2002/783/EC: Commission decision of 12 March 2002 on State aid C 62/2001 (ex NN 8/2000) implemented by Germany for Neue Erba Lautex GmbH and Erba Lautex GmbH in bankruptcy (Text with EEA relevance.) (notified under document number C(2002) 944)
Date: 2002-03-12
Institutions: European Commission
Subjects: Germany, State aid, control of State aid, incorporation, redemption, textile industry

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COMMISSION DECISION

of 12 March 2002

on State aid C 62/2001 (ex NN 8/2000) implemented by Germany for Neue Erba Lautex GmbH
and Erba Lautex GmbH in bankruptcy

(notified under document number C(2002) 944)

(Only the German text is authentic)

(Text with EEA relevance)

(2002/783/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

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

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

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

Whereas:

I. PROCEDURE

(1)

(2)

By letter dated 29 December 1999, received on 3 January
2000, Germany notified the Commission of aid granted
to the newly created Neue Erba Lautex GmbH. Since the
aid had already been paid out the case was registered as
non-notified aid NN 8/2000.

The Commission sent out questions on 24 January
2000. Replies were received on 24 February and 6 March
2000. Further questions were sent out on 17 April
2000. Replies were submitted on 5 June 2000. The case
was discussed during a meeting with representatives of
the German Government on 6 June 2000. Further
information was provided on 6 July 2000, 9 October
2000 and 8 January 2001. The case was again discussed
during a meeting with representatives of the German
Government on 28 February 2001. New questions were
sent out on 15 March 2001. Replies were received on 9
and 17 April 2001. Additional questions were sent out
on 26 April 2001. Further information was received on
7 May and 6 June 2001.

(3)

(4)

(5)

By letter dated 30 July 2001, the Commission informed
Germany of its decision to initiate the procedure under
Article 88(2) of the EC Treaty in respect of the aid.
Germany submitted its reaction by letter dated 21 Sep-
tember 2001, registered on 24 September 2001.

The Commission decision to initiate the procedure
was published in the Official
Journal of the European
Communities (2). The Commission invited interested par-
ties to submit comments. It received comments from
two German competitors and from a Belgian association
of textile manufacturers. These comments were forward-
ed to Germany by letters dated 11 and 21 December
2001 and 10 January 2002. Germany replied by letter
dated 7 February 2002, registered on the following day.

II. DESCRIPTION OF THE AID

A. The relevant undertaking

(a) Neue Erba Lautex GmbH

According to the information available, Neue Erba
Lautex GmbH (hereinafter referred to as ‘NEL’)
is a
company with limited liability and paid in equity capital
of EUR 25 000. It was created on 23 December 1999
by the provisional administrator in bankruptcy of Erba
Lautex GmbH, which had filed for bankruptcy on
2 November 1999 (3). NEL was created as a wholly
owned subsidiary of the bankrupt Erba Lautex GmbH
and has continued the latter’s activities without disrup-
tion. The intention was to offer NEL for sale, transferring
to it the assets of the bankrupt Erba Lautex GmbH.

(6)

According to Germany, certain assets of the bankrupt
Erba Lautex GmbH have been leased to NEL. According

( 1) OJ C 310, 7.11.2001, p. 3.

(2) See footnote 1.
(3) Bankruptcy proceedings were initiated on 31 December 1999.

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to the documents submitted to the Commission, NEL
was to pay a monthly rent of some EUR 215 626
(DEM 421 729) for the assets. The Commission has not
been informed whether the rent is effectively being paid.
Some pending orders from the bankrupt Erba Lautex
GmbH were taken over.

(7)

NEL’s workforce consists of 249 employees of the
bankrupt Erba Lautex GmbH, 16 trainees and one of
its former managers, Mr Matt (4). According to the
information provided by Germany, following an agree-
ment with representatives of the workforce, the contracts
of the abovementioned 249 employees of the bankrupt
Erba Lautex GmbH were terminated. These employees
then signed direct contracts with NEL. No indemnifi-
cations were paid.

(8)

Structure as described by Germany:

Erba Lautex in bankruptcy

(including assets/staff to be transferred to NEL)

NEL

(9)

Since it is continuing the activities of the bankrupt Erba
Lautex GmbH, which was active in the textile industry,
NEL is also active in this market. Activities were restarted
on 31 December 1999. Like the bankrupt Erba Lautex
GmbH, NEL is located in Neugersdorf, Saxony, an area

( 4) Germany states that Mr Maron, former investor and manager of

Erba Lautex GmbH, is no longer in this post.

eligible for regional aid under Article 87(3)(a) of the EC
Treaty.

T h e a t t e m p t e d s a l e o f N E L

(10) Back in December 1999, Germany stated that the assets
of Erba Lautex would be transferred to NEL, at which
point NEL would be sold through an open and uncon-
ditional bidding procedure. The administrator in bank-
ruptcy requested Price Waterhouse Coopers (hereinafter
referred to as ‘PWC’) to organise the tender. According
to Germany, on 25 February 2000 an offer for sale was
published in the Financial Times and on the Internet,
while a letter was sent to 70 European and international
textile companies. The initial deadline to respond to this
call for tender was 20 March 2000. It was extended to
12 May 2000 in order to provide more time for offers
to be made.

(11) According to Germany, negotiations have taken place
with several
interested parties. The administrator in
bankruptcy counted on being able to close the sale
operation at the earliest by the end of February 2001. It
did not do so. Germany insists that negotiations with
potential investors are taking place, although it has not
disclosed the number or identity of potential investors,
stating that confidentiality has been requested.

T h e i n t e n d e d r e s t r u c t u r i n g o f N E L

(12) Germany submitted a study prepared by PWC indicating
that the creation of a legal successor to continue the
business of the bankrupt Erba Lautex GmbH would be
possible only if the new company were restructured.
The planned restructuring costs of the newly created
NEL are detailed in the table below.

Restructuring measures

Cost
(DEM million)

Cost
(EUR million)

Acquisition of real estate and buildings (*)

Acquisition of non-fixed assets (**)

New investments

Liquidity

8,0

6,0

8,0

27,0

Repayment of two loans from the BvS and the Land of Saxony

8,7

TOTAL

57,7

4,090

3,067

4,090

13,805

4,448

29,500

(*) Real estate valued by an independent expert at EUR 0,911 (DEM 1,781 million), buildings at EUR 3,329 million

(DEM 6,512 million).

(**) Valued by an independent expert at DEM 5,9 million.

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(13) According to Germany the above are maximum costs. It
has not been stated how these costs would be financed
or whether State support would be made available in the
event of NEL’s finally being sold. Although Germany
initially stated that the planned restructuring would not
start until NEL were sold, the latest information available
seems to indicate that several measures, such as the
training of the workforce, the development of new
products and an amendment to the business strategy,
have already been undertaken.

ible with the common market since it did not fulfil the
criteria set out in the 1994 Community guidelines
on State aid for rescuing and restructuring firms in
difficulty (6). The Commission consequently ordered
recovery of the aid together with interest from the date
on which it was awarded. In November 1999 Erba
Lautex GmbH filed for bankruptcy. According to
Germany, the incompatible aid was registered as part of
the estate of bankruptcy. No aid has been recovered to
date.

(14) The study found that, after restructuring, NEL would
return to viability by 2002. According to the latest
information, NEL incurred losses of EUR 1,62 million
(DEM 3,169 million) in the year 2000. It is not indicated
how these losses were offset, or whether they were
borne by NEL or Erba Lautex GmbH. According to the
latest information, in the year 2001 NEL incurred losses
of some EUR 0,5 million (DEM 1 million).

B. The new financial measures

(a)

Purported rescue aid

(b)

Erba Lautex GmbH in bankruptcy

(15) The former Lautex Weberei und Veredlung GmbH was
a textile company held by the Treuhandanstalt and
subsequently by its legal successor, the Bundesanstalt für
vereinigungsbedingte Sonderaufgaben (BvS), until
its
privatisation in 1997. In 1998 the company had 360
employees.
turnover of
EUR 29,158 million (DEM 57,029 million) and held
assets of EUR 45,976 million (DEM 89,921 million).

In 1997 it

achieved a

(16)

In 1997, the company was privatised by sale to the
Daun Group, a German-based conglomerate also active
in textiles with 11 600 employees and a turnover of
EUR 0,72 billion (DEM 1,4 billion). In April 1998, a
further investor, the Maron Group, took over half the
share capital and the undertaking became Erba Lautex
GmbH. The Maron Group also operates in the textile
sector. It includes the former Erba GmbH, a converter of
fabrics for shirts and blouses, and weaving and dyeing
plants in the Czech Republic. No data on the number of
employees, turnover or assets of this group have been
provided.

(17)

In its Decision 2000/129/EC (5), the Commission pro-
hibited aid of EUR 60,84 million (DEM 119 million) to
Erba Lautex GmbH. The aid was found to be incompat-

(18) On 23 December 2000 NEL received purported rescue
aid of EUR 2,224 million (DEM 4,35 million) from the
Sächsischen Aufbaubank (hereinafter referred to as the
‘SAB’). On 1 February 2001 a further loan for the same
amount was granted by the BvS for the same purpose.
In addition, on 19 May 2001 the BvS granted a further
amount of EUR 0,159 million (DEM 0,312 million). The
same amount was granted on 8 June 2001 by the SAB.
Germany states that these loans were granted at the
reference rate.

(19) The purported rescue aid totals EUR 4,767 million
(DEM 9,324 million) and was initially granted for six
months. This period was extended to 12 months
because, according to Germany, the beginning of the
restructuring was delayed. Germany states that an agree-
ment was reached for the repayment of these loans,
whereby the SAB and the BvS would each be paid a
monthly amount of 2 556 (DEM 5 000) from 1 July
2001. However, this entails a substantial extension of
the 12-month duration of the loans.

(b) The capital injection

(20) On 27 February 2001 the Commission was informed
that EUR 3,289 million (DEM 6,434 million) had been
repaid by the BvS to Erba Lautex GmbH’s former
investors. This amount consisted of the reimbursement
of the price paid for the company and of a capital
injection of EUR 3,067 million (DEM 6 million) to
which the investors agreed upon privatisation.

( 5) OJ L 42, 15.2.2000, p. 19.

(6) OJ C 368, 23.12.1994, p. 12.

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(21) Germany provided evidence that between April 1998
and August 1999, each of the investor groups had paid
in a total of EUR 1,533 million (DEM 3 million) as
equity capital. Under the privatisation contract, the
privatisation was conditional upon a positive Com-
mission decision on the aid granted to the company.
However,
since the Commission took a negative
decision, the investors were entitled to repayment of
these amounts. The privatisation contract further stipu-
lated that the BvS should reimburse the investors for
these amounts.

(22) On initiating the formal investigation procedure, the
Commission noted that the company benefited from a
capital injection of EUR 3,067 million (DEM 6 million)
and that the BvS did not register that amount as a claim
against Erba Lautex GmbH as part of the bankruptcy
proceedings. In its response to the initiation of the
formal investigation procedure, Germany informed the
Commission that on 27 July 2001 this claim had
been registered, with interest, as part of the estate of
bankruptcy. No information has been provided on
whether the claim has been accepted by the adminis-
trator in bankruptcy.

III. REASONS FOR THE INITIATION OF THE FORMAL
INVESTIGATION PROCEDURE

(23) On the basis of the information available, the Com-
mission took the view that the public financial measures
for NEL and Erba Lautex constituted State aid within the
meaning of Article 87(1) of
In its
provisional assessment, it regarded both entities as one
economic unit, since NEL is a 100 % subsidiary of the
bankrupt Erba Lautex whose activities it has continued
by leasing its assets.

the EC Treaty.

(24) The Commission considered that no exception seemed
to justify granting new aid to the same economic entity
and in particular took account of the fact that the aid
declared incompatible in July 1999 had not been
recovered. Following the established case-law of the
Court of Justice of the European Communities, the
Commission took the view that no new aid should have
been paid out until the aid declared incompatible had
been recovered. Moreover, the new aid seemed to have
a negative cumulative effect in the market, as pointed
out by the complainants. The Commission seriously
doubted that the new aid could be considered compatible
with the common market. Consequently the formal
investigation procedure was initiated.

IV. COMMENTS FROM THIRD PARTIES

(25) The Commission received comments from two German
competitors and from a Belgian federation of textile
manufacturers. All competitors stated that the continued
operation of the bankrupt Erba Lautex GmbH through
NEL entailed considerable distortions of competition,
particularly given the low prices with which NEL was
said to be able to operate. The Belgian federation of
textile manufacturers expressed its concern that, since
the aid declared incompatible had not been recovered,
the bankrupt Erba Lautex GmbH was still active through
NEL and was able to offer prices which were, according
to its information, below cost.

V. COMMENTS FROM GERMANY

(26)

In its reaction to the initiation of the formal investigation
procedure, Germany insisted that the newly created NEL
is to be regarded as a rescue company (Auffanggesellschaft)
within the meaning of the exception in footnote 10 of
the 1999 Community guidelines on State aid for rescu-
ing and restructuring firms in difficulty (7). This footnote
states that the only exception to the principle of a newly
created firm not being eligible for rescue or restructuring
aid are ‘any cases dealt with by the BvS in the context of
its privatisation remit and other similar cases in the new
Länder involving companies emerging from a liquidation
or a takeover of assets occurring up to 31 December
1999’.

(27) According to Germany, an Auffanggesellschaft is a com-
pany created to continue the activities of a former
company in liquidation. For this purpose, it takes over
its assets, whereas the liabilities remain within the old
company. According to Germany, both criteria are met
in the present case. Rejecting the Commission’s view
that in the absence of liquidation or a takeover of assets,
NEL cannot qualify as an Auffanggesellschaft, Germany
states that the initiation of bankruptcy proceedings is a
form of liquidation and considers the lease of the assets
as comparable to their takeover.

(7) OJ C 288, 9.10.1999, p. 2.

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(28)

In response to the comments from third parties,
Germany states that NEL has had to operate with higher
prices than those formerly offered by the now bankrupt
Erba Lautex GmbH. In response to the statements made
by NEL’s competitors, Germany claims that NEL has lost
potential orders precisely for offering higher prices than
its competitors. Moreover, Germany claims that NEL’s
current difficult situation does not leave it any possibility
to engage in an aggressive price policy.

(32)

VI. ASSESSMENT

A. Aid within the meaning of Article 87(1) of the EC
Treaty

(29)

Financial assistance deriving from public resources was
awarded to NEL and to the bankrupt Erba Lautex GmbH,
giving these entities advantages over their competitors.
As the textile market is a highly competitive European
product market suffering from overcapacity, financial
advantages favouring a company over its competitors
threaten to distort competition and affect trade between
Member States.

(30) NEL has been incurring losses and has stated that it
needs to restructure to be able to operate on its own.
Moreover, it is 100 % owned by a bankrupt company,
Erba Lautex GmbH, which is obviously a firm in
difficulty. In its decision initiating the formal investi-
gation procedure, the Commission considered that a
private investor would not have made such financial
support available to these entities in view of
their
difficulties. Consequently, the financial measures from
the public authorities for NEL and Erba Lautex GmbH
were regarded as State aid within the meaning of
Article 87(1) of the EC Treaty.

(31) The purported rescue aid granted by the BvS, a public
agency, and the SAB, a public bank, together with
the deferment of payment, constitute a first series of
measures to be assessed by the Commission. Germany
never contested the fact that both NEL and the bankrupt
Erba Lautex GmbH should be regarded as entities in
difficulties. Moreover, it accepts that the loans from the
BvS and the SAB granted directly to NEL should be
regarded as rescue aid. The Commission will accordingly
maintain its stance. However, Germany contests the
view that the capital injection to Erba Lautex GmbH
should be regarded as aid. It considers that this measure
does not threaten to distort competition in the common
market or affect trade between Member States.

Secondly, the Commission will
look at whether the
capital injection constitutes aid. In its decision initiating
the formal investigation procedure, the Commission
considered that the reimbursement of the capital injec-
tion to Erba Lautex GmbH’s former investors, as agreed
in the privatisation contract, did not confer any financial
advantage on the investors. However, the capital injec-
tion itself did confer an advantage on the now bankrupt
Erba Lautex GmbH since its capital was increased by
EUR 3,07 million (DEM 6 million). When the BvS
reimbursed the former investors of the now bankrupt
Erba Lautex GmbH, this advantage, paid out of State
resources after the event, remained in the company.
However, the advantage is deemed to have been granted
at the moment of the privatisation. Since the BvS agreed
to reimburse the investors in the event of a negative
Commission decision on the aid previously granted to
the company, the BvS acted similarly to a guarantor for
the capital injection. By analogy with the Commission
notice on the application of Articles 87 and 88 of the
EC Treaty to State aid in the form of guarantees (8) the
advantage is granted at the moment when the obligation
to back the capital increase was agreed to, not when this
obligation is invoked or when payments are made.

(33)

Since the textile market is a highly competitive market
and there is trade between Member States, such a
financial advantage threatens to distort competition and
affect trade between Member States. The Commission
refers to its Decision 2000/129/EC, which describes the
circumstances under which the privatisation of the
now bankrupt Erba Lautex GmbH took place. The
Commission considers that no market economy investor
would have undertaken to provide backing to such a
capital injection without the expectation of obtaining
any proceeds.

(34) Consequently the Commission maintains its view that
this measure should be regarded as State aid within the
meaning of Article 87(1) of the EC Treaty. Germany’s
registering this claim as part of the estate of bankruptcy
one year after reimbursing the investors does not alter
the fact that the capital increase constitutes aid. On the
contrary, the lack of diligence on the part of the German
authorities could be regarded as an additional financial
advantage for the bankrupt company and/or its creditors.

(8) OJ C 71, 11.3.2000, p. 14.

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B. The recipients of the aid

(40)

Since the aid was not granted under an approved scheme,
it must be assessed as new aid by the Commission.
the EC Treaty lay down
Article 87(2) and (3) of
exemptions to the general prohibition on aid stipulated
in Article 87(1).

(35) The Commission already had doubts about Germany’s
claim that the newly created NEL should be regarded as
the sole recipient of the purported rescue aid when it
initiated the formal investigation procedure.

(36)

In its decision initiating the procedure, the Commission
took the view that NEL and the bankrupt Erba Lautex
GmbH formed a single economic unit. NEL is a 100 %
subsidiary of the bankrupt Erba Lautex GmbH, and has
no assets of its own but leases the assets of the bankrupt
Erba Lautex GmbH in order to continue the latter’s
activities. The bankrupt Erba Lautex GmbH holds all
shares and assets and consequently controls the newly
created entity. The Commission therefore considers the
relevant aid recipient to be the group formed by the
bankrupt Erba Lautex GmbH, as parent company, and
its 100 % subsidiary, NEL. This view is supported by an
analysis of which entity ultimately benefits from the aid.

(37) The purported rescue aid for NEL also benefited the
bankrupt Erba Lautex GmbH. The aid was used, accord-
ing to Germany, to cover running costs and to make
replacement investments. Running costs are the expendi-
ture incurred in order to carry out the operation of a
fixed asset. In this case they consisted of salaries, energy,
delivery of raw materials, etc. Aid for the coverage of
personnel expenditure would directly benefit NEL, while,
since NEL operates in Erba Lautex GmbH’s installations
and with its machinery, aid to cover costs derived
from the use of these or any replacement investments
ultimately results in an advantage for the bankrupt Erba
Lautex GmbH as well. As regards the capital injection, it
obviously benefited Erba Lautex GmbH.

(38) Taking into account the fact that NEL and the bankrupt
Erba Lautex GmbH form a group and that both benefit
it can be assumed that both together
from the aid,
should be considered the relevant aid recipient.

C. Derogation under Article 87(3)(c) of the EC Treaty

(41) The exemptions in Article 87(2) of the EC Treaty do not
apply in this case because the aid measures do not have
a social character and are not granted to individual
consumers, nor do they make good the damage caused
by natural disasters or exceptional occurrences, nor are
they granted to the economy of certain areas of the
Federal Republic of Germany affected by its division.
The exemptions laid down in Article 87(3)(b) are not
applicable either.

(42)

Further exemptions are laid down in Article 87(3)(a) and
(c) of the EC Treaty. As the aid was not granted for
regional development purposes but to restore the long-
term viability of an undertaking in difficulty, only the
exemptions in Article 87(3)(c) of the EC Treaty may
apply. Article 87(3)(c) provides for the authorisation of
State aid granted to promote the development of certain
economic activities, where such aid does not adversely
affect trading conditions to an extent contrary to the
common interest. Moreover, the only measures which
Germany is prepared to regard as aid constitute rescue
aid in its view. Germany has never argued that the aid
was for a small business or provided evidence that the
firm is a small business.

(43) The Commission has

issued special guidelines for
assessing rescue and restructuring aid. Following its
preliminary examination,
the Commission considers
that none of the other Community guidelines, such as
for research and development, environment, small and
medium enterprises, or employment and training, could
apply to this case. Since the aid was granted after
30 April 2000, the Community guidelines of 23 Decem-
ber 1999 (9) (hereinafter referred to as the ‘Guidelines’)
are applicable (10).

(39) The new aid granted to the group constituted by NEL
and Erba Lautex GmbH totals EUR 7,834 million
(DEM 15,324 million). It consists of EUR 4,767 million
(DEM 9,324 million) of purported rescue aid and
EUR 3,067 million (DEM 6 million) in the form of a
capital injection.

(9) See footnote 7.
(10) Point 7.5 of these Guidelines states that ‘the Commission will
examine the compatibility with the common market of any
rescuing and restructuring aid granted without its authorisation
(...) on the basis of these guidelines if some of all of the aid is
granted after their publication in the Official Journal of the European
Communities’.

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(a)

Eligibility of the firm

obligations of purchaser and lessee are radically different
and in no way comparable for the purpose of footnote
10 of the Guidelines.

(44) Germany claims that the sole aid recipient is NEL, which,
as an Auffanggesellschaft, qualifies for the exception in
footnote 10 of the Guidelines. As explained above,
the footnote allows rescue or restructuring aid for
companies in the new Länder emerging from a liqui-
dation or a takeover of assets occurring up to 31 Decem-
ber 1999. However, in its decision initiating the formal
investigation procedure the Commission noted that
neither liquidation nor a transfer of assets had yet taken
place. Germany claims that the initiation of bankruptcy
proceedings is a form of liquidation and that the lease of
the assets is comparable to their takeover.

(47) Moreover, in this case, all relevant transactions took
place within the same group, since NEL is not an
independent entity, but is wholly owned by its parent
company, the bankrupt Erba Lautex GmbH. The assets
were therefore not ‘taken over’ within the meaning of
the Guidelines. The Commission accordingly takes the
view that the criteria of footnote 10 of the Guidelines
are not met. It must therefore examine whether the aid
to the group can be considered rescue or restructuring
aid on the basis of the Guidelines.

(45) The Commission disagrees with the view that bank-
ruptcy proceedings are a form of liquidation. It is in the
nature of liquidation that assets are transformed into
cash. Liquidation usually refers to the selling of assets
and payment of liabilities in anticipation of going out of
business. In the sense of winding-up, it relates to the
distribution of a company’s assets among its creditors
and members prior to its dissolution. On the other hand,
bankruptcy may result in reorganisation and continued
operation of the firm where it does not require liqui-
dation and distribution of the proceeds. Consequently
bankruptcy and liquidation are different issues. The
initiation of bankruptcy proceedings does not necessarily
mean that the company will be liquidated, particularly
under German law where there is the possibility of
continuing activities. In this case, the decision was to
continue activities until an unspecified point in time.
Consequently, the effects of the decision to initiate
bankruptcy proceedings are in no way comparable to
those of a decision to liquidate the company.

(b) Compliance with the criteria set out in the Guidelines

(48) The measures which Germany regards as aid are said to
constitute rescue aid granted solely to NEL. However, as
explained above, the Commission believes that the group
constituted by the bankrupt Erba Lautex and its 100 %
subsidiary NEL should be regarded as the relevant
recipient. Moreover, it considers that the capital increase
also constitutes aid which needs to be assessed under
the same Guidelines.

(49)

In order to be considered rescue aid within the meaning
of the Guidelines, the aid must consist of liquidity
support in the form of loans or loan guarantees granted
at market rates and must be reimbursed over a period of
not more than 12 months. It must be granted on the
basis of serious social difficulties for a limited period,
usually six months, until the firm’s future can be assessed
and a restructuring or liquidation plan devised.

(46) As for the argument that the lease of the assets can be
considered comparable to their takeover, the Com-
mission can only reject this view. The nature of a lease
contract and that of a purchase contract are radically
different. Under a lease contract, the lessee hires an asset
from the lessor. The lessor retains the right of ownership
but the lessee acquires the right to use the asset for a
specific period of time in return for the payment of
specific rentals or payments. In a purchase contract, the
right of ownership is transferred from the seller to the
the legal rights and
purchaser for a price. Hence,

available

(50) However, the capital increase is not liquidity support
and was not granted on market conditions, according to
the
the usually
information. Moreover,
accepted period of six months for which rescue aid can
be approved is substantially exceeded in the present case
without any justification being provided. The purported
rescue aid, according to the information submitted,
would be repaid by the company within some eight
years, without counting repayment of any interest. As
regards the capital increase, it is highly doubtful that it
will be paid back at all.

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(51)

In addition, the Commission can conclude that rescue
aid has been granted only if the future of the recipient is
to be assessed. However, the future of NEL had already
been assessed, since a restructuring plan had already
been prepared at the date of its creation and before the
award of the purported rescue aid. As for the bankrupt
Erba Lautex GmbH, its future remains unclear since it
has so far been decided only that it would continue its
activities through NEL for an unspecified period of time.

(52) Germany states that the rescue aid was necessary until
the restructuring of NEL could start. However, the
Commission considers that the aim of rescue aid under
the Guidelines is to allow the company to be kept in
business until its future can be determined. Even apply-
ing a certain degree of flexibility, rescue aid cannot be
approved for an unlimited period of time. However, this
is precisely the case here, since the restructuring was
supposed to start with the sale of NEL, for which no
date was envisaged. Two years after launching the call
for tender, the sale has not yet taken place. Moreover,
some restructuring steps seem to have already been
undertaken despite the fact that NEL has not been sold.
However, this does not render the purported rescue aid
compatible; rather, it means that it should have already
been paid back in full, which is not the case.

(53)

In view of the above, the Commission must conclude
that the aid is not acceptable as rescue aid. Furthermore,
the reasons listed below do not allow it to conclude that
the aid could be considered compatible as restructuring
aid either.

company could not be revitalised. Although Germany
claims that the viability of NEL can be restored, this
would depend on its being sold. However, as stated
repeatedly, no investor seems willing to acquire the new
legal entity. There is therefore no significant contribution
from the aid recipient, nor can one be expected.

(56)

Lastly the Commission takes account of the comments
submitted by third parties, to the effect that the continu-
ation of the activities of the bankrupt Erba Lautex GmbH
through NEL thanks to the unrecovered incompatible
aid and to the new aid distorts competition in the
common market.

(c) Application of the Deggendorf doctrine

(57)

In its decision initiating the formal investigation pro-
cedure the Commission thought it appropriate to con-
sider the recovery of the aid declared incompatible by its
Decision 2000/129/EC. In accordance with the judg-
ment of the Court of Justice of the European Communi-
ties of 15 May 1997 in Case C-355/95 P Textilwerke
Deggendorf v Commission and Germany (11), when the
Commission examines the compatibility of State aid
with the common market,
it must take all relevant
factors into account. These include, where appropriate,
the circumstances already considered in a prior decision
and the obligations which that decision may have
imposed on a Member State. It is the Commission’s
responsibility, when examining new aid, to assess the
cumulative effect in terms of distortion of the market of
new aid and unrecovered incompatible aid.

(54)

First, Germany has never submitted a restructuring plan
for the whole group. Germany recently claimed that the
creation of a subsidiary to which the profitable assets
will be transferred can be regarded as a form of
restructuring. However, this would mean that it was the
bankrupt Erba Lautex GmbH which was restructured.
But there is no expectation of a plan to restructure or
liquidate the bankrupt Erba Lautex GmbH. The sole plan
submitted to the Commission concerns NEL, a part of
the group.

(58) Commission Decision 2000/129/EC found that State aid
amounting to EUR 60,844 million (DEM 119 million)
granted to Erba Lautex GmbH was unlawful and incom-
patible with the common market. Article 2 of that
Decision required Germany to recover the aid from the
recipient. Germany did not contest the Decision within
the prescribed period and it thus became legally enforce-
able.

(59) The Commission would point out that the purpose of
recovering unlawful and incompatible aid is to put an
end to undue distortions of competition in the common

(55)

Second, there are no realistic expectations that the group
or even part of it could restore its viability. Germany has
never stated that the viability of the bankrupt Erba
Lautex GmbH could be restored. In the report of the first
assembly of creditors it is stated that the bankrupt

(11) [1997] ECR I-2549.

L 282/56

EN

Official Journal of the European Communities

19.10.2002

market caused by that aid. In this respect it is noted that
no aid has yet been recovered and that the bankrupt
Erba Lautex GmbH continues to operate, through NEL,
in the same market. Therefore distortions of competition
have not yet been brought to an end. The new aid does
not contribute to improving this situation. On the
contrary, it allows Erba Lautex GmbH, through NEL, to
continue its activities. Consequently the Commission
considers that the new aid has a negative cumulative
effect on competition.

VII. CONCLUSION

(60) The Commission finds that Germany has unlawfully
implemented the
aid in question in breach of
Article 88(3) of the EC Treaty. Moreover, the aid cannot
be considered compatible with the common market and
has a negative cumulative effect,

HAS ADOPTED THIS DECISION:

Article 2

Germany shall take all necessary measures to recover the
1.
aid unlawfully made available to the recipient referred to in
Article 1.

Recovery shall be effected without delay and in accord-
2.
ance with the procedures of national law provided that they
allow the immediate and effective execution of this Decision.
The aid to be recovered shall include interest from the date of
its being made available to the recipients to the date of its
Interest shall be calculated on the basis of the
recovery.
reference rate used for calculating the grant-equivalent of
regional aid.

Article 3

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

Article 1

This Decision is addressed to the Federal Republic of Germany.

Done at Brussels, 12 March 2002.

Article 4

to

aid

State

amounting

The
EUR 7,834 million
(DEM 15,324 million) granted by Germany to the group
constituted by the bankrupt Erba Lautex GmbH and its wholly
owned subsidiary, Neue Erba Lautex GmbH, is incompatible
with the common market.

For the Commission

Mario MONTI

Member of the Commission