2000/131/EC: Commission Decision of 26 October 1999 on the State aid implemented by Spain in favour of the publicly owned shipyards (notified under document number C(1999) 3864) (Text with EEA relevance) (Only the Spanish version is authentic)
Date: 1999-10-26
Institutions: European Commission
Subjects: Spain, State aid, building subsidy, public sector, regional aid, shipbuilding

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 26 October 1999

on the State aid implemented by Spain in favour of the publicly owned shipyards

(notified under document number C(1999) 3864)

(Only the Spanish version is authentic)

(Text with EEA relevance)

(2000/131/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

(2)

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

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

Having regard to Council Directive 90/684/EEC of 21
December 1990 on aid to shipbuilding (1), as prolonged by
Regulation (EC) No 3094/95 (2);

Having regard to Council Regulation (EC) No 1013/97 of 2
June 1997 on aid to certain shipyards under restructuring (3),

Having called on interested parties to submit their comments
pursuant to the provisions cited above (4) and having regard to
their comments,

Whereas:

I. PROCEDURE

(1)

By letter D/6715 dated 6 August 1997 the Commission
approved restructuring aid for the publicly owned yards
in Spain pursuant to Regulation (EC) No 1013/97. The
aid was approved subject to a number of conditions,
including the volume of aid, compliance with which the
Commission monitors.

(1) OJ L 380, 31.12.1990, p. 27.
(2) OJ L 332, 30.12.1995, p. 1.
(3) OJ L 148, 6.6.1997, p. 1.
(4) OJ C 113, 24.4.1999, p. 14.

a

submitted

Spanish Government

information provided during

The
regular
monitoring report on 15 September 1998, which was
supplemented by
a
monitoring visit from 30 September to 2 October of the
same year. By letter dated 22 October 1998 the
Commission raised certain questions about the volume
of tax credits granted to the yards. The Spanish authori-
ties commented by letter dated 13 November 1998.

(3)

(4)

(5)

(6)

By letter dated 15 February 1999 the Commission
informed Spain of its decision to initiate the procedure
laid down in Article 93(2) of the EC Treaty.

The Commission decision to initiate the procedure was
published in the Official Journal of the European Communi-
ties (5). The Commission invited interested parties to
submit their comments on the matter.

The comment received were forwarded by the Commis-
sion to Spain, which was given the opportunity to make
observations.

II. DETAILED DESCRIPTION OF THE AID

the Commission State

Under its August 1997 Decision in State aid Case C
56/95 (6),
totalling a
maximum of ESP 229,008 billion in support of the
restructuring of the publicly owned yards in Spain. The
package of approved aids included ‘special’ tax credits of
up to ESP 58 billion in the period 1995 to 1999.

aids

(5) See footnote 4.
(6) OJ C 354, 21.11.1997, p. 2.

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(7)

(8)

(9)

The reason for the inclusion of these special tax credits
was as follows. When the restructuring plan was origi-
nally drawn up, the yards were still part of the INI group
(Instituto Nacional de Industria) and able to reduce by
28 % after tax losses through INI, in accordance with
generally applicable Spanish national legislation, offset-
ting losses against profits elsewhere in the group. The
financial projections under the plan assumed that such
tax credits would continue to be available despite the
fact that as from 1 August 1995 the yards had formed
part of the loss-making State holding company Agencia
Industrial del Estado (AIE). Legislation was accordingly
passed (Law 13/96 of 30 December (7)) allowing compa-
nies in such a position to continue, up until 31
December 1999, to receive from the State erquivalent
amounts to what they would have been entitled under a
tax consolidation system. On the basis of the forecast
losses under the restructuring plan, it was estimated that
these tax credits for the publicly owned shipyards would
amount to 58 billion pesetas. The Commission consid-
ered that this was a specific measure in favour of the
yards and thus constituted a State aid.

On 1 September 1997, the yards were absorbed into
Sociedad Estatal de Participaciones Industriales (SEPI),
which like INI, is able to take advantage of general tax
consolidation rules to offset losses against profits.

the distortive effect of

The aid package was approved on the condition that the
total sum, as well as the amounts per category of aid
were maximum amounts. Such conditions were set to
ensure that the aids were used for the purposes intended
and to limit
the aid on the
shipbuilding industry. According to the information
available to the Commission within the context of its
monitoring of the restructuring plan, the yards received
in 1998 a special tax credit of ESP 148,451 billion,
notwithdstanding the fact the yards also received a tax
credit under general measures in 1998, corresponding to
their losses in 1997, based on general Spanish tax
consolidation rules, as a result of their integration SEPI.

(13)

These views were echoed by the Danish authorities,
which referred to the difficult global market situation
and the problems of yard closures and workforce reduc-
tions in Denmark since 1992. They emphasised that the
Spanish yards are in direct competition with Danish
yards and have obtained a competitive advantage
through the State aids that have been granted.

IV. COMMENTS FROM SPAIN

(14)

(15)

(16)

Spain submitted its comments by letters dated 6 April
1999 and 18 August 1999 (the latter providing supple-
mentary
the
observations
substance of the previous letter).

reiterating

essentially

The Spanish authorities considered that the decision to
initiate the procedure was imprecise as to the nature of
the supposed infringement that it refers to. In their view
the text suggests that there have been two infringements:
firstly, non-compliance with the Commission Decision
authorising the aid package; and secondly, the granting
of aid in the form of special tax credits, which may be
incompatible with the common market.

They maintain that this conclusion is not substantiated
and causes confusion when it comes to presenting
observations. They consider that it is unclear what non-
compliance is referred to, as this supposed infringement
appears to be distinct from the problem of special tax
credits. Since there is no reference to any other infringe-
ment related to the latter issue, they assume that the
the compatibility the
Commission has doubts about
special tax credits amounting to ESP 18,451 billion.
Given that this type of aid was authorised, the Commis-
sion's concern must be that the amount approved has
supposedly been exceeded by this figure.

(10)

For this reason the Commission doubted whether the
special tax credits of ESP 18,451 billion paid in 1998
were in accordance with its previous aid decision and
compatible with the common market.

(17)

The Spanish authorities point out that the years have
received aid matching the exact amount authorised. It is
therefore erroneous to suggest that more aid has been
granted than was approved and that there has been any
infringement of the Decision.

III. COMMENTS FROM INTERESTED PARTIES

(18)

(11)

(12)

The Commission has
from a
Member State (Denmark) and the Association of Danish
Shipbuilders (Foreningen af
Jernskibs- og Maskinbyg-
gerier i Danmark).

received comments

The Association of the Danish Shipbuilders commented
that the tax credits concerned constituted illegal aid that
should be repaid given the serious market situation and
the major loss of employment in the sector.

In their view, the Commission's doubts are based on a
false premise, by totalling amounts that cannot be added
together. There is a fundamental difference in nature
between State aid and tax credits under general meas-
ures. In effect, aid in the form of ‘tax credits’ as laid
down in the Commission's August 1997 (8) Decision
approving the restructuring aid package is public aid
since these amounts are not justified under the general
tax system in Spain. However tax credits derived from
the financial consolidation of the SEPI group are auto-
matic operations derived from the applicable general
legislation, which are not considered State aid under
Community law.

(7) BOE 315, 31 December 1996, p. 38974.

(8) See footnote 6.

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(19) Had the Commission not made the addition, it could not
have concluded that
the aid granted was excessive.
Therefore, according to the Spanish authorities, it seems
that if the shipyards had not been integrated into SEPI's
financial consolidation regime, the Commission would
not have considered that more aid had been granted
than was authorised.

(20)

Spain disputes a conclusion which in essence declares
that certain amounts that may be received legally and
that do not amount to aid in any way, may be consid-
ered the cause of an infringement. The incorporation of
the shipyards into a legal tax system cannot be the cause
of a supposed infringement when the aid has not been
excessive in a global sense or in a specific sense.

(21) According to the Spanish argumentation, one of the
consequences deriving from the Commission's inter-
pretation (if correct) is that from the moment the ship-
the Commission
yards were
Decision authorising aid to the shipyards should have
been considered substantially modified as regards as aid
in the form of tax credits.

integrated into SEPI,

(22)

The Spanish authorities further argue that, indeed, the
Commission appears to recognise that
the new tax
credits under the SEPI tax system are general measures,
which are not considered aid and which do not give rise
to any legal
infringement of the Decision. Although
these tax credits have begun to take effect since 1998,
for the 1997 fiscal year, the Commission is now saying
in practice that
the original Decision, authorising
ESP 58 billion of special tax credits, should be consid-
ered modified as from the moment when the shipyards
returned to a regime of financial consolidation.

(23) According to the Spanish authorities, this interpretation
has no foundation, particularly since nowhere in the
August 1997 Decision does it state that this aid of
ESP 58 billion is subject to the condition that the ship-
yards are not integrated into a new regime of financial
consolidation in the future.

(24)

Furthermore, if the integration of the shipyards into SEPI
the Commission should have
affected the aid limit,
alerted the Spanish authorities and taken steps to modify
its decision. In the absence of such action, there is no
way that a de facto change is possible, since a change of
this nature, under the principles of legal security, would
require a formal modification of the act fixing the aid
limit. In the absence of such a modification, the new
facts (i.e. the disappearance of AIE, the incorporation of
the shipyards into SEPI and the application of certain
taxation norms) do not constitute elements that give rise
to the authorised limits being exceeded.

(25)

(26)

(27)

(28)

The Spanish authorities note that the text of the opening
of the procedure states that if it had been known that
the shipyards were to be incorporated into SEPI,
‘the
amount of aid … would have been reduced appropria-
tely’. However they maintain that this argument is not
the aid was excessive.
valid for demonstrating that
Rather,
If
instead of authorising ESP 58 billion, a smaller amount
had been authorised, then there would have been an
excess, but as the authorisation was for ESP 58 billion,
there was no excess.

there was no such excess.

implies that

it

Furthermore, the Spanish authorities argue that if the
the
Decision had been modified to take account of
shipyards' integration into SEPI, this change could only
impact on the aid amounts for tax credits after the
month of September 1997, when the integration took
place. They maintain that the amount of aid up to this
date was within the authorised limit, emphasising that
Decision fixed only global amounts per heading, valid
over the entire period of the restructuring.

Spain has never considered that aid should be added to
measures that do not constitute aid; or that the incor-
poration of the shipyards into SEPI would have the
immediate effect of substantially modifying the 1997
in particular, the immediate and substantial
Decision,
reduction of
the aid of ESP 58 billion. The 1997
Decision reflected a global and combined package of
assistance to publicly owned shipyards, divided into
separate categories but in any case being accounted for
jointly.

figures

The Spanish authorities recalled that up until 1997, they
had estimated that the amount of this aid in the form of
special tax credits would reach ESP 48 billion. However,
in the final negotiations prior to the Commission's
in the
Decision approving the aid, various
restructuring plan were revised in order to take into
account the delays in its approval and implementation.
Additional aid was agreed on top of
initially
proposed, including, as part of the overall package, an
increased figure for special tax credits of ESP 58 billion.
The increase was justified by the delays in approval and
implementation of the restructuring plan, which resulted
in greater losses than foreseen (and a shorter time avail-
able in which to disburse the aid). Therefore, had it been
known that the shipyards were to be integrated into
SEPI and that this would mean a loss or reduction in
aids, their inclusion in another chapter would have been
negotiated.

that

(29)

Finally, the Spanish authorities that when complex cases
such as this are being negotiated, the overall aid under
negotiation is the main focus of discussion.

(30) Having made these observations, the Spanish authorities
presented data seeking to demonstrate that the special
tax credits granted were within the limits.

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(31)

They explained that this aid was directly related to the years 1995, 1996 and 1997, mainly because
significant losses were forecast for those three years. It was calculated as 28 % of net results before
tax, which amounted to ESP 57,963 billion, i.e. the ESP 58 billion finally approved as aid. The
following table shows the basis for this calculation.

1995

1996

1997

1998

TOTAL (1)

(ESP million)

Net result before tax

(90 463)

(90 458)

(27 422)

Taxes (28%)

50 299

7 664

Net result after tax

(90 463)

(40 159)

(19 758)

834

(248)

586

57 963

(1) The 1998 tax is not taken into account as positive results were expected.

(32) According to the Spanish authorities, the forecast was
carried out at the beginning of 1997, based on 1995
results and estimated results for the following period.
The deductions were calculated as 28 % of
forecast
losses. No request was made for an estimation of
possible changes in assessment bases and the tax credit
that could result.

(33) With regard to this aspect,

the Spanish authorities
consider that if the aid was calculated as 28 % of losses
before tax this is how it should be applied. It could not
be applied any other way since the shipyards did not
belong to any other financial consolidation group; and
therefore neither the AIE nor any other public body
could provide fiscal compensation for the taxable assess-
ment bases. For Spain, the fact that the shipyards were
integrated into SEPI has no practical relevance, since
during the period when the shipyards were under AIE
control, their real losses justified granting consistent aid
amounting to 28 % of net results before tax, up to the
approved limit. It owuld be wrong for the Commission
to conclude that
the yards were only entitled to a
smaller amount of aid when the actual losses were much
greater than originally foreseen.

(34) According to the

figures

the Spanish authorities
presented in their observations, the losses amounted to
ESP 90,463 billion in 1995, ESP 97,056 billion in
1996 and ESP 19,883 billion up to September 1997,
the month in which the shipyards were incorporated
losses for this period therefore
into SEPI. The total
amounted to ESP 207,402 billion and the 28 % aid
generated was 58,073 billion. However
the actual
amount of aid paid was in fact slightly less than would
have been due by applying the deduction of 28 % for
the period in question. According to the Spanish author-
ities, payment of the aid was effected in two tranches:
ESP 39,549 billion in March 1997 and ESP 18,451
billion in July 1998. The timing of these payments was
late because of budgetary constraints, which explains the
and
apparent
payments, particularly as regards the 1998 payment
which does not correspond to the 1997 results. If the
basis for calculating the entitlements had been general
tax consolidation rules, the yards would have been able
to receive interest due to the late payments. However no

inconsistency

entitlements

between

such interest payments were made, confirming that the
losses
method of calculation used was 28 % of net
before tax.

(35)

In conclusion, the Spanish authorities therefore consider
that the aid figure under the heading of tax credits is
within the amount
laid down in the Commission's
decision, with the overall amount of aid authorised also
being respected.

(36) As regards observations on the comments from third
parties under the procedure, Spain submitted its views
by letter dated 18 June 1999. It shared the concerns
expressed about
situation, and
the overall market
considered that the problems facing Danish yards were
similar to those encountered by Spanish yards against
unfair competition practices from the Far East. It denied
any suggestion that its yards had received any illegal
aids.

V. ASSESSMENT

(37)

(38)

The Commission notes that the aid it approved as being
in compliance with the provisions of the Regulation (EC)
No 1013/97 was considered compatible with the
common market as it complied with former Article
92(3)(e) of the EC Treaty. However, this applies only
provided that the conditions laid down in the Commis-
sion Decision approving the aid in accordance with the
Regulation are respected. Should the conditions for
approving the aid not be complied with, the aid falls
under the general prohibition of Article 87(1) of the EC
Treaty and may therefore be considered incompatible
with the common market, unless it can be declared
compatible for other reasons.

Regulation (EC) No 1013/97 contained a derogation
from the normal rules on aid to shipbuilding (applicable
to other Community yards)
for the publicly owned
shipyards in Spain in order to create the possibility for
these yards to undergo further comprehensive restruc-
turing and to become competitive. According to Article
1(4) of the Regulation, a package of aids, which would
otherwise have been incompatible with the shipbuilding
aid directive, may be considered compatible with the
common market subject to certain conditions. One of

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including the special

the conditions laid down in this provision is that the
overall aid package is a maximum. Moreover for each
category of aid approved,
tax
credits, the amount approved is expressly stated to be a
maximum by the use of
the words ‘up to’. This is
reflected in the Commission's August 1997 Decision,
which makes it clear that the basis for approving the
otherwise incompatible aid,
including the special tax
credits is Article 1(4) of Regulation (EC) No 1013/97.

credits together. These are different concepts and
general measure tax credits based on reintegration in
SEPI do not constitute State aids,

— the amount of ESP 58 billion special tax credits
approved was based on a forecast of net accounting
results before tax in the period 1995 to 1998. On
this basis
the approved amount has not been
exceeded.

(39) Against this background, the Commission finds it very
difficult
to undertand why the Spanish authorities
should claim that the reasons for initiating the Article
88(2) procedure are unclear. The facts of the case, which
are not in any way disputed by the Spanish authorities,
received aid totalling
in 1998 the yards
are that
ESP 18,451 billion as
tax credits, notwith-
special
standing the fact that the yards also benefited from tax
credits under general measures. In opening the proce-
dure, the Commission was therefore concerned about
the compatibility of the 1998 payment (in whole or in
part) on the grounds that this resulted in the yards
receiving the full amount of approved special tax credits
when this was supposed to be a maximum. If the yards
were also receiving tax credits under general measures
(the previous absence of which was the sole reason for
the special tax credits in the first place), the justification
for paying the maximum amount of aid seemed ques-
tionable and a possible infringement of the Commis-
sion's Decision. The Commission's doubts in this respect
have been fully confirmed by the procedure, as will be
explained below.

(40)

The three main arguments presented by Spain can be
summarised as follows:

— the various aid measures approved (including the
special tax credits) were negotiated as a package and
should be treated as such. In the case of both the
overall package and the specific provision for tax
credits the total amounts finally approved (which
were increased from those originally envisaged due
to delays in approval of the plan) have not been
exceeded, despite the fact that actual
losses have
been greater than foressen,

— the Decision did not prohibit the yards from getting
tax credits under general measures in addition to
special tax credits, nor was it subsequently modified
to that effect following the yards'
integration into
It is wrong to add special and general tax
SEPI.

(41)

(42)

So far as the first argument is concerned, it is perfectly
true that there were delays in approving the plan. This is
not however relevant for the Commission's assessment
since additional aids were provided for to take account
of the delay (including an increase in the maximum for
tax credits from ESP 48 billion to ESP 58 billion). More
importantly, the Commission notes that although the
total amount of aid was a package, a maximum for each
type of aid was claerly specified to ensure that the aid
was used for the purposes intended and was not simply
used as an operating aid to enable the yards to continue
in business as before without proper restructuring. This
is fully in line with Commission policy in such cases. It
has also been consistent Commission practice not to
allow transferability of aids
from one category to
another. Moreover this would in any case require a
qualified majority of Member States in the Council to
agree to an amendment to Regulation (EC) No 1013/97
providing the legal basis for the aids to be approved in
the first place.

The Commission also agrees that the maximum overall
amount of aid approved, including the maximum sum
allocated for tax credits, appears not
to have been
exceeded. However all the figures were maximal; they
were not automatic entitlements. It has been consistent
Commission policy that aid must not be granted if the
need for it is not clearly established. it cannot be used in
cases where other means would be sufficient to achieve
the same end without aid. Moreover aid may only be
considered compatible with the common market if it is
kept to the minimum necessary to achieve its objectives.
It cannot simply be used to improve the situation of the
recipient undertaking. Such an approach, which was
Justice judgement of 17
confirmed by the Court of
September 1980 in Case 730/79, Philip Morris BV
Commission (9), is even more imperative in cases such as
this where the aid is being granted by way of derogation
from the strict rules that normally apply to the ship-
building sector.

(43)

Linked to their argument that the aids approved should
be seen as a package, the Spanish authorities argue that
had it been known prior to the 1997 Commission
Decision that integration into SEPI would follow (and
the volume of approved special
tax credits reduced
accordingly) they would simply have proposed addi-
tional aid to make up the difference. It is difficult for the
Commission to see how such an approach could have
been reconciled with the need to keep the aid to the
strict minimum necessary (which already included loss

(9) Rec. 1980, p. 2671, paragraph 17.

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compensation as well as tax credits to reduce losses
sufficient to enable a return to viability at the end of the
restructuring). It is unclear what purpose the ‘new’ aid
could justifiably have served and it would probably have
counterpart measures
impacted on the necessary
the possible distortion to
imposed to minimise
competition.

(44) As regards Spain's second argument, the Commission
acknowledges that tax credits under nationally applic-
able general measures would not constitute State aid
provided that they apply without distinction to all firms
and to the production of all goods. The Commission is
not in any way seeking to challenge Spain's right to
apply such general measures to the publicly owned ship-
yards following their integration into a group (SEPI) able
from Spanish tax consolidation rules.
to benefit
Notwithstanding this, however,
the granting of such
credits, in addition to the special tax credits approved
under the previous decision, has resulted in the yards
receiving greater public financial support than was fore-
seen when the aid was approved. The justification for
approving the special tax credits was that general tax
credits would not be available to the yards. Examining
the availability of general tax credits granted is thus
highly relevant for determining whether all the special
tax credits can be justified. It is not a question of adding
together measures that should not be added together,
but an appropriate basis for assessing whether any
infringement of the Commission's Decision in respect of
special tax credits is involved.

the original Decision were
terms and conditions of
perfectly clear. Moreover since the full amount of special
tax credits had not been paid at the time of the yards'
absorption into SEPI, there were no grounds for the
Commission not to assume that following this event,
and the resulting provision of tax credits under general
tax consolidation rules, the maximum approved amount
of special tax credits would not be needed. As soon as
the Commission became aware of the possible breach of
receipt of
the Decision (after
the September 1998
July 1998 aid
confirming the
monitoring report
payment and of the final 1997 accounts confirming the
tax credits under general rules), it began the preliminary
investigation which led to the opening of the Article
88(2) procedure.

the

because

amount

approved was

(47) As regards Spain's third main argument, the method of
calculation for estimating the amount of aid needed in
the form of special tax credits, the Commission does not
dispute that the estimates submitted at the time by the
Spanish authorities were based on net results before tax.
such,
The Commission accepted these estimates as
precisely
a
maximum. In fact, as explained below, under spanish tax
law (including the specific law passed to allow the yards
to get special tax credits) the basis for determining tax
the before tax accounting
credit entitlements is not
results, but the amount of the tax base. However the fact
that the amount was stated to be a maximum meant
that it was not necessary at the time to scrutinise in
detail the method used to calculate the tax credits. What
matters for the purposes of controlling the aids, (and
ultimately the effect on competition) is the amount of
actual
losses which could be used in practice for tax
credit purposes.

(48)

(45)

In that context, the Commission would underline, as
noted above, that the amount of tax credits approved by
the Council and the Commission as aid was expressly
stated to be a maximum, not an automatic entitlement.
As was made clear in the Commission's proposals to the
(points 3.9, 5.21 and 5.22 of Annex 3 to
Council
COM(97) 132 final), it was assumed that no tax credits
under general measures would be possible. It was clearly
not the intention to allow the yards to obtain special tax
credits as well as credits under general measures. Had it
the
been known that such a possibility could arise,
volume of aid proved at the time under this head would
have been reduced accordingly.

In that context it should be noted that Law 13/96,
enabling the yards to benefit from special tax credits,
states that companies that before 31 December 1994
were classified within a group capable of making a
consolidated tax declaration and therefore with a right
to compensation for losses from profits generated by
other companies in the same group, and have lost the
right to such possibilities, shall receive from the State
the same amount of company tax that would have been
due to them had they remained in a tax consolidation
system, in accordance with current legislation. Article 27
of Law 43/95 of 27 December on company tax law (10)
makes it clear that the amount to be paid shall be
calculated on the taxable base, which Article 10 of the
same law defines as the accounting result, corrected by
permanent differences
and
temporary differences (for example restructuring provi-
sions not allowed for when costs generated but only
when paid subsequently). It is evident from the audited
accounts for the separate yards that
tax
credits corresponding to 1995 and 1996 losses were
determined on this basis and not on the net results
before tax. It is also clear from the 1997 accounts that
the tax credit granted under general tax consolidation
rules was calculated on exactly the same basis.

(i.e. non-eligible

the special

items)

(46)

Spain criticises the Commission for not drawing atten-
tion to the implications of the integration of the yards
into SEPI. However the onus is on the Member State to
whom a Decision is addressed to ensure that it is fully
respected. The Commission did not consider it necessary
or appropriate to amend the previous Decision, since the

(10) BOE 310 of 28 December 1995, p. 37072.

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(49)

The Spanish calculation of the amount of aid justified does not therefore correspond to the actual
taxable results. Nor does it explain why any payment in 1998 on the basis of Law 13/96 was
justified given the SEPI-generated general tax credit in 1998 which, in accordance with Spanish fiscal
law does not correspond to the results in the last four months of 1997. (i.e. the period as from the
yard's integration into SEPI), but to the full year. The Spanish claim that the aid was justified by the
worse than expected results is also debatable. Even on the basis of their own figures actual net results
before tax in 1995 and 1996 were not significantly different from those foreseen under the plan.
Losses in 1997 (and 1998) were indeed higher, but as indicated above (and confirmed below) these
were fully covered by general tax credits.

(50)

The Commission has made an analysis on the basis of the taxable base according to the published
audited accounts, and calculated what tax credits the yards were entitled to receive in the period
1995 to 1997 on the basis of each yard being taxed separately. On this basis it is estimated that the
entitlement was as follows (payments would normally be made in the year following entitlement):

1995

1996

1997

(ESP million)

Result before tax (per accounts)

(99 100)

(103 034)

(41 398)

Add permament differences

Add temporary differences

9 239

42 376

6 663

(17 416)

6 048

(7 728)

Taxable result

Credit at 28 %

(47 485)

(113 787)

(43 078)

13 296

31 860

12 062

(51)

(52)

The total entitlement for the three years in thus ESP 52,218 billion, of which ESP 45,156 billion
corresponds to 1995 and 1996 combined. However account needs to be taken of certain pre-1995
temporary differences amounting to ESP 5,607 billion, thereby reducing the relevant figure for 1995
to 1996 ESP 39,549 billion.

The total of special and general
tax credits actually paid amounted to ESP 70,062 billion,
comprising ESP 58 billion in special tax credits plus the above 1997 tax credit paid in 1998 under
general measures. As acknowledged above, the latter general tax credit, which, in accordance with
Spanish fiscal law does not correspond to the results in the last four months of 1997 (i.e. the period
as from the yards' integration into SEPI), but to the full year, does not constitute aid. The only
question that therefore needs to be examined is whether the tax credits due for 1995 and 1996 were
covered by aid in the form of special tax credits and if so to what extent the ESP 58 billion paid up
to 1998 can be justified on this basis. As noted above, the payments actually received were
ESP 39,549 billion in March 1997 and ESP 18,451 billion in July 1998. The 1997 payment
corresponds exactly to the 1995/1996 entitlement. There is no apparent justification under the
applicable tax laws for the 1998 payment since the 1997 entitlement was covered in full by a tax
credit under general measures.

There remains the possibility that the yards might have been owed interest due to late payments of
the 1995 and 1996 tax credit entitlements. This has been alluded to by the Spanish authorities in
presenting their figures, but in a negative sense, stating that no such interest payments were made
because the basis of determining the credits due was not normal tax consolidation rules (which
provide for such payments). As noted above, the Commission does not accept the Spanish figures.
Nor does it accept that the credits were not calculated in accordance with general tax consolidation
rules. On the basis of the information available the Commission is unable to judge whether the yards
were legally entitled to such interest payments in the event that tax credits were paid late. However
even if that were so, and even if it were accepted that the 1995/1996 entitlement was paid late
(which may not be the case since data provided by the Spanish authorities prior to the Commission
Decision, supported by data submitted by the yards within the framework of the monitoring, appear
to suggest that there may have in fact been an anticipated payment in 1996), interest due, if any,
would not be such as to explain the payment of ESP 18,451 billion in 1998.

12. 2. 2000

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Official Journal of the European Communities

L 37/29

(53)

(54)

(55)

(56)

(57)

It must therefore be concluded that the yards received their full entitlement to tax credits on the
basis of the special tax credits paid in 1997 (corresponding to the results in 1995/1996) and the
general tax credit paid in 1998 (corresponding to the 1997 results), despite the greater than foreseen
losses. The 1998 payment of special tax credits must be considered a breach of the Commission's
Decision since it cannot be justified as a special tax credit. The ESP 18,451 billion seems to have
served an altogether different purpose, being used effecitvely as an operating aid to enable the yards
further to reduce their losses. Under Article 4 of Council directive 90/684/EEC, which applied during
the period in question, all operating aid was subject to a common maximum aid ceiling. As far as the
Commission is aware the public yards have always received contract-related aid up to this maximum
ceiling,

leaving no headroom for any additional aid.

Therefore, the Commission concludes that the payament of ESP 18,451 billion in 1998 was no
longer compatible with Article 87(3)(e) of the EC-Treaty. As no other basis of compatibility exists or
has indeed been invoked by Spain, this aid is incompatible with the common market pursuant to
Article 87(1) of the EC-Treaty.

The Commission notes that aid which is incompatible with the common market shall be recovered.
The aim of recovery of aid is to seek to re-create the status quo ex ante by annulling the negative
effect on competition caused by the illegal aid.

The Commission stresses that the sums to be recovered shall bear interest from the date on which
they were made available to the recipient until their actual recovery. The recovery shall be effected in
accordance with the procedures of national law and the interest shall be calculated on the basis of
the reference rate used for calculating the grant equivalent of regional aids.

VI. CONCLUSIONS

The Commission concludes that the publicly owned yards in Spain received aid in the form of
special tax credits of ESP 18,451 billion that cannot legally be justified. The overall limit on such aid
payment has not been exceeded, but was a maximum. Within that maximum the aid was to
correspond only to taxable losses and was on the assumption that the yards were unable to benefit
from tax credits under Spain's general tax consolidation system. This was as an essential condition
for approval of the aid and thereby for the compatibility of the aid with the common market
pursuant to Article 87(3)(e) of the EC Treaty.

(58)

Since it is the opinion of the Commission that ESP 18,451 billion is no longer compatible with
Article 87(3)(e) of the EC Treaty and thereby incompatible with the common market pursuant to
Article 87(1) of the EC Treaty, this sum shall be recovered. The sum to be recovered shall bear
interest from the date on which the aid was made available to the recipient until actual recovery,

HAS ADOPTED THIS DECISION:

Article 1

State

The
aid granted by
EUR 110 892 743,38 (ESP 18,451 billion),

Spain in favour of

its publicly owned shipyards

amount

to

is incompatible with the common market.

Article 2

1.

Spain shall take the necessary measures to recover from the recipient the aid referred to in article 1.

2.
Recovery shall be effected in accordance with the procedures of national law. The aid to be recovered
shall bear interest from the date on which it was made available to the recipient until recovery. Interest shall
be calculated on the basis of the reference rate used for calculating the grant equivalent of regional aids.

L 37/30

EN

Official Journal of the European Communities

12. 2. 2000

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

Article 3

This Decision is addressed to the Kingdom of Spain.

Article 4

Done at Brussels, 26 October 1999.

For the Commission

Mario MONTI

Member of the Commission