2001/43/EC: Commission Decision of 20 September 2000 amending Commission Decision 1999/395/EC on State aid implemented by Spain in favour of Sniace SA, located in Torrelavega, Cantabria (Text with EEA relevance) (notified under document number C(2000) 2741)
Date: 2000-09-20
Institutions: European Commission
Subjects: Cantabria, Spain, State aid, application of EU law, regional aid, textile industry

L 11/46

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Official Journal of the European Communities

16.1.2001

COMMISSION DECISION

of 20 September 2000

amending Commission Decision 1999/395/EC on State aid implemented by Spain in favour of
Sniace SA, located in Torrelavega, Cantabria

(notified under document number C(2000) 2741)

(Only the Spanish text is authentic)

(Text with EEA relevance)

(2001/43/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Communities and, in particular, the first paragraph of Article
88(2),

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

Whereas:

(1)

(2)

(3)

I. BACKGROUND

A. Commission Decision 1999/395/EC (2)

‘Sniace’),

By its decision to open the procedure provided for
pursuant to Article 88(2) of the Treaty regarding certain
measures undertaken in favour of Sociedad Nacional de
Industrias y Aplicaciones de Celulosa Espanola SA (3),
(hereinafter
the Commission expressed its
the repayment agreements between
doubts whether
Sniace and the wages fund Fogasa and the rescheduling
agreement between Sniace and the Social Security
Treasury, among other measures, constituted compatible
State aid within the meaning of the Article 87(1) of the
Treaty.

By its Decision 1999/395/EC, the Commission came to
the conclusion that
the treatment of Sniace's debts,
through the abovementioned agreements, were not
consistent with prevailing market conditions in so far as
the rate of interest was below market rates. Accordingly,
the Decision stated that,
the abovementioned agree-
ments were incompatible with the common market.

Spain challenged Decision 1999/395/EC before the
Court of
the Court
Justice by application lodged at
Registry on 24 December 1998 (Case C-479/98). The
Decision was also challenged by the beneficiary, Sniace,
before the Court of First Instance by application lodged
at the Court Registry on 24 August 1999 (Case T-190/
99). Both cases are currently pending.

B. The judgment of the Court of Justice of the Euro-
pean Communities of 29 April 1999 in case C-
342/96, Spain v. Commission (4), relating to State
aid granted by Spain to Tubacex (hereinafter the
‘Tubacex judgment’)

State aid granted by Spain in favour of Tubacex (herein-
after
the Tubacex judgment). The Court annulled
Commission Decision 97/21/ECSC,EC (5), which had
declared as incompatible aid to Tubacex the resche-
duling agreements between Tubacex and the Social
Security Treasury
agreements
between Tubacex and the Fogasa, in so far as the rate of
interest was below market rates.

repayment

and the

(5)

(6)

(7)

(8)

In its ruling the Court concluded that Fogasa does not
award loans to undertakings in liquidation or in difficul-
ties, but settles all valid claims put forward by employees
with money which it pays and then recovers from the
undertakings. Moreover, Fogasa may conclude repay-
ment agreements enabling it to reschedule the sums
payable or to make them payable by instalments.

Similarly, the Social Security Fund may agree to resche-
dule the payment of debts in respect of social security
contributions or to their payment by instalments.

The Court noted that in these repayment and resche-
duling agreements, the State did not act as a public
investor whose conduct must be compared with the
conduct of a private investor laying out capital with a
view to realising a profit but as a public creditor which,
like private creditor, seeks to recover sums owing to it.

The interest normally applicable to that type of debt is
intended to make good the loss suffered by the creditor
because of the debtor's delay in performing its obliga-
tion to pay off its debt, namely default interest. If the
rate of default interest applied to the debts of a public
creditor is lower than the rate charged for the debts
owed to a private creditor,
it is the latter rate which
ought to be charged.

(4)

On 29 April 1999 the Court of Justice delivered its
judgement in Case C-342/96 Spain v. Commission on

(1) OJ C 110, 15.4.2000, p. 33.
(2) OJ L 149, 16.6.1999, p. 40.
(3) OJ C 49, 14.2.1998, p. 2.
(4) [1999] ECR I-2459.

(9)

Based on the above arguments,
the Court annulled
Decision 97/21/ECSC,EC to the extent that it declared
the measures to be incompatible with the EC Treaty.

(5) OJ L 8, 11.1.1997, p. 14.

(11)

(12)

(13)

(14)

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II. PROCEDURE

(10) Having reexamined its Decision 1999/395/EC in the
light of the Tubacex judgment, the Commission decided
to initiate the procedure laid down in Article 88(2) of
the Treaty. The case was registered under C5/2000.

(17) Moreover, the Spanish Government recalls that while a
private creditor can agree any interest rate with the
debtor,
the Social Security authorities are bound by
Article 20 of the Social Security General Laws (7) which
states that the legal interest rate is to be applied in the
rescheduling agreements of debt.

The Commission informed the Spanish Government of
its decision by letter dated 16 February 2000 (SG(2000)
D/101521).

(18)

The Commission Decision to initiate the procedure was
published in the Official Journal of the European Communi-
ties (6). The Commission invited interested parties to
submit their comments on the re-analysis of the meas-
ures in the light of the Tubacex judgment and, conse-
quently, on the envisaged partial
its
Decision 1999/395/EC.

revocation of

III. COMMENTS FROM INTERESTED PARTIES

No comments were submitted by interested parties.

(19)

the comparison of

The Commission considered in the opening decision
the terms contained in the
that
private creditors' agreement in October 1996 with the
terms of the rescheduling agreement between the Social
Security Treasury and Sniace may not constitute a
correct application of the ‘private creditor’ test as defined
In this regard, the Spanish authorities
by the Court.
stated that owing to legal constrains of public adminis-
tration, the circumstances of public creditors cannot be
similar to those of private creditors. However,
they
emphasise that in spite of the different circumstances, it
should be noted that the agreements between the Social
Security Treasury and Sniace and agreements between
Fogasa and Sniace were less generous than those reached
in the private creditors' agreement.

Finally,
the Spanish authorities reiterated the views
expressed under the procedure which led to Decision
1999/395/EC.

IV. COMMENTS FROM SPAIN

By letter registered 19 April 2000 under A/33374, the
Spanish Government replied to the Commission's letter
opening the procedure. The main points were as follows.

The Spanish authorities disagree with the decision of the
Commission to open the formal investigation procedure
inasmuch as in their view the investigation procedure
was not necessary to carry out the envisaged partial
revocation of Decision 1999/395/EC.

(15) As regards the rescheduling agreement between Sniace
and the Social Security Treasury the Spanish authorities
do not support the view of the Commission that ‘it
seems probable that, in the case of out of court agree-
ments concerned with or having the effect of resche-
duling pre-existing debts,
the creditor's
behaviour would lead him to seek to obtain from the
debtor a rate of interest on arrears that would be higher
than the legal
interest rate as compensation for not
pursuing the recovery of the debt by legal means.’ On
the contrary, they claim that, owing to the financial
situation of the company as well as costs, delay and
uncertainty involved in legal proceedings, out of court
agreements would frequently lead to agreeing an interest
rate lower than the legal

the logic of

interest rate.

(16)

Thus, the Spanish authorities reiterate their argument
that
the granting of deferments applying the legal
interest rate protects the interests of the social-security
system,
in terms of recovering debts, better than any
other form of action that a private creditor could have
taken.

V. ASSESSMENT

(20)

(21)

(22)

The Commission must consider whether or not any of
the elements deemed as incompatible with the common
market set out in Article 1 of Decision 1999/395/EC
constitute State aid within the meaning of Article 87(1)
of the Treaty. If any such aid were found to exist, the
Commission would then need to consider whether it
was compatible with the common market.

The factual and legal context of the Tubacex judgment is
similar to the one raised by Spain before the Court of
Justice in Case C-479/98 and by Sniace before the Court
Instance in Case T-190/99 against Decision
of First
1999/395/EC. The Commission considers that the argu-
ments developed by the Court in this judgment are
relevant with equal force to the agreements between
Sniace and Fogasa and between Sniace and the Social
Security Treasury which were deemed to contain State
aid in Decision 1999/395/EC.

It should firstly be noted that Sniace was already subject
to the pre-existing statutory obligation to repay the
wages advanced by Fogasa and to pay its debts in
respect of social security contributions. The agreements
in question did not therefore create any new debt owed
by Sniace to the public authorities. Thus, in the repay-
ment agreements of Fogasa and in the rescheduling
agreements of the Social Security Treasury, the State did
not act as a public investor whose conduct must be

(6) See footnote 1.

(7) BOE 154, 20.6.1994, p. 20658.

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compared with that of a private investor providing
capital with a view to realising a profit but as a public
creditor which,
like a private creditor, may seek to
recover sums owing to it. Consequently, in assessing the
contested State aid, the Commission has to compare the
default rate of interest applied to the debts of the public
creditor with the rate charged for the debts owed to
private creditors acting in similar circumstances.

(23) However it should be noted that particular circum-
stances of debtors and creditors are likely to prove prob-
lematic for the determination of a common applicable
behaviour of private creditors seeking to recover sums
owing to them. Consequently, the Commission has to
base its assessment on an analysis of the behaviour of
private creditors on a case by case approach.

(24)

In the particular case of Sniace, following an application
made by the company in 1992, the Spanish Courts
ordered suspension of payments in March 1993. By
using their abstention rights (8), public creditors did not
subscribe to the creditors agreement of October 1996
within the framework of the suspension of payments
procedure agreement. As the Commission noted in the
opening decision (9), by using their abstention rights, the
public creditors were protecting their claims.

(25)

The separate agreements between Fogasa and Sniace and
between the Social Security Treasury and Sniace did not
accord Sniace any more generous treatment than that
reached in the private creditors' agreement.

considers

(26) However, the circumstances of the private creditors were
not the same as those of public creditors because of
their status, the securities provided and abstention rights
that the public institutions enjoyed. Consequently, the
comparative
that
Commission
approach does not constitute in this particular case a
correct application of the ‘private creditor’ test as defined
by the Court, which as it subsequently underlined in its
judgment of 29 June 1999 in the DMT case (C-256/
97) (10), supposes that the public creditors' behaviour
under examination should be compared with that of a
hypothetical private creditor finding himself, as far as
possible,

in the same situation.

such

a

the legal value (‘valor legal’) of the debt at the time the
repayment is made. Therefore, legal interest rate would
be the highest rate a private creditor could expect to
obtain if he pursued the recovery of the debt by legal
means.

(28) As a consequence, a private creditor could not have
obtained from the debtor a rate of interest on arrears
that would be higher than the legal interest rate as a
compensation for not pursuing the recovery of the debt
by legal means.

(29)

(30)

Finally, the particular circumstances of Sniace at the time
the rescheduling agreements with Fogasa and the Social
Security Treasury were made should be underlined. The
company had been in serious
financial difficulties,
resulting in the suspension of all debt repayments and
there were serious doubts about its future existence. As
the Commission noted in its Decision 1999/395/EC, by
not proceeding to execution and thereby possibly
provoking the liquidation of the company, the Social
Security Treasury acted in such a way as to maximise its
prospects of recovering the debt.

In the light of the above, the Commission can accept
that in this particular case, by rescheduling and applying
the legal interest rate to debts owed by Sniace, Spain was
seeking to maximise the recovery of the sums due to it
without suffering any financial loss. Consequently, Spain
acted as a hypothetical private creditor would have
done, vis-a-vis Sniace.

CONCLUSION

(31)

In the light of the above, the reassessment of the alleged
aid deemed as incompatible with the common market
Decision 1999/395/EC leads to the conclusion that the
repayment agreements between Fogasa and Sniace and
the debt rescheduling agreement between the Social
Security Treasury and Sniace do not constitute State aid.

(32) Accordingly, the Commission considers it appropriate to

amend its Decision 1999/395/EC,

(27)

The Commission notes that Article 1108 of the Spanish
Civil Code establishes that the legal interest rate is that
which applies for compensation of damage and harm
when the debtor delays the payment and no determined
interest rate has been agreed. In addition, Article 312 of
the Spanish Commercial Law rules that in case of a
money loan and in the absence of any specific agree-
ment between the parties, the debtor is obliged to repay

(8) According to Spanish law, public institutions such as the Social
Security Treasury enjoy the privilege of not subscribing to a credi-
tors agreement.
(9) See footnote 3.
(10) [1999] ECR I-3913.

HAS ADOPTED THIS DECISION:

Article 1

Decision 1999/395/EC is hereby amended as follows:

1. The first subparagraph of Article 1 is replaced by the

following:

‘The following measures which Spain has implemented in
favour of Sociedad Nacional de Industrias y Aplicaciones de
Celulosa Española SA (Sniace) do not constitute State aid:

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(a) the agreement of 8 March 1996 (as amended by the
agreement of 7 May 1996) between Sniace and the
Social Security Treasury to reschedule debts covering
ESP 2 903 381 848 (EUR 17 449 676,34) in principal,
as further amended by the agreement of 30 September
1997 to reschedule debts covering ESP 3 510 387 323
(EUR 21 097 852,72) in principal;

2. Article 2 is revoked.

Article 2

This Decision is addressed to the Kingdom of Spain.

Done at Brussels, 20 September 2000.

(b) the agreements of 5 November 1993 and 31 October
guarantee
ESP 1 362 708 700
ESP 339 459 878

1995 between Sniace
Fogasa
fund
(EUR 8 190 044,23)
(EUR 2 040 194,96) respectively’

and
covering
and

the wage

For the Commission

Mario MONTI

Member of the Commission