2001/247/EC: Commission Decision of 29 November 2000 on the aid scheme implemented by Spain in favour of the shipping company Ferries Golfo de Vizcaya (Text with EEA relevance) (notified under document number C(2000) 3931)
Date: 2000-11-29
Institutions: European Commission
Subjects: Spain, State aid, control of State aid, infringement of EU law, maritime transport

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 29 November 2000

on the aid scheme implemented by Spain in favour of the shipping company Ferries Golfo de
Vizcaya

(notified under document number C(2000) 3931)

(Only the Spanish text is authentic)

(Text with EEA relevance)

(2001/247/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, in accordance with the abovementioned Articles, called
on interested parties to submit their comments (1), and having
regard to those comments,

Whereas:

I. PROCEDURE

(1)

(2)

lodged on 21 September 1992,

the
By complaint
Commission was informed that Spain had introduced an
aid scheme in favour of the shipping company Ferries
Golfo de Vizcaya (letter of intent of 9 July 1992). Three
further complaints were made on 16 March, 13 April
and 19 April 1993. By letter dated 1 April 1993, Spain
furnished the Commission with additional information.

By letter dated 13 October 1993,
the Commission
informed Spain of its decision to initiate the procedure
laid down in Article 93(2) (now Article 88(2)) of the
Treaty in respect of this aid (case C 32/93). On 10
November 1993 Spain indicated that the aid would be

(1) OJ C 70, 8.3.1994, p. 5; OJ C 233, 14.8.1999, p. 22.

suspended. The Commission decision to initiate the
procedure was published in the Official
Journal of the
European Communities (2). The Commission invited inter-
ested parties to submit their comments on the aid. The
Commission received comments from interested parties.
The Spanish authorities submitted their arguments by
letter dated 25 January 1994.

The lawyers of Ferries Golfo de Vizcaya informed the
Commission on 27 March 1995 that the aid scheme had
been amended on 7 March 1995. On 7 June 1995 the
Commission decided to close the procedure concluding
informed the Spanish
that no aid was involved.
Government of its decision by letter of 11 July 1995 (3).

It

In its judgment of 28 January 1999 in Case T-14/96,
Bretagne Angleterre Irlande (BAI) v Commission (4),
the
Court of First Instance of the European Communities
annulled the Commission Decision of 7 June 1995.

Following the Court judgment, the Commission decided
on 26 May 1999 to extend the procedure initiated in
1993 in respect of the Agreement of 9 July 1992 (the
first Agreement) to include the Agreement concluded
between the District Council of Vizcaya and Ferries
Golfo de Vizcaya on 7 March 1995 (the second Agree-
ment) and informed Spain of its decision by letter of 16
June 1999.

(3)

(4)

(5)

(2) See first reference in footnote 1.
(3) OJ C 321, 1.12.1995, p. 4.
(4) 1999 ECR II-139.

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(6)

(7)

(8)

(9)

(10)

This decision was published in the Official Journal of the
European Communities (5). The Commission invited inter-
ested parties to submit their comments on the aid. The
Commission received comments from interested parties
and forwarded them to Spain, which was given the
opportunity to react.

The Spanish authorities submitted their arguments by
letter dated 21 October 1999 and some further observa-
tions on 8 February 2000 and 6 June 2000.

II. DETAILED DESCRIPTION OF THE AID

The original Agreement of 9 July 1992 between the
District Council of Vizcaya and the Department of
Commerce, Consumption and Tourism of the Basque
Government of
the one part and Ferries Golfo de
Vizcaya of the other part was suspended and replaced by
the Agreement between the District Council of Vizcaya
and Ferries Golfo de Vizcaya of 7 March 1995.

II.1. The original Agreement (letter of intent of 9
July 1992) between the District Council of
Vizcaya and the Department of Commerce,
Consumption and Tourism of
the Basque
Government of the one part and Ferries Golfo
de Vizcaya of the other part

The Agreement concluded in 1992 by the autonomous
Basque authorities and the shipping company Ferries
Golfo de Vizcaya (6) provided that the latter would start
to operate a scheduled service between Bilbao and Ports-
mouth at the rate of two round trips per week (except
for three weeks in the low season) and would ensure
that, when choosing the crew and the goods and
catering services on board the vessel, preference would
be given to people and companies from the territory of
Vizcaya and the autonomous Community of the Basque
Country. The Agreement also stipulated that Ferries
Golfo de Vizcaya would install
information
offices in each of its berthing points.

tourist

intended to distribute

The Agreement also provided that the District Council
of Vizcaya and the Basque Government would undertake
to buy a number of travel vouchers from the company
between 1993 and 1996. The autonomous Basque
authorities
vouchers,
exchangeable for tickets within the same month, among
low-income groups as part of a cultural and social
the autonomous Basque authorities'
policy.
commitment
for
to
26 000 vouchers over the period from March 1993 to
March 1996. The said authorities undertook to pay for
the vouchers even if voyages were not made for reasons
beyond the control of Ferries Golfo de Vizcaya.

ESP 911 800 000

amounted

In total,

these

(11)

(12)

(13)

(14)

The Agreement further stated that, should the results of
the operation of the service be positive, the amount
corresponding to such positive
results would be
deducted from the monthly payments that the auto-
nomous Basque
authorities would make. On the
the said
if a negative result were shown,
contrary,
authorities agreed to pay Ferries Golfo de Vizcaya the
difference between the partial sums of the payments
made and the total value of the global amount agreed.

Following the initiation of the procedure, the original
Agreement was suspended and Ferries Golfo de Vizcaya
was asked to establish a provision of the amounts it had
received plus interest. On 7 March 1995; the District
Council of Vizcaya concluded a new agreement with
Ferries Golfo de Vizcaya.

II.2. The Agreement of 7 March 1995 between the
District Council of Vizcaya and Ferries Golfo
de Vizcaya

The second Agreement covered a period of four years
(January 1995 to December 1998). It provided that the
Ferries Golfo de Vizcaya company would maintain and
promote a scheduled service between Bilbao and Ports-
mouth at the rate of two round trips per week (except
for three weeks in the low season) using a mixed British/
Spanish crew and local British and Spanish sources for
goods and services.

It also provided that the District Council of Vizcaya
would buy vouchers from the company and would
distribute them among disadvantaged groups in order to
provide them with foreign travel opportunities. The
vouchers were exchangeable for tickets, even outside
their prescribed conversion period provided that
the
conversion took place during the low season and that
there was sufficient capacity. In total, the autonomous
Basque authorities undertook to buy 46 500 vouchers
between January 1995 and December 1998 for
ESP 985 500 000. The price was calculated on the basis
of the estimated low-season commercial price of the
tickets for the years concerned and discounted in order
to reflect the District Council's long-term purchasing
commitment.

II.3. Grounds for initiating the procedure

(15)

The Commission took the view on 29 September 1993
that the first Agreement involved aid because the ship-
ping company was being financed by the autonomous
Basque authorities under conditions not available on the
market and that the element of commercial risk was
eliminated for Ferries Golfo de Vizcaya. The following
four points were emphasised:

(5) See second reference in footnote 1.
(6) Ferries Golfo de Vizcaya was a subsidiary of P & O European Ferries
of the United Kingdom and Vapores Suardiaz of Spain. Since 1994,
Ferries Golfo de Vizcaya has been 100 % owned by P & O European
Ferries.

(a) the fact that the autonomous authorities had agreed
to purchase a set number of vouchers over a three-
year period rather than on the basis of need;

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(b) the fact that they guaranteed for these vouchers a
price higher than the agreed commercial price;

(c) the fact that the autonomous authorities had under-
taken to pay for the vouchers even if voyages were
not carried out or were diverted to other ports for
reasons beyond the control of Ferries Golfo de
Vizcaya;

The Association of Pensioners Evacuated during the Civil
War and the Automobile Association Services indicated
their support for the first Agreement.

(21)

The following comments were made on the second
Agreement.

(d) the fact

that

they had undertaken to cover the

Brittany Ferries

company's losses.

(16)

The Commission also stated that the aid scheme did not
seem to qualify for exemption under any of the catego-
ries of Article 92(2) and (3) (now Article 87(2) and (3))
of the Treaty.

(17) As far as the second Agreement is concerned, following
Instance of 28
the judgment of
January 1999,
in its
decision of 26 May 1999 extending the procedure, that
this Agreement also appeared to fall within the scope of
Article 92(1) (now Article 87(1)) of the Treaty.

the Commission considered,

the Court of First

(18)

that

It assumed that

The Commission pointed out
the autonomous
Basque authorities had not demonstrated why they
needed more vouchers within the framework of the
second Agreement than within that of the first (46 500
instead of 26 000).
the number of
vouchers had been artificially increased to offset the
decrease in the price of the vouchers and so maintain
the public financial contribution at the level originally
agreed, and it concluded that the Agreement did not
constitute a normal commercial
It also
emphasised that the number of vouchers actually distrib-
uted did not correspond, even approximately, to the
number of vouchers pre-purchased by the public author-
ities. It added that the fact that Ferries Golfo de Vizcaya
had been allowed to keep the money it had received
under the first Agreement until the entry into force of
the second Agreement also suggested the ‘non-commer-
cial’ nature of the Agreement.

transaction.

(19)

The Commission also stated that the aid granted by the
autonomous Basque authorities to Ferries Golfo de
Vizcaya was likely to affect trade between Member States
and to distort competition since the company operated
between two Member States and competed with other
Community operators. Finally, it indicated that it was of
the preliminary view that the scheme did not qualify for
any of the exemptions provided for by Article 92(2) and
(3) (now Article 87(2) and (3)) of the Treaty.

(22)

(23)

Brittany Ferries argued that the 1995 Agreement did not
constitute a normal commercial transaction and that the
aid affected trade between Member States.

In addition to supporting the analysis the Commission
presented when initiating the procedure, it pointed out
the following peculiar features of the Agreement which
clearly indicate that it does not constitute a normal
commercial transaction:

(a) the uneven purchase of vouchers between different

months and years;

(b) the provision according to which the tariffs would
be revised if the vessel used by Ferries Golfo de
Vizcaya was changed;

(c) the fact

that

the autonomous Basque authorities
were not obliged to convert the purchased vouchers
into tickets;

(d) the conditions relating to the nationality of the crew

and the regularity of the service.

(24)

Brittany Ferries further claimed that the aid did not
qualify for any of the exemptions provided for by Article
92 (now Article 87) of the Treaty.

Ferries Golfo de Vizcaya

(25)

Ferries Golfo de Vizcaya argued that the 1995 Agree-
ment did have a commercial nature and did not involve
aid. It claimed that the advance bulk purchase of tickets
by the District Council of Vizcaya at a volume discount
price was no different from the practice of commercial
bulk tourist ticket purchasers. It explained the increase
in the number of vouchers by:

(a) the discount in their price,

(b) the expectations of the District Council, based on its
Inserso programme,

experience with the national
and

III. COMMENTS FROM INTERESTED PARTIES

(c) the fact that its budget had already been allocated.

(20) After

the procedure was

initiated, comments were
received from Ferries Golfo de Vizcaya, the recipient of
in favour of both the Agreements, and from
the aid,
Brittany
competitor operating on the
Ferries,
Plymouth/Santander route, against the two Agreements.

a

As far as the incomplete conversion of vouchers is
concerned, the shipping company emphasised that the
process was not yet over and would be pursued (the
Agreement allows vouchers to be converted beyond the
period covered by the Agreement).

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Furthermore, Ferries Golfo de Vizcaya submitted that it
derived no financial benefit from the retention of the
monies which were to be repaid following the cancella-
tion of the Agreement because it had repaid them with
interest.

(32)

The autonomous Basque authorities further indicated
that there was no aid element in the 1995 Agreement
with Ferries Golfo de Vizcaya, which was intended to
meet the genuine need to provide subsidised trips for
Vizcaya's senior citizens and facilitate access to transport
for the people and institutions of Vizcaya.

(26)

(27)

Ferries Golfo de Vizcaya also submitted that
the
Commission were to find that the 1995 Agreement was
transaction and
length commercial
not
involved State aid, such aid should nevertheless be
approved.

an arm's

if

(28) As far as Article 87(2)(a) of the Treaty is concerned (aid
having a social character), Ferries Golfo de Vizcaya
argues that, to its knowledge, the District Council of
Vizcaya had approached other international ferry service
operators with a view to establishing their interest in
running the service.

(29) As far as Article 87(3)(c) of the Treaty is concerned,
Ferries Golfo de Vizcaya submits that the aid should be
approved because it facilitated the development of the
Vizcaya region without distorting competition. The
company argues that ‘Ferries Golfo de Vizcaya's opera-
tion “doubled” the size of the market for ferry services
between Spain and the United Kingdom without any
negative impact on Brittany Ferries' carryings’.

(30)

if

the
Finally, Ferries Golfo de Vizcaya argued that
the 1995 Agreement
Commission were to find that
involved State aid that could not be approved,
the
Commission should not make a recovery order as the
aid was granted lawfully at that time. It states that the
1995 Agreement had been notified to the Commission
in due time and that the aid had been granted only after
the Commission's favourable decision of 7 June 1995.

(33) On the first point,

explained that

they explained that

the District
Council of Vizcaya had participated since 1988 in the
national Inserso programme of subsidised travel, but had
decided to terminate its arrangement with Inserso in
1993 (1995 in practice) owing to problems that had
arisen in the implementation of the programme. The
autonomous Basque authorities
the
arrangement with Inserso had to be terminated on
account of
the way places were distributed and the
limited number of destinations. To replace the Inserso
programme, the District Council of Vizcaya set up its
own travel programme, ‘Adineko’, in 1996. The District
Council of Vizcaya stated that
the
quantity of vouchers needed was based on data from the
that
Inserso programme and indicated that
Adineko had enjoyed only limited success had no
bearing on the genuine need to conclude the Agreement.
The District Council of Vizcaya also emphasised that it
would continue to implement the Agreement, after its
termination date, as there was no limitation on the
period for converting the vouchers.

its estimate of

the fact

(34) On the second point, the autonomous Basque authori-
ties referred to their obligation to help people whose
particular requirements,
income level or social back-
ground meant that special arrangements were needed for
them to travel.
transport vouchers were
distributed to a wide range of people and institutions
(e.g.
local authorities, associations, vocational schools
and universities).

In practice,

IV. COMMENTS FROM SPAIN

(31)

The autonomous Basque authorities claimed they were
pursuing two goals when they concluded the 1992
Agreement with Ferries Golfo de Vizcaya (the first
Agreement, which was cancelled). Firstly, they acted like
a private investor by financing a company and expecting
a reasonable return on their investment. They stated that
they had chosen a reliable company and that their agree-
ment with Ferries Golfo de Vizcaya included a provision
according to which they were entitled to 10 % of the
profits made by the company after the first three years
of operation. Secondly, they wanted to promote trade
and tourism and help the regional development of the
Basque Country. In their view, the Basque Government
authorities' participation in the Agreement did not fall
under Article 92(1) (now Article 87(1)) of the Treaty.
However, they argued that if it were considered to fall
under that Article, the aid would qualify for an exemp-
tion under Article 92(3)
the
Treaty.

(now Article 87(3)) of

(35)

(36)

The autonomous Basque authorities also submitted that
if the Commission were to find that the 1995 Agree-
ment involved State aid, such aid should be approved
because the agreement facilitated economic development
in the Historic Territory of Vizcaya as provided for by
Article 87(3)(c) of the Treaty and/or because it was
conceived with social objectives, as provided for by
Article 87(2)(a) of the Treaty.

In justifying their
the autonomous
first argument,
Basque authorities explained that in the early 1990s
Vizcaya was suffering serious economic problems. The
District Council decided to promote a ferry service
between Bilbao and Portsmouth in order to stimulate the
tourism-related sectors of the Vizcaya economy. The
District Council ordered a viability study from KPMG
and decided to purchase vouchers as an incentive to get
a new high quality, regular, mixed ferry service.

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(37)

The autonomous Basque authorities claimed that their
contribution was in the nature of an investment aid and
did not constitute an operating aid. They explained that
they wanted to make a minimum contribution to the
initial
investment costs borne by Ferries Golfo de
Vizcaya and that when the 1992 voucher scheme was
cancelled, the District Council sought to conclude a new
agreement with Ferries Golfo de Vizcaya in order to
meet its undertaking to contribute to the initial invest-
ment costs for the ferry service. They also pointed out
that the aid was not linked to the annual costs of Ferries
Golfo de Vizcaya and that the service was viable.

(38)

The autonomous Basque authorities concluded that any
hypothetical element of State aid which the Commission
could see in the 1995 Agreement should be considered
State aid for investment in Vizcaya granted on an ad hoc
basis (7) [...] but as a fundamental part of the District
Council's policy for development of
the Vizcaya
economy. According to them, the ‘aid’ meets the condi-
tions laid down by Article 87(3)(c) of the Treaty since:

showed interest

they explained that

the Agreement entailed no
tion,
discrimination against other ferry operators since no
other operator
in establishing the
Bilbao/Portsmouth service. They also pointed out that
the KPMG viability study had been forwarded to all
operators potentially interested in establishing the
service and that contact had been maintained with them
between 1989 and 1991.

(40)

Lastly, the autonomous Basque authorities argued that if,
despite all their arguments, the Commission were to find
that the 1995 Agreement involved State aid that could
not be approved, the Commission should not make a
recovery order as this would be contrary to the princi-
ples of legal certainty and legitimate expectation. They
insisted on the fact that the 1995 Agreement had been
implemented lawfully at that time.

V. ASSESSMENT OF THE AID

(a) it is substantially below the maximum rate of State
aid allowed for Vizcaya in 1995 (the amount paid by
the District Council is equivalent to approximately
6,7 % of Ferries Golfo de Vizcaya's investment costs
in relation to the service),

(41)

(b) the aid contributed to economic development

in
Vizcaya (they claimed that, to date, the service had
led to the creation of 706 jobs in Vizcaya and the
Basque Country),

V.1. Legal basis for the assessment

The only Agreement that was fully implemented, the
second Agreement concluded on 7 March 1995, covered
the period 1995 to 1998. It was concluded at a time
when the Guidelines for the examination of State aids to
Community shipping companies of 3 August 1989 were
in force (8). These guidelines were revised in 1997
following the publication of the Community guidelines
on State aid to maritime transport on 5 July 1997 (9).

(c) the aid is of

interest

to the Community (the
Commission promotes short sea shipping and co-
finances transport projects within the framework of
its regional policy), and

(d) the scheme has had no adverse effect on trade and
competition (every operator potentially interested in
the service was approached by the District Council;
the autonomous Basque authorities claimed that the
Bilbao/Portsmouth service had led to no reduction in
activity on the Santander/Plymouth route operated
by Brittany Ferries).

(39) With respect to their second argument, the autonomous
Basque authorities submitted that Article 87(2)(a) of the
Treaty (aid having a social character) provides an altern-
ative legal basis for approval of any element of State aid
the Commission could hypothetically see in the 1995
Agreement. They stated that the vouchers purchased
were distributed to citizens applying under specific
social programmes run by the District Council. In addi-

V.2. Existence and compatibility of the aid

V.2.1. Existence of aid

(42) Article 92(1) of the Treaty (now Article 87(1)) prohibits
aid granted through State resources which distorts or
threatens to distort competition by favouring certain
undertakings,
in so far as it affects trade between
Member States.

(43)

The first Agreement concluded by the autonomous
Basque authorities and Ferries Golfo de Vizcaya was
repealed and the monies received by Ferries Golfo de
Vizcaya reimbursed. Therefore the case became devoid
of purpose.

(44) As far as the second Agreement

the
Commission takes the view that it falls under Article
92(1) of the Treaty (now Article 87(1)).

is concerned,

(7) They referred to the judgment of the Court of First Instance of the
European Communities of 14 September 1994 in Cases C-278/92,
C-279/92 and C-280/92, Spain v Commission (1994 ECR I-4103).

(8) Annex 1 to ‘Financial and fiscal measures concerning shipping
operations with ships registered in the Community’, SEC(89)921
final.

(9) OJ C 205, 5.7.1997, p. 5.

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(45) As a preliminary point, it must be recalled that, in its
judgment of 28 January 1999 on the case, the Court of
First Instance ruled that ‘a State measure in favour of an
undertaking, which takes the form of an agreement to
purchase travel vouchers cannot be excluded in principle
from the concept of State aid in the sense contemplated
in Article 92 of the Treaty, merely because the parties
undertake reciprocal commitments’
(ground 71). To
determine whether the 1995 Agreement falls within the
scope of Article 92(1) of the Treaty (now Article 87(1)),
it must be considered whether it constitutes a ‘normal
commercial transaction’ (see, for instance, ground 75 of
the Court of First Instance's judgment).

(46)

The autonomous Basque authorities argued that
the
number of vouchers provided for in the Agreement
(15 000 in 1995 and in 1996, 9 000 in 1997 and
7 500 in 1998) had been calculated on the basis of the
annual
Inserso
programme in Vizcaya (around 15 000 in practice), i.e.
the programme which they wanted to terminate and
replace with their own Adineko programme.

beneficiaries

number

the

of

of

(47) On the basis of the data submitted, the Commission
upholds its view that the total number of vouchers
purchased by the District Council of Vizcaya was not
fixed by reference to the District Council's actual needs
and that the second Agreement does not constitute a
transaction but was designed to
normal commercial
maintain at its original level the aid contained in the first
Agreement, as is shown below.

V.2.1.1. S u b s i d i s e d h o l i d a y t r i p s

(50)

area (10) and that
its own scheme would not be
successful. Furthermore, no indication was given by the
autonomous Basque authorities of why the number of
vouchers purchased had to differ significantly from
month to month (e.g. 750 vouchers were purchased in
January 1995 compared with 3 000 in February 1995).

The District Council of Vizcaya's own Adineko travel
programme was not adopted until 1996 and thus post-
dates the conclusion of the 1995 Agreement. Further-
more, it appears from the data supplied by the auto-
nomous Basque authorities that this programme, which
was supposed to replace the Inserso programme and to
make use of the vouchers bought by the District Council
of Vizcaya, only offered a very limited number of trips
to the United Kingdom: 2 132 in 1996 (i.e. 14 % of the
total number of vouchers purchased that year), 1 000
(11 %) in 1997, 400 (5 %) in 1998 — 3 532 in total.

V.2.1.2. A c c e s s t o t r a n s p o r t f o r t h e p e o p l e a n d

i n s t i t u t i o n s o f V i z c a y a

(51) No indication was given by the autonomous Basque
authorities of how the needs relating to the other part of
the scheme (facilitation of access to transport for the
people and institutions of Vizcaya, which is different
from the made-to-measure holiday packages provided
through Inserso and Adineko) had been estimated. In
practice, according to the said authorities, 12 520 travel
vouchers were distributed under the scheme between
1995 and 1998.

(52)

In addition, the Agreement contains several provisions
that a normal commercial agreement to purchase travel
vouchers would not include, such as the following:

(a) it specifies the weekly and annual number of cross-
ings to be made by Ferries Golfo de Vizcaya, and
indicates the days when vessels should operate (see
Article 3b of the Agreement) (11), it also stipulates
that the consent of the District Council of Vizcaya is
needed for Ferries Golfo de Vizcaya to change the
vessel providing the service (see Article 1 — Article
3a specifies the level of amenities required on
board);

(48)

It cannot be asserted that
the District
Council of Vizcaya in this field were derived from the
Inserso figures (around 15 000 beneficiaries per year in
Vizcaya) as the following shows.

the needs of

(53)

(49)

The District Council of Vizcaya decided to purchase
15 000 vouchers from Ferries Golfo de Vizcaya in 1995
while it was still participating in the Inserso programme,
itself designed to benefit approximately 15 000 people
of Vizcaya in 1995. The autonomous Basque authorities
did not explain why Vizcaya's needs were double in that
particular year. Nor did they indicate why the scheme
only provided for 9 000 and 7 500 vouchers (instead of
15 000) in 1997 and 1998. When the District Council
of Vizcaya decided to commit
to buying this
number of vouchers, it did not know that the Inserso
programme would continue to benefit people from the

itself

(b) Article 3a of

the Agreement

lays down certain
conditions, such as the nationality of the crew and
the sources of goods and services.

The Commission concludes from the above that the
purchase of vouchers from Ferries Golfo de Vizcaya
under the second Agreement did not correspond to the
autonomous Basque authorities' genuine social needs
and did not constitute a normal commercial transaction
but rather constituted aid to the shipping company. The
fact that the amount of money provided for under the
first and the second Agreements remained at approxi-
mately the same level (12) reinforces this conclusion. The
autonomous authorities managed to design a second
scheme allowing the ferry company to keep the amount
of aid promised in 1992.

(10) Even though the District Council of Vizcaya had stopped contribu-

ting to this programme.

(11) Ferries Golfo de Vizcaya may alter its sailing schedule for commer-
cial reasons only after notifying the District Council of Vizcaya.
(12) ESP 911 800 000 under the first Agreement and ESP 985 500 000

under the second Agreement.

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(54)

Finally, the money granted by the District Council of
Vizcaya to Ferries Golfo de Vizcaya was likely to affect
trade between Member States and distort competition, as
the company operates between two Member States (the
United Kingdom and Spain) and competes with other
Community operators. International maritime transport
services have long since been liberalised (see, in partic-
ular, Council Regulation (EEC) No 4055/86 of 22
December 1986 applying the principle of freedom to
provide services to maritime transport between Member
States and between Member States and third coun-
tries (13)). Ferries Golfo de Vizcaya competes directly
with at least one other company, Brittany Ferries, which
provides services between Plymouth (United Kingdom)
and Santander (Spain). It should also be pointed out that
Ferries Golfo de Vizcaya's parent company, P & O, oper-
ates and competes with other Community operators on
various intra-Community routes. The fact that Brittany
Ferries' passenger carryings increased over the period
does not mean that the aid did not distort competition,
as that increase might have been greater had the aid not
existed.

(55) As the Court of First Instance points out in its judgment
of 28 January 1999,
‘as the travel vouchers purchased
by the Spanish authorities can be used only in the low
season, the improved service supplied by the under-
taking does not in principle entail significant additional
costs for it and, consequently, the effects of the new
Agreement on competition and trade between Member
States are the same as those which could be attributed to
the 1992 agreement. It is settled case law that the rela-
tively small amount of aid or the relatively small size of
the undertaking which receives it does not as such
exclude the possibility that intra-Community trade may
be affected’ (grounds 76 and 77).

V.2.2. Article 92(2) and (3) (now Article 87(2) and (3)) of

the Treaty

(56) As a derogation from the prohibition laid down by
Article 92(1) of the Treaty (now Article 87), paragraphs
2 and 3 of the Article provide that certain types of aid
are compatible or may be considered compatible with
the common market. The Commission takes the view
that none of the exceptions listed in these paragraphs
can be invoked in the present case.

(58) Article 92(2)(a) (now Article 87(2)(a)) provides that ‘aid
having a social character, granted to individual consum-
ers’ is compatible with the common market ‘provided
that such aid is granted without discrimination related to
the origin of the products concerned’. The aid granted
by the autonomous Basque authorities benefits indi-
vidual consumers with special needs and might therefore
have been considered an ‘aid having a social character,
granted to individual consumers’. However, the condi-
tion laid down by the Treaty (the absence of discrim-
ination related to the origin of the products concerned)
is not met in the present case. Vouchers have only been
purchased from Ferries Golfo de Vizcaya and the auto-
nomous authorities have failed to prove that
the
company was selected in a transparent manner.

(59)

the
The autonomous Basque authorities argued that
scheme is not discriminatory. However, the evidence
submitted is weak: they explained that they had sent the
viability study produced by KPMG to all possible opera-
tors and that
they had been in contact with them
between 1989 and 1991 in order to see whether they
would be willing to start to operate a regular service
between Bilbao and Portsmouth. However, they never
claimed or demonstrated that
they had contacted
companies other than Ferries Golfo de Vizcaya when
they decided to purchase vouchers in 1995 as part of
their social scheme. In view of all the above, it may be
concluded that
the aid favoured Ferries Golfo de
Vizcaya.

(60)

Furthermore, other companies might have been willing
to carry these passengers to the United Kingdom via a
different
route. The autonomous Basque authorities
might have achieved identical social goals with a diversi-
fied travel offer (for instance, to other regions of Spain
or, if it had to be international, by organising trips to
France or
other neighbouring countries
Portugal).

such as

(61)

Therefore, the aid cannot qualify under Article 92(2)(a)
of the Treaty (now Article 87(2)(a)).

(62) Article 92(3) of the Treaty (now Article 87(3)) provides
that some other types of aid may be considered to be
compatible with the common market. Points (a), (b), (d)
and (e) are not applicable to the present case.

(57)

Points (b) and (c) of Article 92(2) (now Article 87(2))
concerning natural disasters and the Federal Republic of
Germany are manifestly not applicable in the present
case.

(13) OJ L 378, 31.12.1986, p. 1.

(63)

Point (c) provides that ‘aid to facilitate the development
of certain activities or of certain economic areas, where
such aid does not adversely affect trading conditions to
an extent contrary to the common interest’ may be
considered compatible with the common market.

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Official Journal of the European Communities

L 89/35

ties’ without ‘adversely affecting trading conditions to an
extent contrary to the common interest’.

(71)

(72)

The aid does not fulfil the criteria laid down by the
Commission in its Guidelines for the examination of
State aids to Community shipping companies of 3
August 1989 and its Community guidelines on State aid
to maritime transport of 5 July 1997, as referred to in
recital 41.

The 1989 Guidelines stated that whereas certain types of
aid listed therein, such as the special taxation of certain
shipping activities, could be considered compatible with
the common market, ‘any other kind of operating aid …
is in principle incompatible with the common market’.
This basic principle is upheld in the 1997 Guidelines.
The type of aid granted to Ferries Golfo de Vizcaya does
not correspond to the types of aid authorised in the
Guidelines (relief of taxation and social charges for ship-
ping companies and seafarers).

(73)

The fact that the service was viable and that the aid was
not linked to the annual costs or losses of Ferries Golfo
de Vizcaya has no bearing on this conclusion.

For the reasons given above, the Commission takes the
view that the aid the autonomous Basque authorities
granted to Ferries Golfo de Vizcaya cannot be consid-
ered to be aid of a regional or sectoral nature compatible
with the common market, as it is operating aid (14) with
no incentive effect, having been granted well after the
service began to operate (15).

From the regional policy perspective, the autonomous
Basque authorities and Ferries Golfo de Vizcaya argue
that the aid could be authorised as it facilitates the
economic
any
distorting effect on competition on British-Spanish ferry
routes.

of Vizcaya without

development

The Commission takes the view that the aid, granted to
a specific company, cannot be considered to be an aid to
the Vizcaya region even though it may have had an
impact on the region's economy (16). Any activity carried
out in a region has an impact on that region's economy.
Any aid to a company in a given region will necessarily
have some kind of impact but that does not make it a
proper regional aid.

The figures provided by the Spanish authorities refer to
the impact of the new ferry service on the economy.
However, the aid that is being examined was granted
between 1995 and 1998, well after the date when
Ferries Golfo de Vizcaya started its service. The auto-
nomous authorities did not explain what the impact of
the aid might have been nor did they show that the
impact of the ferry service on the economy would have
been very different in the absence of the aid. It is there-
fore difficult to argue that the aid facilitated the develop-
ment of the region.

(64)

(65)

(66)

(67)

(68)

(69)

In any case, even if the aid were a ‘regional’ aid, it could
not be considered compatible with the common market
as it is an operating aid and not an investment aid as the
autonomous Basque authorities have argued.

(74)

The aid was not linked to any specific investment made
by the company. Besides, it cannot be maintained that
the autonomous Basque authorities contributed in 1995
to investments made by Ferries Golfo de Vizcaya around
1992 for starting the service. The autonomous authori-
ties merely raised the company's income by buying
tickets. Therefore, the aid is clearly an operating aid.

(70)

the view that

From the sectoral policy perspective, the Commission
takes
the aid cannot be considered
compatible with the common market on the grounds
that it would ‘facilitate the development of certain activi-

(14) See the judgment of 8 June 1995 of the Court of First Instance in

Case T-459/93, Siemens v Commission, 1995 ECR II-1675.

(15) See judgment of 17 September 1980 of the Court of

Justice in
Case 730/79, Philip Morris Holland BV v Commission, 1980 ECR
2671.

(16) See point 2 of the Guidelines on national regional aid (OJ C 74,

10.3.1998, p. 9).

(17) 1997 ECR I-0135.

V.3. Recovery of the aid

The autonomous Basque authorities and Ferries Golfo de
Vizcaya argued that even if the Commission were to find
that the 1995 Agreement involved State aid that could
not be approved, the Commission should not make a
recovery order as this would frustrate their legitimate
expectations. The Commission cannot share this view.
As the Court of First Instance held in its judgment of 14
January 1997 in case C-169/95 Kingdom of Spain v
Commission (17), ‘in view of the mandatory nature of the
supervision of State aid by the Commission under
Article 93 of the Treaty, undertakings to which an aid
has been granted cannot, in principle, entertain a legiti-
mate expectation that the aid is lawful unless it has been
granted in compliance with the procedure laid down in
that Article. A diligent operator should normally be able
to determine whether that procedure has been followed.
In this case,
it is not contested that, contrary to the
obligations imposed on the Member States by Article
93(3) of the Treaty, the aid in question was granted
without prior notification. The fact that the Commission
initially decided not to raise any objections to the aid at
issue cannot be regarded as capable of having caused the
recipient undertaking to entertain any legitimate expec-
tation since that decision was challenged in due time

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Official Journal of the European Communities

29.3.2001

VI. CONCLUSIONS

(79)

The Commission finds that Spain has unlawfully imple-
mented aid to Ferries Golfo de Vizcaya in breach of
Article 93(3) (now Article 88(3)) of the Treaty. The aid,
for a total sum of ESP 985 500 000, will have to be
recovered from the recipient,

HAS ADOPTED THIS DECISION:

Article 1

The State aid which Spain has implemented in favour of Ferries
Golfo de Vizcaya, to the sum of ESP 985 500 000, is incom-
patible with the common market.

Article 2

1.
Spain shall take all the necessary measures to recover
from the recipient the aid referred to in Article 1 made avail-
able to it unlawfully.

2.
Recovery shall be effected without delay in accordance
with the procedures of national law, provided these allow the
immediate and effective execution of this Decision. The sums
to be recovered shall bear interest from the date on which they
were made available to the recipient until their actual recovery.
Interest shall be calculated on the basis of the reference rate
used for calculating the grant-equivalent of regional aids.

Article 3

Spain shall
following the date of notification of
measures taken to comply with it.

inform the Commission, within two months
the

this Decision, of

This Decision is addressed to the Kingdom of Spain.

Article 4

Done at Brussels, 29 November 2000.

For the Commission

Loyola DE PALACIO

Vice-President

before the Court, which annulled it. However regrettable
it may be, the Commission's error cannot erase the
consequences of the unlawful conduct of the Kingdom
of Spain. The contested Decision cannot therefore be
regarded, either in so far as it requires repayment of the
aid in issue or in so far as it requires payment of interest
thereon, as frustrating the legitimate expectations of the
recipient undertaking’ (grounds 51 to 54).

(75) Generally speaking, for an aid to be granted in accord-
ance with Article 93(3) (now Article 88(3)) of the Treaty,
it has to be notified by the Member State concerned and
cannot be put into effect before the Commission has
reached a final decision on the case. These conditions
have not been fulfilled in the present case.

(76)

(77)

(78)

The Commission's 1995 Decision regarding Ferries
Golfo de Vizcaya was challenged in the Court of First
Instance in due time and was subsequently annulled by
the Court. It follows from the jurisprudence that annul-
ment of authorisation deprives the aid of its basis in
Community law and should in principle render
it
unlawful from the outset.

In any event, even if the payments to Ferries Golfo de
Vizcaya were effectively made only after the Commis-
sion's positive Decision of 7 June 1995, the Agreement,
which provides for payments as from January 1995, was
concluded on 7 March 1995, a few months before the
Commission adopted its Decision. The aid was therefore
implemented before
the Commission reached its
Decision (18).
In accordance with the aforementioned
judgment of 14 January 1997, the Commission's error
cannot erase the consequences of the unlawful conduct
of the autonomous Basque authorities.

The Commission also observes that the aid was not
formally notified. The Guide to procedures in State aid
cases and Council Regulation (EC) No 659/1999 of 22
March 1999 laying down detailed rules for the applica-
tion of Article 93 of the EC Treaty (19) clearly set out
that notifications should be made by the Member States
themselves (at central government level, even if the aid is
granted by regional authorities). The Commission takes
the view that the 1995 Agreement was not formally
notified as it was only sent to the Commission by the
lawyers of the recipient of the aid on 27 March 1995.

(18) This notion was explained by the Commission in its letter to the

Member States of 27 April 1989 (ref. SG(89)D/5521).

(19) OJ L 83, 27.3.1999, p. 1.