2001/142/EC: Commission Decision of 31 October 2000 amending Decision 97/21/ECSC, EC on State aid implemented in favour of Compañía Española de Tubos por Extrusión SA, located in Llodio, Álava (Text with EEA relevance) (notified under document number C(2000) 3268)
Date: 2000-10-31
Institutions: European Commission
Subjects: Spain, State aid, debt, industrial credit, interest rate subsidy, iron and steel industry

L 52/26

EN

Official Journal of the European Communities

22.2.2001

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 31 October 2000

amending Decision 97/21/ECSC, EC on State aid implemented in favour of Compañía Española de
Tubos por Extrusión SA, located in Llodio, Álava

(notified under document number C(2000) 3268)

(Only the Spanish text is authentic)

(Text with EEA relevance)

(2001/142/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Coal and
Steel Community, and,

in particular Article 4(c) thereof,

between these companies and the Social Security Fund,
among other measures, constituted compatible State aid
within the meaning of the former Article 92(1) of the EC
Treaty and Article 1 of Decision 3855/91/ECSC.

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

(2)

Having regard to Commission Decision 2496/96/ECSC of 18
December 1996 establishing Community rules for State aid to
the steel

in particular Article 6(5) thereof (1),

industry and,

Having called on interested parties to submit their comments
pursuant to the provisions cited above (2),

Whereas:

I. Background

A. Commission Decision 97/21/ECSC, EC (3)

(1)

By its decision to open the procedure provided for
pursuant to the former Article 93(2) of the EC Treaty
and Article 6(4) of Commission Decision 3855/91/
ECSC (4) regarding certain measures granted in favour of
Compañía Española de Tubos por Extrusión SA (herein-
after ‘Tubacex’) and its steel-making subsidiary, Acería de
Álava (5), the Commission expressed its doubts whether
the repayment agreements between these companies and
the wages fund Fogasa and the rescheduling agreement

(1) OJ L 338, 28.12.1996, p. 42.
(2) OJ C 110, 15.4.2000, p. 12.
(3) OJ L 8, 11.1.1997, p. 14.
(4) OJ L 362, 31.12.1991, p. 57.
(5) OJ C 282, 26.10.1995, p. 3.

By its Decision 97/21/ECSC, EC the Commission came
to the conclusion that
itemised
below, were not consistent with prevailing market
conditions in so far as the rate of interest were below
market rates. Accordingly, the Decision stated that these
measures were incompatible with the common market:

the these measures,

(Fogasa),

(a) the 10 July 1992 loan agreement between the
fund
and
wage
guarantee
Acería de Álava
covering ESP 444 327 300 in
principal, as amended by agreements of 8 February
1993
in
principal ESP 376 194 872 and ESP 372 000 000
respectively);

(covering

February

Tubacex

1994

and

16

(b) the 10 March 1994 loan agreement between
Fogasa, Tubacex and Acería de Álava covering
ESP 465 727 750 in principal, as amended by
the
agreement of 3 October 1994 covering
ESP 469 491 521 in principal;

(c) the agreement of 25 March 1994 between the Social
Security Treasury and Acería de Álava to reschedule
debts amounting to ESP 274 409 604;

(d) the agreement of 12 April 1994 between the Social
Security Treasury and Tubacex to reschedule debts
amounting to ESP 1 409 957 329.

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(3)

(4)

(5)

(6)

(7)

(8)

B. The judgement of the Court of Justice of the European
Communities of 29 April 1999 in case C-342/96, Spain
v Commission (6) relating to State aid granted by Spain to
Tubacex

Following an application by Spain, the Court of Justice
delivered its judgment
in the abovementioned case,
annulling Decision 97/21/ECSC, EC, which had declared
as incompatible aid to Tubacex the rescheduling agree-
ments between Tubacex and the Social Security Treasury
and the repayment agreements between Tubacex and the
Fogasa, in so far as the rate of interest was below market
rates.

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

Similarly, the Social Security Fund may agree to resche-
duling 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 to 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 due 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.

the Court annulled
Based on the above arguments,
Decision 97/21/ECSC, EC to the extent that it declared
the measures granted in favour of Tubacex to be incom-
patible with the EC Treaty. (Since the decision as regards
incompatibility of the measures with the Steel Aids Code
(to the extent that these measures also benefited Acería
de Álava) had not been challenged, the Court did not
annul that part of the Decision).

II. Procedure

(9)

Having examined the Court judgment, the Commission
decided to (re-)open the proceedings that had preceded
the annulled decision.

(10)

(11)

The Commission informed the Spanish Government of
its decision by letter dated 16 February 2000 (SG(2000)
D/101515).

The Commission decision to initiate the procedure was
published in the Official Journal of the European Communi-
ties (7). The Commission invited interested parties to
submit their comments on the re-analysis of the meas-
ures in the light of the Court judgment and, conse-
its
quently, on the envisaged partial
Decision 97/21/ECSC, EC.

revocation of

III. Comments from interested parties

(12) No comments were submitted by interested parties.

IV. Comments from Spain

(13)

(14)

By letter dated 20 March 2000, the Spanish Government
replied to the Commission's letter opening the proce-
dure. The main points were as follows.

The Spanish authorities disagreed with the decision of
the Commission to open the formal investigation proce-
dure inasmuch in their view the investigation procedure
was not necessary to carry out the envisaged partial
revocation of Decision 97/21/ECSC, EC.

(15) As regards the rescheduling agreements between the
companies and the Social Security Treasury, the Spanish
authorities did not support the view of the Commission
that ‘it seems probable that, in the case of out-of-court
agreements concerned with or having the effect of
rescheduling pre-existing debts, the logic of the creditor's
behaviour would lead him to seek to obtain from the
debtor a rate of interest on arrears that would be higher
interest rate as compensation for not
than the legal
pursuing the recovery of the debt by legal means’. On
the contrary, they claimed that, due 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 agree an interest
rate lower than the legal

interest rate.

(16)

Thus, the Spanish authorities reiterated their argument
the granting of deferments applying the legal
that
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.

(17) Moreover, the Spanish Government recalled that while a
private creditor can agree any interest rate with the
debtor,
the Social Security authorities are bound by
Article 20 of Social Security General Law (8) which lays
down that the legal interest rate is to be applied in the
rescheduling agreements of debt.

(6) Rec. 1999, p. I-2459

(7) See footnote 2.
(8) OBE 154, 20.6.1994, p. 20658.

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(18)

The Commission noted in the opening decision that the
comparison of the terms contained in the private cred-
itors' agreement in October 1993 and the terms of the
rescheduling agreement between the Social Security
authorities and the companies may not constitute a
correct application of the ‘private creditor’ test as defined
by the Court. In this respect, the Spanish authorities
stated that due to legal constrains of public administra-
tion, circumstances of public creditors cannot be similar
to those of private creditors indeed. However,
they
emphasised that despite the different circumstances, the
agreements between the Social Security authorities/
Fogasa and the companies were not more favourable
than those reached in the private creditors' agreement,
on the contrary they were much less generous.

(19)

Finally,
the Spanish authorities reiterated the views
expressed under the procedure which led to Decision
97/21/ECSC,EC and in their submissions to the Court.

V. Assessment

debt owed by the companies to the public authorities.
Thus, in the repayment agreements of Fogasa and in the
rescheduling agreements of Social Security Fund, the
State did not act as a public investor whose conduct
must be compared to 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 due 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
due 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 this particular case the separate agreements between
Fogasa and the companies and between Social Security
and the companies did not accord the companies any
more generous treatment
reached in the
private creditors' agreement reached in October 1993.

than that

(20)

It should be recalled that although the Court of Justice
annulled only those parts of Decision 97/21/ECSC, EC
relating to the measures granted to Tubacex,
the
Commission considers that the Court's analysis of the
measures granted in favour of Tubacex in relation to
Article 87(1) of the EC Treaty is fully applicable to the
ECSC part of Decision 97/21/ECSC, EC in respect of the
measures granted in favour of Acería de Álava. In order
to safeguard the rights of Spain and all other interested
the Commission therefore signalled in its
parties,
(re-)opening of
it
would re-examine that part of the previous decision with
a view to partially revoking it and to adopt a new
decision on the basis of
re-assessment. The
comments received under the procedure confirm that
this approach is appropriate.

the investigation proceedings that

this

(21)

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 97/21/ECSC, EC
constitute State aid within the meaning of Article 87(1)
of the EC Treaty and Article 4(c) of the ECSC Treaty. If
any such aid were found to exist, the Commission would
then need to consider whether it was compatible with
the common market.

(22)

It should firstly be noted that
the companies were
already subject to the pre-existing statutory obligation to
repay the wages advanced by Fogasa and to pay their
debts in respect of social security contributions. The
agreements in question did not therefore create any new

their status,

(25) However, the circumstances of those private creditors
were not the same as those of public creditors because
the securities provided,, etc. Conse-
of
quently, the Commission considers that such a compara-
tive approach does not constitute in this particular case
a correct application of the ‘private creditors’ test as
defined by the Court, which as it subsequently under-
lined in its judgment of 29 June 1999 in the DMT case
(C-256/97) (9), supposes that the public creditors' behav-
iour under examination should be compared with that
of a hypothetical private creditor finding himself, as far
as possible,

in the same situation.

(26)

The Commission notes that Article 1108 of the Spanish
Civil Code establishes that the legal interest rate is that
one which applies for compensation of damage and
harm when the debtor delays the payment and no deter-
mined interest rate has been agreed. In addition, Article
312 of the Spanish Commercial Law rules that in case of
a loan in money and in the absence of any specific
agreement between the parties, the debtor is obliged to
repay the legal value (valor legal) of the debt at the time
the repayment is done. Therefore, the legal interest rate
would be the highest rate a private creditor could expect
to obtain if he pursues the recovery of the debt by legal
means.

(27) 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.

(9) Rec. 1999, p. I-3913.

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(28)

(29)

(30)

Finally, the particular circumstances of the companies at
the time the rescheduling agreements with Fogasa and
the Social Security Fund were made should be under-
lined. They had been in serious financial difficulties,
resulting in the suspension of all debt repayments and
their future existence. By not
serious doubts about
proceeding to execution and thereby possibly provoking
the liquidation of the company, the public creditors
acted in such a way as to maximise the 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 the companies,
Spain was seeking to maximise the recovery of the sums
loss. Conse-
due to it without suffering any financial
quently, Spain acted as a hypothetical private creditor,
which is in the same position vis-a-vis the companies,
would have acted.

Conclusion

In the light of the above, the re-assessment of the alleged
aid deemed as incompatible with the common market
by Decision 97/21/ECSC, EC leads to the conclusion that
the repayment agreements between Fogasa and Tubacex
and the debt rescheduling agreements between Social
Security and Tubacex do not constitute State aid. The
re-assessment leads to the same conclusion in relation to
the agreements with Acería de Álava.

‘Article 1

The following measures which Spain has implemented in
favour of Compañía Espanola de Tubos por Extrusión
(Tubacex) and its steel-making subsidiary Acería de Álava do
not constitute State aid:

(a) the 10 July 1992 loan agreement between the wage
guarantee fund (Fogasa), Tubacex and Acería de Álava
covering ESP 444 327 300 in principal, as amended by
agreements of 8 February 1993 and 16 February 1994
(covering
and
principal
ESP 372 000 000 respectively);

ESP 376 194 872

of

and

(b) the 10 March 1994 loan agreement between Fogasa,
covering
Tubacex
ESP 465 727 750 in principal, as amended by the
agreement
covering
of
ESP 469 491 521 in principal;

October

Acería

Álava

1994

de

3

(c) the agreement of 25 March 1994 between the Social
Security Fund and Acería de Álava to reschedule debts
amounting to ESP 274 409 604;

(d) the agreement of 12 April 1994 between the Social
Fund and Tubacex to reschedule debts

Security
amounting to ESP 1 409 957 329.’

2. Article 2 is revoked.

Article 2

(31)

Consequently, the Commission considers that it should
amend its Decision 97/21/ECSC, EC accordingly.

This Decision is addressed to the Kingdom of Spain.

HAS ADOPTED THIS DECISION:

Done at Brussels, 31 October 2000.

Article 1

Decision 97/21/ECSC, EC is amended as follows:

1. Article 1 is replaced by:

For the Commission

Mario MONTI

Member of the Commission