures from which it benefited did not
have to be notified on the basis of the arrangements
governing the Treuhandanstalt’s operations, which had
been approved by the Commission, most recently in its
letter reference
decision on aid measure N 786/94,
(95) D/1062 (6). The Commission will
accordingly
consider Burg’s position only with respect
to the
privatisation and in so far as it enters into the total cost
of liquidation.

(20) On 30 January and 2 February 1998 comments were
submitted to the Commission by three interested parties
belonging to the same group, namely Max Aicher
GmbH & Co., Neue Maxh(cid:252)tte Stahlwerke GmbH and
Lech Stahlwerke GmbH. They argued that sale at a
negative price had provided Georgsmarienh(cid:252)tte with a
cash injection which enabled Georgsmarienh(cid:252)tte to
improve
finance
acquisitions. The conditions associated with the sale of
Gr(cid:246)ditzer also distorted competition.

financial

position

and

its

to

4. Comments from Germany

(21) Germany commented on the initiation of the procedure
in a letter of 23 September 1997, and provided further
information in the papers referred to in recital 3. These
comments have been taken into account here.

(22) Replying to the comments from interested parties, on 7
May 1998, Germany stated that the sale of Gr(cid:246)ditzer
had not affected Georgsmarienh(cid:252)tte’s cash position.
Under the privatisation agreement Georgsmarienh(cid:252)tte
had undertaken not to sell Gr(cid:246)ditzer’s assets. It would
not currently be able to do so in any event, as the sale
of shares was in suspense, pending the outcome of the
Commission’s
to
Gr(cid:246)ditzer. The two companies’ prices were determined
on an arm’s length basis, and there was no common
cash management. Georgsmarienh(cid:252)tte supported the
position taken by Germany.

assessment of

granted

the

aid

5.1.2. Gr(cid:246)ditzer

ECSC rules on steel undertakings; initiation of procedure

(25) Gr(cid:246)ditzer is an undertaking engaged in the production
of
liquid steel and ingots, which are steel products
within the scope of Annex I to the ECSC Treaty, and it
therefore falls under Article 80 of the ECSC Treaty. It is
also subject
the ECSC
to levies under Article 49 of
Treaty.

(26)

It is worthwhile recalling the position of ECSC steel
undertakings
in the new L(cid:228)nder, which has been
addressed in a number of decisions. Until 1995 these
undertakings qualified for certain exemptions from the
strict requirements of Decision No 3855/91/ECSC (the
fifth Steel Aid Code), which among other things allowed
them to receive regional investment aid. Decisions were
also taken under Article 95 of the ECSC Treaty, with
the unanimous assent of the Council, approving a wide
range of aid payments to EKO Stahl and SEW Freital, in
order to enable them to return to viability. A vital
consideration was that they were to be privatised on the
basis of far-reaching rescue and restructuring measures.

5. Assessment

5.1. Which Treaty is applicable to Burg and

Gr(cid:246)ditzer?

5.1.1. Burg

contrary

The aid measures in Gr(cid:246)ditzer’s case were not notified
to the
to the Commission. This was
arrangements governing the Treuhandanstalt, under
which aid had to be notified in advance if the company
operated in a sensitive industry. Notification took place
only after the company had been privatised in 1997,
and after the aid in the form of shareholder loans and
is an ECSC
the like had been paid. As Gr(cid:246)ditzer

(23) As stated in the decision to initiate the procedure, Burg
is a separate, non-ECSC company that was sold to
Gr(cid:246)ditzer by its public shareholder at
the time of
privatisation. Before privatisation it was not a Gr(cid:246)ditzer
subsidiary. Since privatisation it has served as a steel
service centre for Gr(cid:246)ditzer.

(6) Under the arrangements governing the Treuhandanstalt, aid to
Treuhandanstalt companies in non-sensitive sectors did not have to
be notified if in the period 1992 to 1994 the company employed
less than 1 500 people and net aid amounted to less than DEM
150 million. In 1995 these thresholds changed to 250 employees
and DEM 50 million. Burg had an average workforce of 125, and
the total aid paid to it from 1992 to 1997 was DEM 56 million.

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undertaking,
for which it
the only aid measures
qualified in 1997 were those permitted by the Steel Aid
Code in force at the time, that is to say aid for research
and development, environmental measures and closure.
This means that ECSC undertakings could receive state
aid of other kinds, such as operating aid or regional
investment aid, only on the basis of Article 95 of the
ECSC Treaty.

(27) As the Commission made clear when it decided to
initiate the procedure, the principle that aid benefiting
an ECSC steel-producing undertaking has to be assessed
under the ECSC Treaty results unconditionally from the
ECSC Treaty itself (7). It applies whether or not an ECSC
undertaking also manufactures non-ECSC products.

rule

(28) The Commission has accepted, however, that by way of
certain aid to an ECSC
exception to this
relevant
undertaking may be
provisions of
the aided activities
must be covered by the EC Treaty, and must be
completely separate from the activities falling within the
scope of the ECSC Treaty.

the EC Treaty. But

assessed under

the

far as

As
the investment measures are concerned,
Germany contends that the relevant fixed assets can be
related to specific production facilities, so that the only
investment
that should be assessed under the ECSC
Treaty is that in facilities manufacturing ECSC products,
to DEM 13,3 million. All other
which amounts
investment aid should be assessed under the EC Treaty.

Turning to the social plan and the operating measures,
Germany refers to the KPMG report mentioned in recital
14, and endorses its conclusions on the allocation of aid
between ECSC and non-ECSC facilities.

(32) Germany therefore considers that financing in respect of
activities not directly related to the production of ECSC
steel products should be assessed under the state aid
rules of the EC Treaty. In a letter of 29 March 1999
Germany stated that all aid to Gr(cid:246)ditzer should be
considered under the state aid rules of the EC Treaty.

The Commission’s view

(29) When it initiated the procedure, the Commission took
the view that these conditions did not appear to be
satisfied. As Gr(cid:246)ditzer was one company and did not
keep separate accounts, the Commission considered that
there was a danger of spillover and that it was not
possible to differentiate the state aid received so as to
allocate it between the various ECSC and non-ECSC
activities.

(33) The ECSC rules on state aid lay down rules for aid
measures that distort competition between the recipient
undertaking and its competitors on the markets in ECSC
products. In the same way, the state aid rules in the EC
Treaty apply to aid measures that distort competition
between undertakings on the markets in EC products.

The German reply

(30)

response to the initiation of

In its
the procedure,
Germany did not contest the Commission’s view that
Gr(cid:246)ditzer was an ECSC undertaking engaged in steel
it was
production. But Germany did consider
possible to allocate the financial measures between the
company’s ECSC and non-ECSC activities.

that

(31) Germany argues that that a yearly average of 6 to 7 %
of the ECSC steel products manufactured by Gr(cid:246)ditzer
has been sold to outsiders, a situation which continues
today. The other 93 to 94 % is used by Gr(cid:246)ditzer itself
as input for its own forging, casting and ring-rolling
mill facilities. Here the steel is processed into non-ECSC
steel products. Consequently, aid to this plant affects
competition only in respect of products which are
within the scope of the EC Treaty. It should therefore be
assessed under the state aid rules of the EC Treaty.

(7) Judgment of

the Court of First

the European
Communities in Joined Cases T-129/95, T-2/96 and T-97/96 Neue
Maxh(cid:252)tte v Commission, 21 January 1999, not yet reported.

Instance of

the ECSC Treaty.

As a rule, aid to an ECSC undertaking will be assessed
under
circumstances,
however, the EC Treaty may apply to aid to non-ECSC
activities carried on by an ECSC undertaking, provided
they are clearly separate from the same undertaking’s
ECSC activities.

In some

In order to ascertain whether the activities assisted in
this case are in fact clearly separate, the forms of aid
granted will have to be considered individually.

Investment aid

(34) Gr(cid:246)ditzer is indeed a single company which does not
keep separate accounts for its various activities, and this
does make it more difficult to ascribe aid to its different
areas of business, but it is nevertheless true that the
aided investment related to fixed assets in particular
production facilities.

Gr(cid:246)ditzer’s ECSC and other production processes are
physically separated. Steel made in the steel plant

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proceeds to other
facilities on Gr(cid:246)ditzer’s premises,
namely the forge, ring-rolling mill and foundry. The end
products of these plants (8) are different from the end
products of
the steelmaking plant, and are sold on
different relevant markets. As they are manufactured in
the production processes are not
dedicated facilities,
integrated, and there is physical separation between
them. This makes it possible to distinguish between
ECSC and EC activities in the case of the investment aid.

(37) This clearly shows that resources were being provided
for operational purposes without any
to Gr(cid:246)ditzer
clause or mechanism for allocating them between ECSC
and non-ECSC activities. Allocation was left entirely to
the discretion of the company; there were no ex ante
criteria for a rational separation between the different
production areas.

Operating aid and social measures

(35) But this is not true of the operating measures and the
social measures. Here there is no direct link between the
loans or grants given and the activity being financed.
Aid measures can be assessed separately under the ECSC
and EC Treaties only where a distinction can be drawn
between aid towards ECSC activities and aid towards
other activities. In Gr(cid:246)ditzer’s case there is no separate
such a
or
accounting
distinction.
In cases like this, where there is a real
danger of a spillover from one activity to another, it has
to be concluded that aid to an ECSC undertaking must
be assessed under the ECSC rules.

to facilitate

bookkeeping

(36) And indeed,

such a spillover between ECSC and
non-ECSC activities has in fact occurred at Gr(cid:246)ditzer.
The individual
loans and grants were not tied at the
time they were given to the specific activities that they
served to finance. The report drawn up ex post by KPMG
contradicts
to the
assignment of DEM 166,8 million in aid for operating
measures and social measures (see recital 12, points (a)
and (c), and recitals 13 to 16):

the notification with respect

Social aid

Loss compensation

Site clearance

Settlement of claims

Financing costs

Miscellaneous

Unspecified

Notification

KPMG

103

40

17

(cid:151)

(cid:151)

(cid:151)

33

49

17

40

18

9

6

(cid:151)

company.

In Gr(cid:246)ditzer’s

(38) Of Gr(cid:246)ditzer’s total steel output, 93 % was not sold on
the market but processed into end products within
the
internal pricing and
bookkeeping system the steelmaking plant transferred
its products downstream against full repayment of its
direct and indirect costs, regardless of the fact that the
company was selling its end products at a heavy loss. It
appears from the figures provided when the procedure
was initiated that Gr(cid:246)ditzer has not made a profit since
1990; it accrued losses of more than DEM 317 million
over the years 1992 to 1996. In each of those years,
operating costs far exceeded turnover, by an average of
DEM 30 million a year.

(39) The assignment of profits and losses in the internal
bookkeeping system is therefore arbitrary; no account is
taken of the fact that the production process as a whole
is loss-making. The KPMG report does show the results
for Gr(cid:246)ditzer’s various branches of activity in the years
1991 to 1996 on the basis of the internal bookkeeping
system, but
that 7 % of Gr(cid:246)ditzer’s
production, namely its steel production, operates at a
profit, while the other 93 %, accounted for by the forge,
ring-rolling mill and foundry, operate at a loss. The cost
accounting applied to its business by Gr(cid:246)ditzer hardly
seems logical.

it also shows

(40)

(41)

In these circumstances the forge, the foundry and the
ring-rolling mill can continue only by virtue of
the
operating aid they receive. This means that Gr(cid:246)ditzer
has been able to devote its own resources in the first
place to the steelmaking plant, that is to say the ECSC
production area. The steelmaking plant has enjoyed the
benefit of the aid given to the downstream EC activities.

It follows from the foregoing that the evidence provided
to show a separation between the ECSC and EC
activities
view is
from an accounting point of
insufficient to demonstrate that operating aid to those
activities should be considered under the two Treaties.
Unlike the investment aid, there is no clear separation
(vollkommene Trennung) between the company’s different
activities.

Total

166

166

Conclusion

(8) The main products of the ring-rolling mill are coils, flanges and
the forge, bars,

the foundry, machine parts; and of

tyres; of
forgings, hollow forgings, and crankshafts.

(42) The operating aid and social aid provided by Germany
are subject to the state aid rules in the ECSC Treaty.

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There is overcapacity in the steel
discipline must be observed.

industry, and strict

5.2.1. Assessment of the investment aid to the ECSC steel

plant

In the case of investment in fixed assets which are used
by Gr(cid:246)ditzer for the production of EC products, the EC
Treaty aid rules apply: see recital 34.

Aid to investment in fixed assets used by Gr(cid:246)ditzer for
the production of ECSC products is subject to the state
aid rules in the ECSC Treaty.

5.2. Assessment of the financial measures preceding

privatisation: general

bank

loans

(43) The notification identified investment aid in the form of
guaranteed
of DEM 53,4 million,
shareholder loans of DEM 43,5 million, and regional aid
of DEM 8,4 million
Federal
the
Government/L(cid:228)nder
scheme paid in 1994. On 14
October 1998, Germany informed the Commission that
an investment allowance (Investitionszulage) had been
the
granted in the years 1992 to 1995 to cover
investments up to 1994.

under

joint

(44) Gr(cid:246)ditzer

is a firm in difficulty, as it has accrued
substantial losses since it was set up. Successive public
shareholders have provided loans with no obligation in
respect of repayment and interest.
is clear that a
private investor would never have advanced such loans
to Gr(cid:246)ditzer. The shareholder loans therefore constitute
state aid in their entirety.

It

(45) As the Commission made clear in its communication to
the Member States on public undertakings
in the
manufacturing sector (9), where state guarantees are
given to firms in difficulty there is state aid equal to the
entire amount of the loan guaranteed. In the course of
the procedure Germany informed the Commission that
the premiums were equal to 0,25 % and that no risk
assessment
the
opinion that in view of Gr(cid:246)ditzer’s financial difficulties a
premium of 0,25 % is extremely low. The guarantees
therefore constitute state aid in their entirety.

took place. The Commission is of

(46) As explained in recital 34, the investment aid has to be
assessed under two different treaties. The investment aid
relating to ECSC plant has to be assessed under Article
4(c) of
the ECSC Treaty and the Steel Aid Code
applicable at the time it was granted. The investment
aid relating to EC plant has to be assessed under the
rules of Articles 87 and 88 of the EC Treaty and the
rules applicable to investment aid at the time it was
granted. A detailed assessment is set out below.

(47) According to Article 4(c) of the ECSC Treaty, subsidies
or aids granted by states, in any form whatsoever, are
incompatible with the common market and accordingly
prohibited. Exceptions to this rule are made in the
successive Steel Aid Codes.

(48) Germany

the

states

that of

investment

in the
steelmaking plant DEM 0,5 million was financed by
investment allowances. The remainder was financed by
shareholder loans and guaranteed bank loans. Regional
aid under the joint Federal Government/L(cid:228)nder scheme
was not used to cover investment in the steelmaking
plant.

(49) Part of

the investment aid was granted during the
lifetime of the fifth Steel Aid Code. Article 5 of the
Code stated that aid granted to steel undertakings for
investment under general regional aid schemes could be
deemed compatible with the common market provided
that the undertaking was located in the territory of the
former GDR and that the aid was notified by 30 June
1994 and was approved and paid by 31 December
1994 (for investment allowances under the Investment
Allowances Act 1990, the deadline for payment was 31
December 1995).

(50) The aid was notified only on 6 June 1997. The Court of
First Instance confirmed in Preu(cid:223)ag Stahl v Commission
that the notification and approval deadlines of the Fifth
Steel Aid Code were binding on the Commission (10).
The Commission is
consequently prevented from
considering any of this aid, as it was notified after 30
June 1994, and could not be assessed by 31 December
1994. The question whether there were elements of the
aid that might have been eligible in substantive terms is
thus irrelevant.

(51) The investment aid amounting to DEM 13,3 million
which has been assigned to the steel plant is therefore
incompatible with the ECSC Treaty and the Steel Aid
Code.

5.2.2. Assessment of the aid to investment in the non-ECSC

production facilities

(52) The investment in the non-ECSC facilities amounted to
DEM 96,9 million, and the total aid granted for this
investment amounted to DEM 96,1 million. The aid
included DEM 8,4 million in regional aid and DEM 3,6

(9) OJ C 307, 13.11.1993, p. 3.

(10) Case T 129/96 [1998] ECR II-629.

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million in investment allowances, with the remainder
loans and guaranteed
financed through shareholder
bank loans. The shareholder loans and bank loans were
granted under the general provisions of the Unification
Treaty and the Treuhand Act.

(53) On

informed

14 October

1998 Germany

the
Commission that in the period under consideration the
joint Federal Government/L(cid:228)nder regional development
scheme did not apply to Treuhand companies. When
granting and guaranteeing these loans,
the
Treuhandanstalt and its successors were acting as a de
facto regional aid authority, and the loans were a
substitute for regional investment aid.

therefore,

(54) The Commission recalls

that

in the period under
investment aid
consideration the ceiling for regional
scheme,
the joint Federal Government/L(cid:228)nder
under
including any aid granted under other regional aid
schemes, was 35 % gross.

(55) Germany on the other hand contends that under the
successive arrangements governing the activities of the
Treuhandanstalt (11) a higher amount could be granted
for investment aid.

aid was declared exempt

(56) This argument cannot be accepted. Gr(cid:246)ditzer is a steel
undertaking, and the fifth Steel Aid Code allowed
investment aid to be given to steel undertakings only if
general
the
prohibition, for a limited period of time and up to a
maximum intensity of 35 %. This was confirmed in the
EKO Stahl case (12), and reiterated in the Commission’s
report on the implementation of
the fifth Steel Aid
Code in 1994 (13).

from the

aid for rescuing and restructuring firms in difficulty (15)
and the guidelines on national regional aid (16).

(58) As had been explained, the possibilities for approving
aid in the ECSC sector are limited. Gr(cid:246)ditzer is an ECSC
company, and there is no legal basis for permitting it
rescue and restructuring aid under that Treaty. Where
restructuring aid has been allowed to other ECSC firms,
by decisions taken under Article 95 of the ECSC Treaty,
the overriding consideration has been a return to
viability in a context of privatisation. In Gr(cid:246)ditzer’s case
no restructuring plan showing a return to viability has
ever been submitted.

(59) Moreover, Germany itself considers that the investment
aid was granted as regional aid or as a substitute for
regional aid.

(60) The Commission therefore takes the view that the only
legal basis on which the investment aid can be assessed
is that provided by the guidelines on national regional
aid in force at the time the aid was granted. Gr(cid:246)ditzer’s
EC activities are in a sensitive sector, and under the
framework for certain steel sectors not covered by the
ECSC Treaty the regional aid ceilings apply here too.

(61) The Commission is consequently of the opinion that the
overall regional investment aid ceiling of 35 % cannot be
exceeded.

of

the

successive

Furthermore, Gr(cid:246)ditzer operates in a sensitive sector for
Treuhandanstalt
purposes
arrangements. The framework for certain steel sectors
not covered by the ECSC Treaty (14) explains that the
concept of a sensitive sector takes in not only ECSC
steel production but also the preliminary processing of
ECSC steel, which includes such things as forging and
casting. Gr(cid:246)ditzer operates in both of these areas, and is
thus clearly in a sensitive sector.

the

competition. All

(62) The Commission concludes that aid with an intensity of
more than 35 % would constitute an unacceptable
distortion of
aid
towards EC activities must therefore be assessed on the
aid
basis of
for
Federal
approved
Government/L(cid:228)nder regional scheme. The total intensity
of aid which was admissible under that scheme and any
other regional aid schemes at the time in question was
35 % gross.

ceilings
connection with

investment

investment

regional

the
in

joint

the

(57) Under the Treuhandanstalt arrangements, aid to firms in
sensitive sectors had to be notified in all circumstances.
The Treuhandanstalt arrangements did make provision
for exceptions
to the notification requirement, but
specifically excluded these sensitive sectors, and clearly
stated the Commission had to assess aid to these sectors
under the rules in force, such as the guidelines on state

(11) Commission letter SG(91) D/17825, 26.10.1991; Commission
letter SG(92) D/17613, 8.12.1992, and communication regarding
aid measure E 15/92, 15.10.1992; and Commission letter
SG(95) D/1062, 1.11.1995.

(12) Notice in case C 35/94, (OJ C 1, 17.1.1997, p. 7).
(13) SEC(95) 1309 final, p. 10 to 11.
(14) OJ C 320, 13.12.1988.

(63) The Commission consequently finds that of the aid paid
to cover investment in Gr(cid:246)ditzer’s non-ECSC activities,
which amounted to DEM 96,1 million, 35 % can be
declared compatible with the common market under
Article 87(3) of the EC Treaty; this is equal to DEM
33,7 million. The remainder, amounting to DEM 62,4
million, is incompatible with the common market under
Article 88(2) of the EC Treaty.

(15) See most recently OJ C 368, 23.12.1994, p. 12.
(16) See most recently OJ C 74, 10.1.1998, p. 9.

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5.3. Assessment of the social measures

5.4. Assessment of the operational measures

(64) The social measures totalled DEM 61,3 million, as

explained in recital 12.

(71) A sum of DEM 133,8 million, financed by shareholder
loans, was paid to cover operational costs in the years
1992 to 1996. Its breakdown is detailed in recitals 13
to 16.

(65) The money

promotion
granted
the Employment
measures under Paragraph 249 of
Promotion Act (DEM 6,9 million) does not constitute
state aid (17).

employment

for

(66) The Commission does not accept the German argument
that a sum of DEM 28,3 million paid towards the social
plan constitutes a general measure, since it was granted
to a specific undertaking out of resources that were not
available to all undertakings without distinction. This
means that the social aid totals DEM 54,4 million.

(67)

(68)

It has already been explained that all the social aid has
to be assessed under the ECSC Treaty. According to
Article 4(c) of the ECSC Treaty, subsidies or aids granted
by states,
in any form whatsoever, are incompatible
with the common market and accordingly prohibited.
Exceptions to this rule are made in the successive Steel
Aid Codes. The aid under consideration here was
granted during the lifetime of the fifth Steel Aid Code.
The sixth Steel Aid Code contains identical provisions.

In order to qualify for aid under the Steel Aid Code,
social measures must be paid to workers made
redundant or accepting early retirement; they must arise
from the total or partial closure of steel plants that have
been in regular production up to the
time of
notification of the aid, and they must not exceed the
payment levels customary in the Member States on 1
January 1991.

(69) According to the information provided by Germany,
production capacity at Gr(cid:246)ditzer fell from 285 000 t
per year in 1989 to 150 000 t per year in 1996.
Annual steel production fell to 69 000 t. Between 1990
the 5 000
and the end of 1996 about 4 300 of
employees left the company owing to the reduction in
capacity. The funding provided was used to finance
redundancy
and
short-time working and training facilities for the benefit
the social
of
measures were aimed at staff who ultimately left the
company.

former Gr(cid:246)ditzer employees. Thus all

retirement

schemes

early

and

common market

(72) As has already been explained, all this aid has to be
assessed under the ECSC Treaty. According to Article
4(c) of the ECSC Treaty, subsidies or aids granted by
states, in any form whatsoever, are incompatible with
the
and accordingly prohibited.
Exceptions to this rule are made in the successive Steel
Aid Codes, but the Codes do not permit operating aid.
In recitals 35 to 41 it has been explained why the
operating aid cannot be considered as intended for a
particular purpose, especially as it was not earmarked
on any
aid is
consequently incompatible with the ECSC Treaty and
the Steel Aid Code.

in advance. This

rational basis

(73) The Commission notes that after privatisation a sum of
the
DEM 9,6 million was used to repay part of
shareholder
the loans
granted for operational purposes
therefore DEM
124,2 million.

loans. The total amount of

is

5.5. Assessment of the measures taken in connection

with the privatisation

5.5.1. Summary of the arguments put forward by Germany

(74) The German view that

the privatisation did not

comprise any state aid rests on two arguments.

(a)

(b)

In the first place, even if Georgsmarienh(cid:252)tte’s bid
did involve a cost,
in the form of a negative
this outcome was nevertheless
purchase price,
advantageous to the public shareholder which was
selling the company, since the costs entailed by a
liquidation of Gr(cid:246)ditzer would have been higher. A
private investor would have sold Gr(cid:246)ditzer on the
same basis.

In the second place, Georgsmarienh(cid:252)tte’s bid was
the best to emerge from an unconditional, open
and transparent procedure. Georgsmarienh(cid:252)tte was
the only bidder to have submitted a business plan
that satisfied the seller’s demands. Germany refers
to the Commission policy according to which a sale
is open,
following a privatisation process
transparent and unconditional does not constitute
aid.

that

(70) The Commission is therefore of the opinion that these
measures are compatible with the common market.

5.5.2. The cost of privatising Gr(cid:246)ditzer

(17) Commission letter SG(95) D/341, 13.1.1995.

(75) The first argument put

forward by Germany is that
although the price secured was negative, privatisation

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was still more advantageous than liquidation. The cost
liquidating Gr(cid:246)ditzer would have been DEM 475
of
million gross, or DEM 381 million net after deduction
of the liquidation value of Gr(cid:246)ditzer’s assets (18).

(76) The total cost of privatising Gr(cid:246)ditzer proved to be
DEM 340 million. Germany accordingly contends that
privatisation was still
the cheapest option. Thus the
price arrived at satisfied the private investor test.

(77) According to the KPMG liquidation report sent by
Germany, the cost of liquidating Gr(cid:246)ditzer would have
been DEM 475 million, breaking down as follows:

(a)

liabilities: DEM 418 million (shareholder loans DEM
196 million; guaranteed bank loans DEM 49
liabilities DEM 26 million, and
million; other
provisions
costs DEM 147
million);

for miscellaneous

(b) cost of

the liquidation itself: DEM 57 million
(mainly operating and running-down costs incurred
during the liquidation process).

(78) But the Court of Justice held in the Hytasa case that a
private shareholder in a limited company was liable for
the debts of the company only up to the liquidation
the company’s assets (19). According to the
value of
liquidation report, the liquidation value of the assets was
DEM 94 million. This sum was available to satisfy all
the debts of the company in the order in which they
were ranked under the applicable German insolvency
law. The cost of liquidation was therefore limited to
DEM 94 million.

long term and considerations of

(79) The figure of DEM 475 million assumes full satisfaction
of all debts by the public authorities, which would
necessitate further funding. As the Court held in the
same judgment, this calculation is incorrect. The Court
found that, even if guided by prospects of viability in
and
the
reputation, a private
consider
contributing capital to a company which was to be sold
off, especially if the injection was linked to the sale of
the undertaking, as in that case there was no hope of
profit even in the long term, and the operation would
be costlier than selling the assets (20). This reasoning
applies in cases of liquidation too.

investor would not

image

(18) The KPMG liquidation report describes the situation on 30 June
1996. Privatisation did not take place until February 1997, so that
there is a small difference between the figures given and the
figures for privatisation. The public seller considered in the report,
EREL, had also been succeeded in the meantime by BMGB.

(19) Joined Cases C-278/92, C-279/92 and C-280/92 Spain v

Commission [1994] ECR 1-4103.

(20) Same judgment, paragraph 26.

(80) The Court also held that a distinction had to be drawn
between the obligations which the state had to assume
as owner of the share capital of a company and its
In Gr(cid:246)ditzer’s case
obligations as a public authority.
Germany has cited as
in the total cost of
items
liquidation a series of costs to the shareholder which are
in fact costs that the state has to bear in its capacity as
a public authority. These are:

(a)

the repayment of DEM 49 million in guaranteed
bank loans. These guarantees were provided by the
Treuhandanstalt and the BvS. Both bodies were
federal institutions owned directly by the state. At
the time of the privatisation they were not the state
shareholders; these were in the first place EREL and
later BMGB, both of which were also likewise
institutions under direct state control (21).
federal
Any guarantee claims on loans that could not be
repaid out of the company’s assets would therefore
be made not on the shareholder EREL but on the
Treuhandanstalt or the BvS as state institutions;

(b) a provision of DEM 15 million for

existing
environmental damage (Altlasten, see recital 83); a
sum of DEM 22 million towards costs arising out
of a social plan that are not required by any
binding obligation, and a provision of DEM 87
million for the cost of site clearance, that is to say
demolishing all buildings, completely clearing the
site, and selling the site to a third party despite the
fact
to no
more than DEM 9 million.

the selling price would amount

that

Given Gr(cid:246)ditzer’s financial situation, it is unlikely that a
private investor would have provided additional funding
towards a social plan. And if the sale value of the land
was only DEM 9 million, a private investor would not
have decided to clear the site. Even if Gr(cid:246)ditzer was
under a legal obligation to clear the site, the shareholder
would not have injected additional funding when the
company was to be liquidated. Costs of that kind would
have been borne by the state.

(81) Germany contends

that

insolvency
equity
German law classes
as
(Eigenkapitalersatz, equity substitution), which means that
they
assets.
claimed back
Shareholder loans constitute capital that the shareholder

in the event of
loans

cannot be

shareholder

from the

(21) This division was the result of

the decision to dissolve the
Treuhand in 1994;
its activities were shared between three
separate organisations. The Guarantees were transferred to the
BvS, while management, and shareholdings, were transferred to
EREL, and later BMGB.

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has made available to the company, and cannot be
recovered in a liquidation.

takeover to take place on 1 January 1997 (Angebots-
synopse f(cid:252)r GSW vor Endverhandlungen mit GMH).

the opinion that

The Commission remains of
in
accordance with the case-law of the Court of Justice the
cost of liquidation comprises only the liquidation value
of the assets, that is to say DEM 94 million. But even if
the shareholder loans were to be included in the cost of
liquidation at full value, the total would still be DEM
292 million (assets DEM 94 million + shareholder loans
DEM 198 million) (22).

(86) According to the information supplied by Germany,
Georgsmarienh(cid:252)tte was awarded the contract mainly
because it was the only company to provide a business
plan as requested. Its offer was also the best in both
financial and conceptual terms. The German authorities
forwarded Georgsmarienh(cid:252)tte’s business plan
have
(Unternehmenskonzept Gr(cid:246)ditzer Stahlwerke GmbH).

(82) The cost of privatisation was DEM 340 million, so that
liquidation would have been cheaper. A private investor
would have wound up the company.

(83) With regard to the DEM 15 million in environmental
costs, the Commission sees an additional argument in
the fact that in comparing the cost of liquidation with
cost of privatisation Germany has not used
the
comparable figures. Germany has stated that
in the
event of liquidation the environmental costs would be
borne by the shareholder. In the case of privatisation
the costs arising out of existing environmental damage
were covered by an exceptional arrangement laid down
by the Land of Saxony. But the privatisation costs listed
by Germany do not include any provision for existing
environmental
liabilities. For an objective comparison,
the DEM 15 million for site clearance, at least, should
liquidation or
either be excluded from the cost of
included in the cost of privatisation.
the cost of
If
privatisation is taken to include the DEM 15 million
made available, it rises to DEM 355 million.

by

issued

(87) The Commission considers that the procedure was not
the
The memoranda
unconditional.
investment banks did not call
for any binding bid.
Potentially interested parties were asked to submit a
forward
business plan in which they were to put
detailed commitments regarding jobs to be created or
saved, future investment and financing. Those selected
were to be invited to bilateral negotiations, and the
commitments
entered into would have a decisive
influence on the purchase price. The memoranda
expressly mentioned the possibility that state aid might
sought, and no
be granted. No concrete bid was
parameters or
the
assessment of bids.

laid down for

ceilings were

(88) The Commission also considers that the procedure was
neither open nor transparent. Negotiations were entered
into with three parties on the basis of documentation
that did not comprise an open call for bids, meeting
clear requirements, but merely an invitation to open
individual negotiations regarding commitments to be
entered into by both seller and buyer, which were to be
finalised through a negotiation process which was not
clearly defined.

5.5.3. The privatisation procedure

(84) Turning to the second argument, Germany has informed
the Commission that on 12 June 1996 the public
shareholder instructed two investment banks, M. M.
Warburg & Co. and Freyberg Hambros, to search for a
candidate.
In September 1996 both banks issued a
memorandum with information on Gr(cid:246)ditzer and its
subsidiary Burg, on the basis of which bids were to be
made. A total of 23 potentially interested investors
asked for supplementary information. Three of these,
Georgsmarienh(cid:252)tte, Industrial Technology and JPS, were
selected as having the necessary technical and financial
background. Bilateral negotiations were entered into
with those three.

(89)

The commitments ultimately entered into influenced the
purchase price negotiated. Any differences between
positions
therefore
necessarily due to the methods chosen. The Commission
considers that Georgsmarienh(cid:252)tte’s offer and business
plan did not constitute a binding bid.

final negotiations were

in the

inherent

In these circumstances, where differences between the
offers were
chosen,
in
Georgsmarienh(cid:252)tte was the only candidate of the three
to be given a final opportunity to close the negotiations
and
seller’s
requirements.

final position to the

procedure

to adapt

the

its

(85) Germany has submitted a synopsis of

the state of
negotiations with the three parties with a view to a

(22) An exact valuation of

the shareholder loans would require a

thorough analysis of the undertaking and its prospects.

(90) The Commission is accordingly of the opinion that the
privatisation did not take place on the basis of an open,
transparent and unconditional procedure. The German
argument
transparent and
tendering was open,
unconditional cannot be accepted.

that

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5.5.4. The amount of aid to Gr(cid:246)ditzer to be taken into

consideration

(91)

In line with its established practice,
that when a
considers
unacceptable to a private investor the whole of
negative sales price constitutes aid.

the Commission
is made on terms
the

sale

(92) The bulk of

the negative sales price consists of

the
waiver, redemption or partial takeover of loans and the
non-recovery of subsidies. These measures have been
assessed above (23). In order to calculate the state aid
component in the privatisation, account must also be
taken of the financial measures referred to in recitals 17
and 18. The commitments entered into by the seller
BMGB in the
the privatisation of
Gr(cid:246)ditzer amounted to:

agreement

for

(a) DEM 37,5 million in subsidies for investment and

operating purposes;

(b) DEM 16,3 million in the form of loans to be paid
back on receipt of regional aid under the joint
Federal Government/L(cid:228)nder regional scheme at a
later stage; but to date only DEM 13 million has
been paid out.

(93) These measures were taken pursuant to the privatisation
agreement which entered into force on 1 January 1997.
The total is DEM 53,8 million. Of this figure DEM 50,3
million has been paid. A further DEM 3,3 million in aid
has been committed as a residual
the
loan under
privatisation agreement, but has not yet been paid.

(94) As regards the allocation of these sums, Germany has
indicated that in 1997 and 1998 a total of DEM 33
million was invested in Gr(cid:246)ditzer. Of this figure DEM 1
million went to steel production, DEM 32 million went
to plant covered by the EC Treaty, and the remaining
DEM 17 million was used for operating purposes.

to be assessed under the Steel Aid Code. The investment
aid for non-ECSC production plant, including regional
aid under the joint Federal Government/L(cid:228)nder regional
development scheme, are to be assessed in the light of
the ceilings for regional aid.

(96) Under

the

sixth Steel Aid Code, neither general
investment aid nor operating aid may be given to the
ECSC steel industry. The amount concerned is DEM 18
million (DEM 1 million + DEM 17 million), and this is
incompatible with Article 4(c) of the ECSC Treaty and
with the sixth Steel Aid Code.

(97) Germany has supplied no data regarding the allocation
of the sum of DEM 3,3 million that remains to be paid
under the privatisation agreement, so that it cannot be
concluded that this aid will be used to cover investment
therefore
in the non-ECSC sector. This
incompatible with the common market in coal and steel
under Article 4(c) of the ECSC Treaty and under the
sixth Steel Aid Code.

aid

is

(98) The investment aid for non-ECSC production plant can
the EC
be assessed under the relevant provisions of
the applicable rules on regional aid,
Treaty. Under
this aid
the total admissible intensity of
however,
combined with other regional aid measures is only 35 %
gross. The relevant
investment amounts to DEM 32
million, so that DEM 11,2 million can be declared
compatible with the common market. The remainder,
amounting to DEM 20,8 million, constitutes state aid
incompatible with the common market.

5.5.6. Aid to Burg

(99) Additional

aid to Burg

in connection with the
privatisation amounted to DEM 4,5 million in advance
payments against future regional aid. As explained in
recitals 23 and 24, the Commission should confirm that
the aid to Burg remained within the limits set in the
successive arrangements governing the Treuhand. This
aid is therefore compatible with the common market.

5.5.5. Assessment of the aid to Gr(cid:246)ditzer

(95) The considerations set out in recitals 43 to 63 lead to
the conclusion that the DEM 1 million invested in steel
production and the operating aid of DEM 17 million are

(23) The cost of the privatisation of Gr(cid:246)ditzer amounted to DEM 340
million,
including DEM 286 million for agreements ahead of
privatisation providing for: a waiver of shareholder loans, DEM
198 million; redemption and continuation of guaranteed loans,
DEM 53 million; grants towards social measures, DEM 28 million;
non-recovery of
the
Employment Promotion Act, DEM 7 million, and other items
comprising the balance. The total is made up of this figure and
the new aid of DEM 38 million and DEM 16 million.

subsidies under paragraph 249h of

5.6. Transfer of fixed assets

(100)

In order properly to implement a Commission decision
requiring the recovery of state aid, the Member State
must behave as a private creditor would, and with at
least the same care that the Member State itself would
exercise if it were collecting such things as tax or social
security debts. Domestic law must be applied in the
same way as it would be applied to a claim made purely
under domestic law, and in such a way that collection is
not rendered impossible or extremely difficult. As a
general principle this means that the Member State must

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to do so, where possible

seek to collect
the debt at once and must use all
taking
available means
measures to enforce its claim against all available assets
of the debtor, and seeking the liquidation of the debtor
undertaking if the undertaking is unable to repay the
debt.

investigate, would be what
is transferred (assets and
liabilities, staff, consolidated assets), the purchase price,
the identity of the shareholder or owner or the initial
undertaking and of the buyer, the time at which the
transfer takes place (after investigations have begun,
after the initiation of the formal investigation procedure,
or after the adoption of the final decision), and the
commercial character of the transfer.

(101)

It is possible, indeed it is likely, that in a liquidation as a
insolvency proceedings all the undertaking’s
result of
remaining assets will be sold.
In itself this raises no
particular problem, as the sale takes place under the
supervision of a liquidator who is required to seek the
best possible result in the interest of the creditors, with
the proceeds of the sale of the assets being used to
satisfy their claims. Although the proceeds of the sale of
the assets might not be sufficient to pay off all the
undertaking’s debts, and thus to ensure full repayment, a
importance in terms of
liquidation is not without
competition. Competing undertakings, who might have
suffered injury as a result of the incompatible state aid,
will have the opportunity to fill the gap in the market
left
indeed
themselves to buy the assets being sold with a view to
using them more efficiently.

undertaking,

liquidated

and

the

by

(102) After initiating the procedure in this case, and shortly
before adopting its final decision, the Commission learnt
that Gr(cid:246)ditzer assets were being transferred to other
undertakings controlled by the BvS, at
their current
value as Gr(cid:246)ditzer assets, below the market price, or
without any attempt to sell them on the open market.
The object or effect of this proceeding may be to take
the Commission
these assets outside the reach of
the
decision and to continue the weakest parts of
business. This would be in contradiction with the duty
of Member States to ensure that the obligations imposed
by a Commission decision are complied with.

(103) As with the collection of any debt, a Member State
acting as an ordinary creditor must seek to ensure that
there is no danger that the collection of the debt might
be contested or annulled; to do so it must make use of
all the means available under domestic law, for example
under provisions governing fraud at
the expense of
creditors, or suspected agreements prior to insolvency
proceedings.

(104) Moreover,

that

recovery proceedings

in order to prevent evasion of its decision
and to ensure that all distortion of competition is
eliminated, the Commission has a duty if necessary to
require
should not be
confined to the initial recipient, but should instead be
extended to include any undertaking continuing the
business of the initial undertaking using the transferred
production plant, in so far as there are aspects of the
transfer on either side which indicate that the business
is in fact being continued. Examples of considerations of
this kind, which the Commission would have to

(105) Although Germany has

the kind referred to will be put

informally denied that any
agreements of
into
effect, the Commission considers it necessary to make it
the term (cid:145)the recipient(cid:146)
clear
also any other
includes not
undertaking to which assets may have been transferred
in order to evade the effect of this decision.

in this Decision that

just Gr(cid:246)ditzer but

6. Conclusions

(106) The measures

taken under paragraph 249 of

the
Employment Promotion Act
to cover no more than
DEM 6,9 million in employment promotion costs do
not constitute state aid. Subsidies of DEM 54,4 million
to cover the financing of the social plan and additional
measures are compatible with Article 4(c) of the ECSC
Treaty and the applicable Steel Aid Code.

(107) The Commission

concludes

aid
amounting to DEM 44,9 million which was made
available to Gr(cid:246)ditzer under different headings in the
period 1992 to 1999 is compatible with the common
market under Articles 87 and 88(2) of the EC Treaty.

investment

that

(108) The Commission also concludes that before and after
Gr(cid:246)ditzer’s privatisation Germany took a number of
measures
the company which were
unlawful. The amount of state aid involved totalled
DEM 242,4 million. This figure breaks down as follows.

in respect of

(a) A sum of DEM 155,5 million has to be assessed
the

the ECSC Treaty;

is made up of

it

under
following:

I.

DEM 13,3 million in investment aid for steel
production in the years 1992 to 1996;

II. DEM 1,0 million in investment aid for steel

production in the years 1997 to 1998;

III. DEM 124,2 million in operating aid in the

years 1992 to 1996;

IV. DEM 17,2 million in operating aid in the years

1997 to 1998.

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13.11.1999

This aid is incompatible with Article 4(c) of the
ECSC Treaty and with the applicable Steel Aid
Code. Germany must recover it.

(b)

Investment aid in excess of the 35 % ceiling for
regional aid, which amounts to DEM 83,2 million
(DEM 62,4 million before privatisation and DEM
20,8 million in the course of privatisation), has to
be assessed under the EC Treaty. It is incompatible
with the common market under Articles 87 and
88(2) of that Treaty. Germany must recover this
aid.

(c) A further sum of DEM 3,3 million which Germany
plans to grant to Gr(cid:246)ditzer has to be assessed under
the ECSC Treaty. It is incompatible with Article 4(c)
of that Treaty and with the Sixth Steel Aid Code. It
must not be granted,

HAS ADOPTED THIS DECISION:

Article 1

The payment of DEM 6,9 million by Germany to Gr(cid:246)ditzer
in order to cover the cost of
Stahlwerke GmbH (Gr(cid:246)ditzer)
measures under paragraph 249 of the Employment Promotion
Act does not constitute state aid within the meaning of Article
4(c) of the ECSC Treaty.

Article 2

The following measures which Germany has taken in respect
of Gr(cid:246)ditzer in order to finance a social plan and additional
measures for the benefit of redundant Gr(cid:246)ditzer employees are
compatible with the common market in coal and steel:

(a)

financing in the form of
loans granted by Gr(cid:246)ditzer’s
successive public shareholders, namely the Treuhandanstalt,
EREL and BMGB, which amounted to DEM 26,1 million;

(b) a sum of DEM 28,3 million paid by BMGB.

Article 3

Investment aid granted to Gr(cid:246)ditzer
totalling DEM 44,9
million constitutes state aid compatible with Article 87(a) of
the EC Treaty; this aid breaks down as follows:

(a) DEM

million

8,4
Government/L(cid:228)nder
regional
Verbesserung der regionalen Wirtschaftsstruktur) in 1994

Federal
improvement of
(Gemeinschaftsaufgabe

under
for
structures

economic

the
the

scheme

joint

(b) DEM 3,6 million in investment aid in the form of tax
Investment Allowances Act

concessions
the
(Investitionszulagengesetz) in the years 1992 to 1995

under

Vereinigungsbedingte

(c) DEM 32,9 million in bank loans carrying a 100 %
guarantee from the Treuhandanstalt and the Bundesanstalt
f(cid:252)r
(BvS),
shareholder loans granted by Gr(cid:246)ditzer’s successive public
shareholders in the years 1992 to 1996, and regional aid
paid under the joint Federal Government/L(cid:228)nder scheme for
the improvement of regional economic structures in the
years 1997 to 1999.

Sonderaufgaben

Article 4

Investment aid to Gr(cid:246)ditzer amounting to DEM 83,2 million,
consisting of bank loans carrying a 100 % guarantee from the
Treuhandanstalt or the BvS, shareholder loans granted by the
Gr(cid:246)ditzer’s successive public shareholders in the years 1992 to
1996,
Federal
Government/L(cid:228)nder scheme for the improvement of regional
economic structures paid in the years 1997 to 1999 are
incompatible with the common market under Articles 87 and
88(2) of the EC Treaty.

regional

under

joint

and

the

aid

Article 5

Measures taken by Germany in respect of Gr(cid:246)ditzer totalling
DEM 155,5 million, comprising investment aid of no more
than DEM 14,3 million and operating aid of no more than
DEM 141,2 million (being a payment of DEM 17,0 million
under the privatisation agreement and funding of DEM 124,2
million financed by means of bank loans carrying a 100 %
guarantee from the Treuhandanstalt or the BvS and by means
of shareholder loans granted by Gr(cid:246)ditzer’s successive public
shareholders),
state aid incompatible with the
common market in coal and steel.

constitute

Article 6

to Gr(cid:246)ditzer under
The aid that Germany plans to grant
Article 9(2) of the agreement of 27 February 1997 governing
the sale of shares in Gr(cid:246)ditzer to Georgsmarienh(cid:252)tte GmbH,
amounting to DEM 3,3 million, in the form of loan as advance
payments against regional aid to be received, is incompatible
with the common market in coal and steel.

Article 7

1.
Germany shall take the measures necessary to recover
from the recipient the aid referred to in Articles 4 and 5,
which was granted to it unlawfully.

2.
Recovery shall be effected in accordance with the
procedures of national law in so far as national law does not

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Official Journal of the European Communities

L 292/41

render it
impossible or unduly difficult. The sums to be
recovered shall bear interest from the date on which they were
made available to the recipient until their actual recovery, at
the reference rate used for calculating the grant equivalent of
regional aid.

For the purposes of

3.
this Article the term (cid:145)recipient(cid:146)
comprises not only Gr(cid:246)ditzer but any other undertaking to
which assets have been transferred in such a way as to deprive
paragraph 1 of effect.

Article 9

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

Article 10

This Decision is addressed to the Federal Republic of Germany.

Article 8

Done at Brussels, 8 July 1999.

Walzwerk Burg GmbH benefits under
an existing aid
arrangement. Accordingly, no further procedural steps are
envisaged.

For the Commission

Monika WULF-MATHIES

Member of the Commission