2000/262/EC: Commission Decision of 20 July 1999 on State aid granted by Italy to the Inma shipyard through the public holding company Itainvest (formerly GEPI) (notified under document number C(1999) 2532) (Text with EEA relevance) (Only the Italian version is authentic)
Date: 1999-07-20
Institutions: European Commission
Subjects: Italy, State aid, control of State aid, financial loss, restriction on competition, shipbuilding

4.4.2000

EN

Official Journal of the European Communities

L 83/21

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 20 July 1999

on State aid granted by Italy to the Inma shipyard through the public holding company Itainvest
(formerly GEPI)

(notified under document number C(1999) 2532)

(Only the Italian version is authentic)

(Text with EEA relevance)

(2000/262/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

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

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

Having called on interested parties to submit their comments pursuant to the provisions cited above (1) and
having regard to their comments,

Whereas:

I. PROCEDURE

(1)

As part of the monitoring procedure initiated under the Commission Decision of 17 July 1996 (2) on
the GEPI group (which became Itainvest on 12 September 1997 and is referred to hereinafter by this
new name), the management of the group acknowledged that, in 1997, they awarded a wholly-
owned subsidiary, the Inma shipyard, a capital grant of approximately ITL 100 million (EUR 51,6
million) in order to cover the losses recorded by the shipyard in 1996 and 1997. The Commission
therefore sent the Italian authorities an official request for information dated 1 October 1998. By
letter of 9 November 1998 the Italian Permanent Representative supplied information in the form of
the company's annual accounts for the years 1992 to 1997.

(2)

By letter of 19 January 1999 the Commission informed the Italian Government of its decision to
initiate proceedings under Article 88(2) of the EC Treaty in respect of the aid. The Italian authorities
sent their comments to the Commission by letter No 3896 of 2 March 1999 from the Permanent

(1) OJ C 63, 5.3.1999, p. 2.
(2) OJ C 5, 9.1.1997, p. 3.

L 83/22

EN

Official Journal of the European Communities

4.4.2000

Representative. The Commission decision to initiate the procedure was published in the Official
Journal of the European Communities (3) together with an invitation to other interested parties to submit
their comments. Comments were received, which the Commission forwarded to Italy. Its response
was received by letter of 30 June 1999.

II. DESCRIPTION

(3)

(4)

(5)

(6)

An examination of the accounts shows, firstly that the 1996 financial year closed with a loss of
ITL 21,4 billion (EUR 11 million). The Board of Directors requested Itainvest, as the principal
shareholder of the company, to cover the loss by writing off debts. The shareholders' meeting held
on 13 November 1997 decided that ITL 4,68 billion (EUR 2,4 million) of the loss would be covered
by the statutory and special reserves and the remaining ITL 16,7 billion (EUR 8,6 million) by
Itainvest. At a meeting on 24 March 1998, it was decided that, since the company's accounts at 30
November 1997 already showed a loss of ITL 81,89 billion (EUR 42,3 million), this amount would
be covered and the capital would be restored to a level of ITL 35 billion (EUR 18 million). The
principal shareholder was to subscribe 99 % of the capital but release only three-tenths immediately,
whilst the remaining 1 % was to be subscribed and made available immediately by the shipyard
Nuovi Cantiere Apuania (NCA), which also belongs to Itainvest. Finally, an ordinary and extraor-
dinary shareholders' meeting on 23 June 1998 approved the accounts for the entire 1997 financial
year, recording an overall loss of ITL 103,7 billion (EUR 53,5 million) and decided to cover the
losses of ITL 21,8 billion (EUR 11,2 million) still outstanding for that financial year. The total
amount paid by Itainvest thus amounts to ITL 155,4 billion (EUR 80,2 million).

The same balance sheets also revealed several amounts of aid paid by the competent Italian
authorities (first by the Ministry responsible for the merchant navy and subsequently by the Ministry
for Transport and Navigation) under Laws No 599 of 14 August 1982, No 111 of 22 March 1985,
No 234 of 14 June 1989 and No 132 of 24 February 1994. Although the Commission authorised
the shipbuilding aid established by those laws, it was unable to identify the precise justification for
each aid measure.

The Commission doubted that Inma could benefit from aid by virtue of being listed in one of the
special registers for shipyards established by Law No 234/1989, created by the Italian Government in
order to bring production capacity under control. Inma is not one of the large shipyards whose
restructuring under Law No 111/1985 (4), and the refinancing of that loan (5), was approved by the
Commission, or one of the small- or medium-sized shipyards that were refinanced separately (6).

In view of the foregoing, the Commission initiated proceedings under Article 88(2) of the Treaty
because, having concluded that, as regards Itainvest's contributions towards loss compensation and
recapitalisation, the company was incorporated under public law and benefits from public funds, it
considers that the payments constitute State aid under Article 87(1). Such aid distorts or threatens to
distort competition by favouring an undertaking. Furthermore, as the firm is engaged in ship-
building, the aid should be examined under Council Directive 90/684/EC of 21 December 1990 on
aid to shipbuilding (7), as last amended by Directive 94/73/EC (8) and in particular Article 5(1)
thereof which states that ‘aid to facilitate the continued operation of shipbuilding and ship conver-
sion companies, including loss compensation, rescue aid and all other types of operating aid not
directly supporting particular restructuring measures covered in Chapter III, may be deemed compat-
ible with the common market provided that such aid together with production aid allocated directly
to individual shipbuilding and ship conversion contracts in accordance with Article 4(4) does not
exceed the ceiling expressed as a percentage of the aid recipient's annual turnover in shipbuilding
and ship conversion’.

letter SG(85) D/9151 of 17 July 1985.

(3) See footnote 1.
(4) Aid No 193/84,
(5) See footnote 4.
(6) Aid No 192/87,
(7) OJ L 380, 31.12.1990, p. 27. The application of the Directive was extended by Council Regulation (EC) No 3094/95
(OJ L 332, 31.12.1995, p.l), as last amended by Regulation (EC) No 2600/97 (OJ L 351, 23.12.1997, p. 18).

letter SG(89) D/2375 of 21 February 1989.

(8) OJ L 351, 31.12.1994, p. 10.

4.4.2000

EN

Official Journal of the European Communities

L 83/23

(7)

(8)

(9)

(10)

In view of the various amounts of operating and investment aid and the eligibility of Inma for such
aid, the Commission asked the Italian authorities to provide any information enabling it to assess the
compatibility of the aid with Directive 90/684/EC on aid to shipbuilding and other relevant
decisions.

Lastly, the Commission also had doubts concerning the fact that most of the bank loans of the firm
were covered by guarantees granted by Itainvest and a large proportion of the yard's business in
recent years was with shipping companies wholly or partly controlled by Inma (especially Pugliola
Stargas, Tellaro di Navigazione, Corsica Ferries).

III. COMMENTS FROM INTERESTED PARTIES

As part of the procedure, the Danish authorities put forward their views in a letter dated 21 May
1999, stressing in particular the capacity problems facing the shipbuilding industry worldwide and
referring to the yard closures in Denmark in recent years, notably due to excess capacity. In the
particular case of Inma, the Danish authorities noted that if it was found that the yard did not qualify
for aid, any aid should be recovered. It agreed with the Commission that all aid granted in breach of
the laws in force should be censured.

IV. COMMENTS FROM ITALY

By letter No 3896 of 2 March 1999 the Italian authorities first provided a detailed breakdown, for
each year from 1987, of all aid granted, specifying the amount of each contract or investment, the
rate at which the aid was granted and the relevant legal basis. As regards the inclusion of Inma in the
special shipyards' register, the Italian authorities confirmed that the register was established by Law
No 234/1989 but that the implementing Decree was adopted only in February 1992 and the register
became active only between May and September 1993. Under the Law, only shipyards listed in the
register qualified for aid, with the result that the aid was granted only from 1993. Inma had always
been regarded as a medium-sized shipbuilder. It was not on the list to which the Commission
referred in its letter because it could not qualify for the refinancing under Law 111/1985 since, at the
time, it had received only ship conversion orders and appeared to wish to specialise in that area.
Only the yards included in that list qualified for refinancing but were not entitled to receive aid
under Law No 234/1989 in 1987 and 1988.

(11)

The Italian authorities also stated that the amount contributed by Itainvest to cover losses totalled
only ITL 120,4 billion (EUR 62,2 million), composed of ITL 16,7 billion (EUR 8,6 million) for
1996 and ITL 103,7 billion (EUR 53,5 million) for 1997, the capital contribution of ITL 35 billion
(EUR 18 million) not having been paid out in the end.

(12) As regards the loss compensation granted between 1997 and 1998, the Italian authorities pointed
out that Itainvest had taken all the measures which the situation called for, in its capacity as the sole
shareholder of the yard. In this connection, they gave a brief account of recent developments in the
shipyard.

From 1980 onwards, the yard consistently carried out the necessary adjustments and restructuring
dictated by the market, in particular by reducing the workforce from 622 to 221 persons. Following
the positive results recorded in the period 1992 to 1995, the financial year 1995 closed with a net
profit of ITL 85 million (EUR 0,085 million).

In March 1997, the 1996 balance sheet having shown a loss of ITL 21 billion (EUR 11,2 million),
Itainvest immediately initiated an audit, which revealed a number of management errors, in partic-
ular as regards the acquisition and management of orders received in December 1995.

In February 1998 an assessment of the net worth of the firm at 30 November 1997 revealed losses
of ITL 81,9 billion (EUR 42,3 million) and led to the dismissal of the managing director of Inma, a
vicarious liability action being brought against him. It was then decided to cover the loss and carry
out a fresh audit, with a view to merging Inma with the other shipyard in which Itainvest had an
interest,

i.e. Nuovo Cantiere Apuania (NCA).

L 83/24

EN

Official Journal of the European Communities

4.4.2000

In June 1998 the ordinary and extraordinary general meeting of shareholders recorded the consul-
tant's negative opinion on the merger with NCA and confirmed the decision of February to cover the
1997 losses which had in the mean time risen to ITL 103 billion (EUR 55,3 million).

Following the negative opinion of the consultant on integration with NCA, an invitation to tender
for the shipyard was launched. Of the various bids received in June 1998, there was only one which
could be taken into consideration. However, when the firm's real position emerged,
it became
impossible to sell it and, finally, on 6 November 1998 the general shareholder's meeting decided to
wind up the shipyard and appoint an administrator to complete current orders, depending on how
advanced their construction was, to avoid further damage through the sudden closure of the yard
and the loss of subsidies on the orders in question. The charges borne by Itainvest were estimated at
ITL 325 to 350 billion (EUR 168 to 181 million), consisting primarily in its commitments in
respect of two orders in hand (Tirrenia and Finanziaria Marittima Stolt-Nielsen), in the form of a
performance bond and bonds covering earlier orders (Corsica Ferries and Pugliola), as well as
guarantees covering current administrative expenditure, as follows:

ITL
billion

EUR
million

Previous orders

32,440

16,753

Completion of orders December
1995

175,915

90,852

Current administration

15,510

8,010

Total

223,865

115,616

Provision was also made for Itainvest's exposure to other costs or damage.

(13) With regard to the statement by the Commission that orders in recent years for the construction of
new vessels were from shipping companies either wholly or partially controlled by Inma, the Italian
authorities commented as follows. ‘Tellaro di Navigazione (in liquidation since 28 June 1999) is no
longer in business and the five vessels ordered were never built. Pugliola replaced another defaulting
shipowner which had ordered two vessels from the yard. The first was resold to a private operator
on normal market terms and second was chartered bareboat by the same operator, who will become
the full owner by 2000. Corsica Ferries is a French company which is completely independent of
Inma. Inma had only a minority interest in two firms controlled by Corsica Ferries which in turn
each placed an order for a passenger vessel. The first shareholding was sold in 1998 and the second
will be sold in 2000’.

(14)

In short, the Italian authorities take the view that Itainvest thus acted in the most appropriate way
possible by taking careful stock of the crisis facing the firm and reducing to a minimum the costs
potentially resulting from the guarantees given in order to secure the best possible return on the
transfer of the company's assets. Itainvest acted like any private shareholder by seeking in the first
place, to minimise losses and eventually, when it proved impossible to sell the firm despite
considerable efforts, deciding without delay to put it into liquidation.

(15)

These measures do not therefore constitute State aid under Article 1 (d) of Directive 90/684/EC
which defines aid as that which is granted by Member States to shipbuilding or ship repair
undertakings which they directly or indirectly control and which counts as the provision of risk
capital according to standard company practice in a market economy.

4.4.2000

EN

Official Journal of the European Communities

L 83/25

(16)

(17)

(18)

Furthermore, as stated in the communication to the Member States on the application of Articles 92
and 93 of the EEC Treaty and of Article 5 of Commission Directive 80/723/EC to public undertak-
ings in the manufacturing sector (9), the Commission acknowledges that the economic reasons for
decisions taken by a public shareholder and hence consistency with the private investor principle,
must be assessed at the moment the financing decision is made.

It is also accepted ‘that a parent company may also, for a limited period, bear the losses of one of its
subsidiaries in order to enable the latter to close down its operations under the best possible
conditions. Such decisions may be motivated not solely by the likelihood of an indirect material
profit but also by other considerations, such as a desire to protect the group's image or to redirect its
activities’ (10).

The Commission has also stated that it is not its intention to apply the principles governing State aid
here ‘in a dogmatic or doctrinaire fashion’ and it is aware that a wide margin of judgment must come
into investment decisions as long as ‘the risks are adequately and objectively assessed and discounted
at the time the decision to invest is made,

in the way that a private investor would’ (11).

V. ASSESSMENT

(19)

Because the aid concerns a shipbuilding and ship-repair company,
it must be examined under
Directive 90/684/EC and Council Regulation (EC) No 1540/98 of 29 June 1998 on aid to ship-
building (12).

(20) As regards the production aid, which is covered by Article 4(1) of the Directive, and the investment
aid, which is covered by Article 6, that was granted by the Italian Government, the Commission
concludes, having analysed the exact breakdown of aid granted since 1987, that it complies with
Italian Laws No 599/1982 (for the period 1981 to 1983), No 111/1985 (for the period 1984 to
1986), No 234/1989 (for the period 1977 to 1990) and No 132/1994 (for the period 1991 to
1998). The aid schemes were authorised by the Commission. The laws in question provided for
investment aid with a maximum intensity of between 20 % and 40 % of the investment, on
condition that it was accompanied by a restructuring plan. Between 1982 and 1998, Inma carried
out restructuring which involved a reduction in the workforce of 65 %, of which 50 % between
1982 and 1992. In the period 1987 to 1998, in respect of investments totalling ITL 49,3 billion
(EUR 25,5 million), investment aid was granted amounting to ITL 9,1 billion (EUR 4,7 million),
giving an average intensity of 18,5 % in the period in question. The prior notification of aid granted
under existing schemes is not necessary. The Commission notes, however, that while the amounts
shown in the firm's balance sheets could have created some confusion, essentially because of
payment delays caused by the gap between the entry into force of the Community rules and the
actual implementation of the relevant national measures, and the aid was granted for the most part
after the investments had been made, the investment aid about which it had doubts should have
been notified a posteriori under the monitoring procedure provided for in Article 12 of Directive
90/684/EC, in particular on Schedule 3, attached to the Directive. As regards the contract aid, the
Commission concludes that all the contracts which benefited from aid conformed to those reported
under the monitoring procedure. It notes, however, that, as regards shipbuilding contracts C.4138
and C.4139 for Pugliola-Stargas, C.4248 and C.4249 for Corsica Ferries and C.4260, C.4261 and
C.4262 for Stolt-Nielsen, the rate applicable is the maximum rate in force under Article 4( 1 ) of
Directive 90/684/EC on the date on which the contracts were signed.

(21)

The measures taken by the public-sector group Itainvest to assist its subsidiary Inma should be
assessed under Regulation (EC) No 1540/98, Article 1 of which states that ‘until 31 December 2000,
production aid in support of contracts for shipbuilding and ship conversion, but not ship repair,

(9) OJ C 307, 13.11.1993, p. 3, point 28. The communication, annulled by Court of Justice judgment of 16 June 1993
in Case C-325/91 French Republic v Commission ([1993] ECR I-3283) was readopted by the Commission, following
amendments, after the adoption of Directive 93/84/EC (OJ L 254, 12.10.1993, p. 16).

(10) Judgment of

the Court of

Justice of 21 March 1991 in Case C-303/88 Italian Republic/Commission [1991] ECR

I-1433, paragraph 21.

(11) See footnote 9, points 28 and 29 of the communication.
(12) OJ L 202, 18.7.1998, p. 1.

L 83/26

EN

Official Journal of the European Communities

4.4.2000

may be considered compatible with the common market provided that the total amount of all forms
of aid granted in support of any individual contract (including the grant equivalent of any aid
granted to the shipowner or third parties) does not exceed, in grant equivalent, a common maximum
aid ceiling expressed as a percentage of the contract value before aid. For shipbuilding contracts with
a contract value before aid of more than ECU 10 million, the ceiling shall be 9 %; in all other cases
the ceiling shall be 4.5 %’. Article 5(1) states that aid for the rescue and restructuring of undertakings
in difficulties, including capital injections, debt write-offs, subsidised loans, loss compensation and
guarantees, may exceptionally be considered compatible with the common market provided that it
complies with the Community guidelines on State aid for rescuing and restructuring firms in
difficulty. As the loss compensation is not accompanied by any restructuring plan, the Itainvest
measures cannot be regarded as restructuring aid under Article 5(1) of Regulation (EC) No 1540/98.

(22)

Point 2.1 of
the Community guidelines on State aid for rescuing and restructuring firms in
difficulty (13) define rescue aid as measures which temporarily maintain ‘the position of a firm that is
facing a substantial deterioration in its financial position reflected in an acute liquidity crisis or
technical insolvency, while an analysis of the circumstances giving rise to the company's difficulties
can be performed and an appropriate plan to remedy the situation devised’. Or, in other words, aid
aimed at providing ‘a brief respite, generally for not more than six months, from a firm's financial
problems while a long-term solution can be worked out’. As regards the form of the aid, point 3.1 of
the guidelines states that rescue aid must:

‘— consist of liquidity help in the form of loan guarantees or loans bearing normal commercial

interest rates,

— be restricted to the amount needed to keep a firm in business (for example, covering wage and

salary costs and routine supplies),

— be paid only for the time needed (generally not exceeding six months) to devise the necessary

and feasible recovery plan,

— be warranted on the grounds of serious social difficulties and have no undue adverse affects on

the industrial situation in other Member States’.

(23)

(24)

(25)

The Commission notes in connection with its decision of 17 July 1996 on the Gepi group (14) that
the Inma shipyard was one of 23 companies which the holding company had been required to sell in
order to comply with the conditions governing the group's refinancing under its new name of
Itainvest. A limited budget of ITL 360 billion (EUR 185,9 million) had been earmarked for the
winding-up which would normally end by 31 December 1996 and no later than 31 December
to which the
1997. All
losses
abovementioned decision refers, was granted from June 1997 on the basis of the initial
identified in the 1996 accounts and was therefore not part of the budget of ITL 360 billion
(EUR 185,9 million). These measures were therefore not notified and the Commission was informed
about them only in September 1998 at a meeting between its departments and the Italian authori-
ties.

the assistance granted to Inma in the form of direct contributions,

The Italian authorities attribute the difficulties encountered by the yard in 1996 to management
errors relating to the Stolt Nielsen and Tirrenia orders received in December 1995. The Commission
also notes, however, that completion of the orders was guaranteed by Itainvest to an amount of
ITL 42 billion (EUR 21,7 billion) from March 1996. Therefore, in view of the various financial
operations that were needed in order to complete the orders in hand, it is clear that no financial
institutions would have granted advances without a guarantee from Itainvest, and hence without
recourse to public resources.

The guarantees constitute aid under Article 87(1) of the Treaty because, as the Commission stated in
its 1993 communication to the Member States, ‘it is only if guarantees are assessed at the granting
stage that all the distortions or potential distortions of competition can be detected. The fact that a
firm receives a guarantee even if it is never called in may enable it to continue trading, perhaps
forcing competitors who do not enjoy such facilities to go out of business’ (15).

(13) OJ C 368, 23.12.1994, p. 12.
(14) OJ C 5, 9.1.1997, p. 3.
(15) See footnote 9, point 38 of the communication.

4.4.2000

EN

Official Journal of the European Communities

L 83/27

(26)

(27)

(28)

(29)

If the Italian authorities intend to justify the contribution from Itainvest in the form of loss
compensation on the ground that it was less costly than the obligations arising out of guarantees, it
must be pointed out that such obligations constitute non-notified aid under Article 87(1) of the EC
Treaty and conform to the concept of aid in Article 2(1) and (2) of Regulation (EC) No 1540/98. As
the guarantees are directly linked to the cost of the vessels, they should have been taken into account
in calculating the maximum aid rate for contracts, as defined in Article 4(1) of Directive 90/684/EC,
granted under Italian Law No 132/1994 and approved by the Commission (16). According to the
information provided by the Italian Government on 16 April 1986 under the monitoring procedure
provided for in Article 12 of Directive 90/684/EC, the orders from Stolt Nielsen (six vessels) and
Tirrenia (two vessels) also benefited from 9 % aid in the form of a grant from the competent Ministry
and the maximum aid rate would thus have been exceeded.

The Tirrenia order is not a direct order but shipbuilding work on behalf of a third party, namely the
Ferrari shipyard which received aid from the Italian Government. As the construction of the two
vessels has already benefited from guarantees given to the Inma yard, the two measures (contract aid
and guarantees) together exceed the maximum of 9 % of the contract price before the aid. It would
also seem that the construction of the two vessels had not started by the end of 1996, since by the
end of 1997 work had progressed by only 45,5 % and 28 % respectively.

The Italian authorities state that the first indication of losses incurred by Inma (ITL 21 billion)
emerged in May 1997 at the general shareholders' meeting, which then called for an audit of the
exact position of the yard. The losses are entered in the balance sheet at 31 December 1996, and it is
difficult to accept the assertion of the Italian authorities that the unexpected deficit is due solely to
the management of orders received in December 1995. Especially as in the presentation of the
balance sheet for 1996, it was clearly stated that the Stolt Nielsen and Tirrenia orders had not
contributed significantly to the results of that financial year.

It must therefore be concluded that the poor results achieved by the firm already existed before and
were caused by other orders. The Commission notes that the Corsica Fernes I and Corsica Fernes II
orders, which also benefited from guarantees given by Itainvest to the builders, namely two shipping
companies of which Inma owned 49 % and 51 % respectively, were completed in 1996. The data
provided by the Italian authorities indicate that the assistance given by Itainvest to Inma includes a
10-year claim mobilisation guarantee,
linked to the order for the two vessels, amounting to
ITL 32,440 billion (EUR 16,7 million). As the two ships have already been delivered and paid for, in
principle, the Commission concludes that the guaranteed loans in question were used for the general
management of the yard. As the guarantees were given through public resources, they constitute
State aid in the form of operating aid covered by Article 3(1) of Regulation No 1540/98; they should
therefore be included in the maximum aid for contracts and hence reduce the level of aid granted by
the Italian Government. This was not the case since, according to the information provided by the
Italian authorities, the Ministry granted 9 % of the contract price before aid to all vessels already
i.e. the maximum amount of aid that can be granted under Article 4(1) of Directive
delivered,
90/684/EC.

(30)

The Commission's findings concerning the number and dates of the transactions guaranteed by
Itainvest indicate that the latter, as the paxent company, was closely linked with the risky day-to-day
management of the Inma yard. The Commission cannot therefore accept that Itainvest acted like a
private investor. In view of the already extensive losses (ITL 21 billion or EUR 11 million) at 31
December 1996, of which the shareholder must have been aware well before the general meeting in
May 1997, it must be concluded that Inma was already insolvent by that date and should therefore
have petitioned for bankruptcy.

(16) OJ C 302, 9.11.1993, p. 6; OJ C 390, 31.12.1994, p. 18; OJ C 290, 3.10.1996, p. 14; OJ C 50, 12.2.1998, p. 5.

L 83/28

EN

Official Journal of the European Communities

4.4.2000

(31)

The loss compensation cannot therefore be regarded as rescue aid under the relevant Community
guidelines as it does not fulfil, in either substance or form, the conditions for compatibility with the
common market pursuant to Article 87 of the EC Treaty.

(32)

(33)

(34)

The Commission also considers that the contributions of ITL 21,4 billion in 1997 and ITL 103,7
billion in 1998 constitute aid because they were made ‘in circumstances which would not be
acceptable to an investor operating under normal market conditions’, which is ‘normally taken to
mean a situation where the structure and future prospects for the company are such that a normal
return (by way of dividend payments or capital appreciation) by reference to a comparable private
enterprise cannot be expected within a reasonable time’ (17). The Italian authorities have not shown
that the capital injection could be regarded as reasonable and therefore acceptable ‘to an investor
operating under normal market conditions’, in the sense that ‘the present value of the expected
future cash flows from the intended project’ exceeded ‘the new outlay’ (18).

The Commission therefore concludes that the loss compensation in 1997 and 1998 was intended
solely to enhance the value of the shipyard artificially by injecting non-repayable funds, since there is
no evidence that even if Itainvest had sold the yard, it would have covered the ‘investment’ of
ITL 120 billion, given the difficulties affecting the shipbuilding industry. It is therefore difficult to
conclude that the transaction can be regarded as the action of a private investor since, in any event,
the return on the investment was negative right from the start.

The Commission also doubts that, in preferring to cover the losses, Itainvest opted for the lowest
expenditure since, in principle, bankruptcy would automatically have entailed the cancellation of
contractual commitments, in particular those relating to the Tirrenia order and hence reduced the
cost of its obligations towards the shipping companies, one of the effects of bankruptcy being to
place all creditors on the same footing and then give priority to those that have actually advanced
funds rather than those entitled to compensation for the failure to fulfil a contractual clause. And,
should this not be the case, it would further confirm the Commission's view that Itainvest had
committed itself more deeply than a private investor would under normal market conditions. The
Commission also notes that the breakdown of Itainvest commitments shows a guarantee of ITL 22,7
billion (EUR 11,7 million) for the Tirrenia order, which was issued in March 1998 and a guarantee
of ITL 9 billion (EUR 4,6 million) for the Stolt-Nielsen order, issued in March to May 1998, i.e. after
having taken the decision in February to cover the Inma losses on the basis of the accounts adopted
at 30 November 1997.

(35)

The loss compensation therefore constitutes aid under Article 87(1) of the EC Treaty and Article 1(1)
of Regulation (EC) No 1540/98. In view of the lack of a restructuring plan providing for a capacity
reduction and the fact that the operating aid ceiling authorised by the Commission has been
exceeded, the aid measures in question are incompatible with the common market pursuant to both
Directive 90/684/EC and Regulation (EC) No 1540/98.

VI. CONCLUSIONS

(36)

The Commission concludes that Italy unlawfully granted guarantees for the construction of vessels
ordered by Corsica Ferries, Pugliola, Tirrenia and Stolt Nielsen and covered losses incurred by Inma
in 1997 and 1998, contrary to Article 88(3) of the Treaty. The guarantees granted in respect of the
construction of the ships should not, in accordance with Article 4(4) of Directive 90/684/EC and
Article 3(1) of Regulation (EC) No 1540/98, have exceeded the ceiling on aid for individual contracts
provided for in Article 4(1) of the Directive. The loss compensation constitutes operating aid which,
under Article 5 of Directive 90/684/EC, should also be included in the maximum amount. In the
loss compensation is also
absence of a restructuring plan, the operating aid in the form of
incompatible with Article 5 of Regulation (EC) No 1540/98. Nor can it be regarded as rescue aid
under the relevant Community guidelines. The aid must therefore be recovered,

(17) See footnote 9, point 35 of the communication.
(18) Ibid.

4.4.2000

EN

Official Journal of the European Communities

L 83/29

HAS ADOPTED THIS DECISION:

Article 1

The State aid in the form of guarantees for the Corsica Fernes, Pugliola, Stolt-Nielsen and Tirrenia orders
and the loss compensation totalling ITL 120,4 billion (EUR 62,2 million) granted by Italy through the
public holding company Itainvest to the shipyard Inma SpA is incompatible with the common market.

Article 2

Italy shall take all the necessary measures to recover from the recipient the aid referred to in Article 1

1.
and unlawfully made available to the recipient.

Recovery shall be effected in accordance with the procedures of national law provided that they allow

2.
the immediate and effective execution of the decision.

The aid to be recovered shall include interest on the date on which it was paid to the recipient until
3.
the date of its recovery. Interest shall be calculated on the basis of the reference rate used for calculating the
grant-equivalent of regional aid.

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

Article 3

This Decision is addressed to the Italian Republic.

Article 4

Done at Brussels, 20 July 1999.

For the Commission

Monika WULF-MATHIES

Member of the Commission