2005/652/EC: Commission Decision of 20 October 2004 on the State Aid C 38/03 implemented by Spain (further restructuring aid to the public Spanish shipyards) (notified under document number C(2004) 3918)   (Text with EEA relevance)
Date: 2004-10-20
Institutions: European Commission
Subjects: Spain, State aid, aid for restructuring, control of State aid, shipbuilding

16.9.2005

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Official Journal of the European Union

L 240/45

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 20 October 2004

on the State Aid C 38/03 implemented by Spain (further restructuring aid to the public Spanish
shipyards)

(notified under document number C(2004) 3918)

(Only the Spanish version is authentic)

(Text with EEA relevance)

(2005/652/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

(2)

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 regard to Council Regulation (EC) No 1013/97 of
2 June 1997 on aid to certain shipyards under restructuring (1),

Having regard to Council Regulation (EC) No 1540/98 of 29
June 1998 establishing new rules on aid to shipbuilding (2),

Having called on interested parties to submit their comments
pursuant to the provisions cited above (3) and having regard to
their comments,

Whereas:

I. THE PROCEDURE

(1)

Based on Regulation (EC) No 1013/97, the Commission
in a decision of 6 August 1997 (4) authorised restruc-
turing aid for Spanish public shipyards amounting to
approximately EUR 1,9 billion. According to both the
decision and Council Regulation (EC) No 1013/97 the
condition for the approval of the aid was that no more
aid for restructuring purposes should be provided.

(1) OJ L 148, 6.6.1997, p. 1.
(2) OJ L 202, 18.7.1998, p. 1.
(3) OJ C 201, 26.8.2003, p. 3.
(4) OJ C 354, 21.11.1997, p. 2.

In the years 2000, 2001 and 2002, the state holding
company Sociedad Estatal de Participationes Industriales
(hereafter SEPI) provided IZAR Construcciones navales
(hereafter IZAR) with capital injections for a total sum
of EUR 1 477 million. By letters dated 8 November 2002
and 14 January 2003, the Commission requested infor-
mation on this matter.

(3)

(4)

(5)

By decision of 27 May 2003 the Commission initiated
the procedure laid down in Article 88(2) of the EC Treaty
(hereafter
transactions
whereby SEPI injected EUR 1 477 million in IZAR. The
Spanish authorities were informed of the decision in a
letter from the Commission dated 28 May 2003.

concerning the

the opening)

Spain, by letters dated 11 July 2003, 29 July 2003,
11 August 2003, 19 January 2004, 23 February 2004,
14 April 2004 and 26 July 2004 submitted its
comments on the opening of the procedure.

Following the opening of the procedure, the Commission
received comments from Royal Van Lent Shipyard by
letter dated 24 September 2003, from a party requesting
anonymity by letter dated 24 September 2003 and from
IZAR by letter dated 6 October 2003. These comments
were forwarded to Spain by letter of 13 October 2003.
Spain provided comments by letter dated 10 November
2003. IZAR on 17 November 2003 brought an action (5)
the Commission before the Court of First
against
Instance, requesting an annulment of
the opening of
the procedure.

(5) OJ C 21, 24.1.2004, p. 42, Case T-382/03.

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(6)

(7)

(8)

(9)

(10)

(11)

II. DETAILED DESCRIPTION OF THE AID

(12)

THE BENEFICIARIES

that

time operated as companies,

in July 2000 decided to merge all

SEPI
the publicly
owned, military and civil shipyards and related activities,
which at
into one
group. All the civil shipyards and related activities were
therefore bought, on 20 July 2000, by BAZAN and then
merged into BAZAN which subsequently changed name
to IZAR.

IZAR’s civil activities mainly take place at Astilleros de
(Puerto Real),
Cadiz (Cadiz), Astilleros de Puerto Real
Astilleros de Sestao (Sestao), Astilleros de Sevilla
(Sevilla), Juliana Constructora Gijonesa (Juliana), Fábrica
de Manises (Manises), Astilleros de Fene (Fene). IZAR also
have three mainly military shipbuilding sites, Ferrol,
Cartagena and San Fernando.

THE AID

The investigation covers the following capital injections
from SEPI: EUR 1 322,227 million (ESP 220 billion),
provided to BAZAN on 28 July 2000, EUR 105,171
million provided to IZAR in 2001 and EUR 50,000
million provided to IZAR in 2002.

In the opening decision the Commission noted that the
capital provided by SEPI to IZAR may confer economic
benefits to civil shipbuilding which they were unlikely to
have received from commercial sources. The measures
therefore were likely to constitute aid. By its nature
such aid is likely to distort competition.

the civil yards,

Based on the recent history of
the
Commission therefore suspected that the civil yards had
received financial support through the capital injections
given to IZAR and had doubts that such support would
be in compliance with the rules on state aid for ship-
this state aid procedure is
building. The objective of
therefore to clarify if any of
the capital provided to
IZAR has benefited the civil shipyards or other civil
activities.

(13)

(14)

(15)

(16)

(17)

III. COMMENTS FROM INTERESTED PARTIES

COMMENTS TO THE OPENING OF THE PROCEDURE

(18)

The Commission received comments from three parties.
A party requesting anonymity made a joint comment for
this case and State aid case C-40/00 (1). It underlines that
the investigated aid has created a serious distortion in the
market of recreational ships. Another joint comment for
this case and case C-40/00 was received from Royal van
Lent Shipyard B.V. The company claims that aids granted
by the Spanish government during the past years has
been extremely prejudicial for many of the competitors
in the market for mega yachts.

The Commission also received comments from IZAR.
IZAR claims that the concerned capital
injections fall
the EC Treaty, and that any
under Article 296 of
problems concerning distortion of
trade should be
treated within the context of the cooperation procedure
of Article 298 of the EC Treaty. IZAR also claims that
the capital injected by SEPI is not State resources and in
any case falls under the market investor principle. IZAR
finally claims that the possibility of recovery of any aid
provided to the public Spanish shipyards in 1997 is
unacceptable since it is existing aid.

IV. COMMENTS FROM SPAIN

COMMENTS FOLLOWING THE OPENING

In the procedure, Spain provided the Commission with
the following arguments on why, in its view, no State aid
was involved in the concerned capital injections.

Firstly, Spain claims that SEPI acted as a private investor
in a market economy, that aims at maximizing profits,
the Commission did not prove that SEPI's
and that
resources comes from the State or are imputable to the
State.

Furthermore, the capital was injected in the context of a
plan for the company BAZAN, which used to be a
military company. The capital was injected in order to
cover a number of costs linked to this plan, developed in
1998. In particular, EUR […] (*) million related to so-
linked to pre-
called externalisation of
pensions by former BAZAN employees. This amount
was paid to insurance companies in the years 2000 to
2002, which pay out the pensions. The increased costs
for these commitments explains, according to Spain, the
additional capital injections from SEPI to IZAR in 2001
and 2002.

social costs

In addition, a further approximately EUR […] million
such social costs directly from
had been paid for
BAZAN to some pre-retired employees.

The rest of the capital injected was, according to Spain,
needed to cover investments in the military areas of the
new company IZAR, amounting to EUR […] million, and
for an increased need for working capital for military
constructions.

Spain also stated that these measures should be analysed
within the context of Article 296 of the EC Treaty, since
the capital was provided to BAZAN, which according to
Spain was a purely military company at the time of the
injection of the capital.

(19)

the possibility that
Spain furthermore argued against
the aid authorised in 1997 would become
some of
incompatible in case the Commission would declare
that further illegal aid has been provided to the public
Spanish shipyards.

(1) OJ C 199, 23.8.2003, p. 9.

(*) Confidential information.

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In reaction to the comments provided by third parties
Spain fully agrees with all that was stated by IZAR, and
denies that IZAR has an important activity in the luxury
yacht sector.

it
compatible with the
complies with the provisions of
the Regulation. This
provision applies not only to aid granted to undertakings
engaged in such activities but also to related entities.

common market only

if

(20)

(21)

Spain at a later stage of the procedure provided further
the
information requested by the Commission,
from
estimated losses of
1 July 2000 to 31 December 2003 and information
on the overhead costs of IZAR during this period.

the civil activities of

IZAR,

i.e.

V. ASSESSMENT

LEGAL BASE

(22) According to Article 87(1) of the EC Treaty, any aid
granted by a Member State or through State resources
in any form whatsoever which distorts or threatens to
distort competition by favouring certain undertakings or
the production of certain goods shall,
in so far as it
affects trade between Member States, be incompatible
with the common market. Pursuant to the established
case-law of the European Courts, the criterion of trade
being affected is met if the recipient firm carries out an
economic activity involving trade between Member
States.

(23) According to Article 87(3)(e) of the EC Treaty, categories
of aid specified by a decision of the Council acting by a
qualified majority on a proposal from the Commission
may be considered compatible with the common market.
The Commission notes that the Council adopted on this
basis Regulation (EC) No 1540/98 (hereafter the Ship-
from
building Regulation), which was
1 January 1999 to 31 December 2003. Although Regu-
lation (EC) No 1540/98 expired on 31 December 2003,
and is not concerned by the Commission notice on the
determination of the applicable rules for the assessment
of unlawful State aid (1), in the interest of a consistent
practice the Commission — using its broad margin of
appreciation — intends to apply that Regulation in the
present case.

force

in

(24)

Shipbuilding is an economic activity involving trade
between Member States. Therefore, aid to shipbuilding
falls within the scope of Article 87(1) of the EC Treaty.

(25)

seagoing

The Commission notes that according to the Ship-
‘shipbuilding’ means building of
building Regulation,
self-propelled
The
Commission further notes that IZAR builds these ships
and that consequently it is an undertaking covered by the
Regulation. The Commission further notes that Article 2
of the said Regulation states that aid granted for ship-
ship repair and ship conversion may be
building,

commercial

vessels.

(1) OJ C 119, 22.5.2002, p. 22 (see the last sentence:

‘The present
notice is without prejudice to the interpretation of Council and
Commission regulations in the field of State aid.’)

(26)

(27)

to Regulation (EC) No
In August 1997, pursuant
1013/97,
the Commission exceptionally approved a
package of restructuring aids for the Spanish public
civil shipyards in order for them to return to viability
by the end of 1998. Including aids previously approved,
the total package was ESP 318 billion (EUR 1,9 billion).

In giving its agreement, the Council stressed the ‘one
time, last time’ nature of the aid package. The Spanish
government had undertaken the commitment that the
yards would not receive any further aid for restructuring,
rescue,
loss compensation or privatisation. This was
reflected in the conditions attached to the Commission's
decision approving the aid. It was also underlined in the
first indent of the second subparagraph of Article 5(1) of
the Shipbuilding Regulation. This provision states that no
rescue or restructuring aid may be granted to an under-
taking that has been granted such aid pursuant to Regu-
lation (EC) No 1013/97.

(28) As a consequence, aid in excess of the aid that was
authorised by
initial Commission decision of
August 1997 would have to be considered as incom-
patible with the common market, unless approved
under another legal base.

the

(29)

(30)

The Commission notes that the shipyards Sestao, Puerto
Real, Sevilla, Cadiz, and Juliana were undertakings
covered by Regulation (EC) No 1013/97 and the 1997
Commission decision referred to above. Manises and
Fene (ex Astano) are related entities since they were
owned by the shipbuilding company IZAR during
also
investigation,
the period under
covered by the Shipbuilding Regulation, pursuant to its
Article 1(g).

and therefore

ASSESSMENT OF AID

1. THE ROLE OF SEPI

In its decision to open the formal procedure the
Commission considered that SEPI acted on behalf of
the State,
i.e. that its behaviour in the different trans-
actions is imputable to the State. Spain has contested
independently
this, and claimed that SEPI
from the State and that therefore its behaviour is not
in Spain’s view,
imputable to the State.
SEPI acted as a market investor and therefore the funds
provided from SEPI in this case could not be considered
as State aid.

In any way,

functions

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(31)

(32)

(33)

(34)

is a public holding
The Commission notes that SEPI
company which is directly depending on the Ministry
of Finance. As such it is considered as a public under-
taking in the sense of Commission Directive 2000/52/EC
of 26 July 2000 amending Directive 80/723/EEC on the
relations between Member
transparency of
States and public undertakings (1),
since due to its
ownership or its financial participation, the public autho-
rities can directly or
indirectly exercise a dominant
influence on SEPI.

financial

The Court has defined when funds are considered to be
state resources. It has e.g. stated that even if the sums
corresponding to the measure in question are not perma-
nently held by the Treasury, the fact that they constantly
remain under public control, and therefore available to
the competent national authorities, is sufficient for them
to be categorised as State resources (Court judgment in
Case C-83/98 P,
v Ladbroke Racing and
Commission (2)). This clearly applies to SEPI’s resources.

France

The Court has further taken a decision (Court judgment
C-482/99, Stardust marine (3)), outlining the criteria for
imputability to the State of an aid measure taken by a
public undertaking. This may, according to the Court, be
inferred from a set of indicators arising from the circum-
stances of
in which that
measure was taken.

the case and the context

Examples of indicators provided by the Court are the
integration of the public company into the structures
of the public administration, the nature of its activities
and the exercise of the latter on the market in normal
the
conditions of competition with private operators,
legal status of
its
the undertaking (in the sense of
being subject to public law or ordinary company law),
the intensity of the supervision exercised by the public
authorities over the management of the undertaking, or
in the particular case, an
any other indicator showing,
involvement by the public authorities in the adoption of
their not being
a measure or
the unlikelihood of
involved, having regard also to the compass of
the
measure, its content or the conditions which it contains.

that is closely linked to public policy. Furthermore, SEPI
has a history of behaviour towards the shipyards which
has been carried out in a manner that can be considered
imputable to the State, such as providing part of the
authorised restructuring aid in 1997 and unlawful aid
in 1998 (4).
in other
circumstances provides State
to the
Spanish coal industry (5).

It can also be noted that SEPI
such as

aid,

(36)

(37)

(38)

It derives from points 31 and 32 above that SEPI’s funds
are state resources. Furthermore,
it derives from points
33 to 35 above that the provision of its funds under
investigation in this case,
to shipbuilding companies,
must be considered imputable to the State in so far as
they are provided on terms not
in conformity with
market economy principles.

The general principle that applies for financial
trans-
actions between the state and public companies, is the
so called market economy investor principle. Given that
SEPI’s funds are State resources, it is essential that SEPI,
in its economic transactions with its shipbuilding subsi-
diaries (whether
the subsidiaries are companies with
to such
activities or holding companies
economic
companies) acts fully in line with the market economy
investor principle.

The market economy investor principle is explained in
detail in the Commission communication to the Member
States (6) on the Application of Articles 92 and 93 of the
EEC Treaty and of Article 5 of Commission Directive
80/723/EEC of 25 June 1980 on the transparency of
financial relations between Member States and public
undertakings to public undertakings in the manufacturing
in Case C-40/85 (8)
sector (7). The Court has also, e.g.
stated that the appropriate ways of establishing whether
the measure is State aid is to apply the criterion to what
extent the undertaking would be able to obtain the sums
in question on the private capital markets at the same
conditions. It continues, ‘in particular, whether in similar
circumstances a private shareholder, having regard to the
forseeability of obtaining a return and leaving aside all
social, regional policy and sectoral considerations, would
have subscribed the capital in question’.

(35)

SEPI is a company with a particular legal status, with e.g.
its annual reports not accessible in the public Spanish
registry. The supervision of the company is exercised by
its board of directors constituting to a large extent of
State secretaries and other persons directly linked to
the government. The nature of its activities include priva-
tisation of state owned companies, which is an activity

(1) OJ L 193, 29.7.2000, p. 75.
(2) [2000] ECR I-03271, paragraph 50.
(3) [2002] ECR I-04397, paragraphs 55 to 56.

(39)

The Commission does not exclude that funds provided
by SEPI may be free of aid as long as SEPI’s actions
investor principle. The
comply with the market
Commission will
injection
for
therefore,
under scrutiny, assess whether SEPI acted according to
the market investor principle.

the capital

(4) OJ L 37, 12.2.2000, p. 22.
(5) OJ L 296, 30.10.2002, p. 73.
(6) OJ C 307, 13.11.1993, p. 3.
(7) OJ L 195, 29.7.1980, p. 35.
(8) [1986] ECR 2321.

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L 240/49

2. AID CONTAINED IN THE CAPITAL INJECTIONS FROM

(43)

SEPI TO BAZAN/IZAR

(a) Aid to a purely military company

(40)

(41)

(42)

injection,

Spain claims that on 28 July 2000, when BAZAN
received the main capital
it was a purely
military company since it had not yet merged with the
recently had acquired.
it
civil
any aid provided to
that
Therefore Spain argues
BAZAN would enjoy the derogation provided for in
Article 296 of the EC Treaty.

shipyard companies

The Commission does not agree with this and notes that
when the capital was provided, BAZAN owned all the
concerned civil shipyards and related activities. Whether
BAZAN owned the civil activities in the form of 100 %
owned subsidiaries or as assets can not be relevant. It can
also be noted that the civil subsidiaries were merged into
BAZAN two months later. It is the final use of the funds
by the beneficiary that is relevant for whether the aid
potentially distorts competition among civil shipyards
in the common market.

(b) Use of the funds for social costs

as

costs

social

to whether

In the opening of the procedure the Commission had
doubts
linked to
the
BAZAN's past (before July 2000) were linked exclusively
to military production, due to the fact that BAZAN in
the past appears to have produced some civil ships. The
Commission therefore doubted that the funds provided
to cover these costs would fall under Article 296 of the
EC Treaty.

to external

to cover costs

The Commission notes that the social costs linked to
BAZAN’s past indeed cover a part of the total capital
provided. Spain has been able to demonstrate that EUR
[…] million was provided
insurance
the
companies
former military shipyards. This amount covers part of
the capital provided in 2000, and all capital provided
in 2001 and 2002. The additional capital injections in
2001 and 2002 were motivated by unexpected increased
costs for these pre-pensions. Spain has also argued that a
further EUR […] million was paid directly by BAZAN to
certain pre-retired BAZAN employees.

for pre-pensions of

cover

entire

amount of

(44) However, the social costs linked to BAZAN’s military
past do not
capital
the
provided by SEPI. The Commission has furthermore
not been provided with convincing information about
the military
the need for more working capital
yards, nor a convincing argument why investments in
military shipbuilding should be financed entirely with
own capital, instead of with mostly loans, which would
be a normal market behaviour. Therefore, Spain did not
demonstrate that the full use of the funds provided by
SEPI to IZAR was for military purposes.

for

(c) Loss coverage for civil activities

(45)

Spain has provided the Commission with estimated
financial results of the civil activities of IZAR for the
years 2000 to 2003. This information indicates a total
loss for the civil activities within IZAR of EUR 290
million, as specified in Table 1.

Table 1

Estimated results of IZAR’s civil activities 2000 to 2003 (1)

Gijon

Sestao

Pto Real

Sevilla

Cadiz

2000

2001

2002

2003

Total

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

Fene

[…]

[…]

[…]

[…]

[…]

Manises

[…]

[…]

[…]

[…]

[…]

(EUR million)

Total

– 80,2

– 103,6

– 59,9

– 46,4

– 290,1

(1) The results in this table do not take into account losses incurred by Sestao, Puerto Real and Sevilla covered by the extraordinary gains

referred to in paragraphs 46 and 51 below.

(46)

The results are provided after extraordinary gains, which
in particular affected Puerto Real, Sestao and Sevilla due
to the fact that these companies had positive book values
at the time they were bought by BAZAN for a symbolic
price. From the table it can be concluded that IZAR has
covered losses generated in its civil activities for a total
sum of EUR 290 million during the period 1 July 2000
to 31 December 2003.

(47)

Furthermore, Spain has provided information concerning
the central costs of IZAR, which have not been allocated

to the civil activities in the calculation of the results in
Table 1. The total amount of central costs for the period
2000 to 2003 were EUR […] million. The civil activities’
share of the turnover of IZAR was […] % during this
period. Using this as a key to distribute the central
costs would imply an additional loss of the civil activities
of EUR 74 million over the concerned period.

(48)

In total,
the civil activities of
estimated loss of EUR 364 million over
2000 to 2003.

IZAR thus made an
the period

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(49) When BAZAN acquired the civil activities, it had limited
financial resources (own capital EUR 100 million by the
end of 1999). It furthermore appears to have made losses
(based on IZAR’s annual reports) in it military activities
in 2000 to 2002 of approximately EUR […] million. It
can therefore be established that the losses of IZAR’s civil
activities had to be covered by the capital
injection
provided in year 2000.

Market economy investor principle

regional policy and sectoral consid-
aside all social,
erations would have provided the capital
for use in
question. The Court has stated that an appropriate way
of establishing whether a capital injection is state aid is to
apply the criterion of determining to what extent the
undertaking would be able to obtain the sums
in
question on the private capital markets, the so called
private investor test (1).

(50)

The next
issue to be assessed is whether in similar
circumstances a private shareholder, having regard to
the foreseeability of obtaining a return and leaving

(51)

From the information provided by Spain it is clear that
the civil companies bought by BAZAN in July 2000 were
in economic difficulties (see Table 2).

Table 2

Book values and financial risks (estimated by Spain) in July 2000

Company

Book value

Estimated Risks

Estimated net value

(EUR million)

Companies sold by AESA to BAZAN/IZAR:

Puerto Real

Sestao

Sevilla

Companies sold by SEPI to BAZAN/IZAR:

Cadiz

Juliana

Manises

Fene

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

Total sum

130,5

192,6

– 62,1

(52)

(53)

the difficult
that
There were furthermore no signs
the civil activities, which had
financial situation for
It
been loss-making for several years, would improve.
can therefore be excluded that the civil activities, under
the ownership of BAZAN/IZAR would generate an
acceptable rate of return, due to their past performance
and the lack of any restructuring measures foreseen. This
is also confirmed by the information provided by Spain,
which states that each of IZAR’s civil activities made
operating losses in each year since 2000, with some
minor exceptions.

the provision of capital

For these reasons, it can be established that IZAR would
not have been able to obtain loans or capital on the
private capital markets to cover the losses of its civil
activities. Therefore,
to these
activities did not comply with the private investor test.
For the same reasons SEPI could not have expected a
return on this capital. Therefore the provision of these
resources from SEPI to IZAR did not comply with the
market economy investor principle. Therefore the capital
injected for the use of the civil activities constitutes State

aid to IZAR. This State aid was illegal, given that it was
not notified to the Commission.

(54)

It can neither be authorised for

It can furthermore be concluded that this aid was not
compatible with the common market as it cannot be
authorised as restructuring aid, since for the shipyards
invoked
this was not allowed, due to the reasons
above.
the other
concerned activities, Fene and Manises, since no restruc-
turing plan has been presented by Spain. The aid can
neither be approved under any other provision of the
shipbuilding Regulation. Furthermore, based on the infor-
mation available, the aid could not be authorised based
on any other of the derogations foreseen in Article 87(2)
and (3) of the EC Treaty.

(1) Case C-342/96 Spain v Commission [1999] ECR I-2459, paragraphs
41 and 42, and Case C-256/97 DMT [1999] ECR I-3913, para-
graphs 22 to 24 and the opinion of AG Jacobs in that case, para-
graphs 34 to 36.

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L 240/51

Loans repaid by IZAR on behalf of three activities

amounting

(55) As was established in State aid decision on case C-40/00,
loans
to EUR 192,1 million were on
12 September 2000 repaid to SEPI, with interest, by
IZAR. The funds had been provided in 1999 to the
companies Juliana, Cadiz and Manises, which subse-
quently were taken over by BAZAN/IZAR in July
2000. As stated in the decision on case C-40/00, infor-
mation linked to this loan repayment would be used in
the present investigation.

(56) According to information received from Spain,

the
reported losses for the civil activities for the year 2000,
in Table 1 above, do not include the repayment of the
above-mentioned loans.

that

civil

Juliana, Cadiz

funds provided by SEPI

in 1999
It
is evident
benefited the
and
companies
Manises. However, since the repayment of these loans
was made from the general accounts of
the
effect is that the three companies,
later dissolved into
business units, benefited from not having to repay the
concerned loans. It is thus clear that it was IZAR, which
through the payment from its own resources, alleviated
Juliana, Cadiz and Manises from the financial burden to
repay the loans.

IZAR,

EUR 192,1 million as outlined

million as outlined in paragraph 48 above, plus the aid
in
repayment of
is thus
paragraph 51 above. The total aid amount
EUR 556,1 million. The additional capital
injections in
to IZAR were used to
2001 and 2002 from SEPI
cover unexpected increased costs for pre-pensions in
the former military shipyards and do not constitute aid.

RECOVERY OF RESTRUCTURING AID ALREADY GRANTED
AND APPROVED IN 1997

(61)

Since the doubts of further incompatible State aid to the
public Spanish civil shipyards have been confirmed, the
Commission must assess, as noted in the opening of the
procedure, whether some of the restructuring aid granted
in 1997 will be considered to be incompatible and be
recovered.

(62) On this issue, the Commission considers that, taking into
consideration the comments made by Spain and IZAR in
the context of this procedure, there is no grounds to
the restructuring aid authorised in
consider part of
1997 to be incompatible. The reason is that, according
to the decision (1) authorising the aid, the Commission’s
right to request recovery of the aid authorised in 1997
last monitoring report (2), dated
expired with the
13 October 1999. Therefore, the aid approved in 1997
became existing aid once the monitoring period expired.

The Commission has assessed whether the loans repaid
by IZAR could have been financed with funds received
through a new loan taken by IZAR on market
conditions. Concerning this aspect
the Commission
injection in the year
considers that without the capital
2000, which has been shown above to have been used to
IZAR’s financial
support
situation would have been much worse than it was.
IZAR could
For this reason it can be excluded that
have received a loan on market condition if it had not
received the illegal and incompatible aid in the form of
EUR 364 million of the capital injection.

the civil activities of

IZAR,

The repayment of EUR 192,1 million by IZAR to SEPI
should therefore be considered as a further use of the
capital
injection under investigation to the benefit of
IZAR’s civil activities. For the same reasons as outlined
above for the loss coverage, this use of funds for the civil
activities did not comply with the market economy
investor principle and the corresponding amount used
injected to IZAR constitutes incom-
from the capital
patible State aid to IZAR.

(63)

(64)

(65)

ARTICLE 296

Spain claims that the capital injection would fall under
Article 296 and thus outside the scope of the state aid
rules, since BAZAN was a military company at the time
of the acquisition of the yards.

It cannot be disputed that
the civil activities needed
financial aid in order to continue operations after July
they were part of a ship-
2000. The mere fact
involved in military
building company, which was
construction, does not
these
alter
shipyards and related activities. Therefore aid to such
activities falls under Article 87 of the Treaty.

the nature of

that

VI. CONCLUSION

The Commission concludes that Spain has unlawfully
implemented aid of a sum of 556 million euro in
breach of Article 88(3) of the Treaty. This has been
provided in the form of: Capital
injection of 1 322
million euro from SEPI to IZAR, in year 2000, out of
which 556,1 million euro benefited the civil activities of
IZAR.

(57)

(58)

(59)

Summary

(60)

above
the Commission
Based on the
IZAR’s civil activities have benefited
concludes
that
from the capital injection provided from SEPI to IZAR
in year 2000, by receiving loss coverage of EUR 364

assessment

(66)

The aid should be recovered in their totality from the
current owners of these activities, IZAR,

(1) OJ C 354, 21.11.1997, p. 2, see the penultimate paragraph on

page 7.

(2) COM(1999) 480 final.

L 240/52

EN

Official Journal of the European Union

16.9.2005

HAS ADOPTED THIS DECISION:

Article 1

The State aid amounting to EUR 556,1 million euro unlawfully
granted by Spain, in breach of Article 88(3) of the Treaty, in
favour of IZAR is incompatible with the common market.

Article 2

1.
Spain shall take all necessary measures to recover from
IZAR the aid referred to in Article 1 and unlawfully made
available to the beneficiary.

Recovery

shall be

effected without delay

and in
2.
accordance with the procedures under national
law, provided
these allow the immediate and effective implementation of this
Decision. The
interest
throughout the period running from the date on which they
were put at the disposal of the beneficiary until their actual
recovery. The interest rate to be applied will be the reference
rate used for calculating the grant equivalent of regional aid.
The interest rate referred to in paragraph 4 will be applied on a

recovered shall bear

to be

sums

compound basis throughout the entire period referred to in
paragraph 3.

Article 3

inform the Commission, within two months
Spain shall
following notification of
the measures
this Decision, of
already taken and planned to comply with it. It will provide
this information using the questionnaire attached in the Annex
of this Decision.

Article 4

This Decision is addressed to the Kingdom of Spain.

Done at Brussels, 20 October 2004.

For the Commission

Mario MONTI
Member of the Commission

16.9.2005

EN

Official Journal of the European Union

L 240/53

ANNEX

INFORMATION REGARDING THE IMPLEMENTATION OF THE COMMISSION DECISION C(2004) 3918

1.

Calculation of the amount to be recovered

1.1. Please provide the following details on the amount of unlawful State aid that has been put at the disposal of the

beneficiary:

Date(s) of
payment (*)

Amount of
aid (**)

Currency

Identity of beneficiary

(*) Date(s) on which (individual instalments of) the aid has been put at the disposal of the beneficiary (in so far as a measure

consists of several instalments and reimbursements, use separate rows).

(**) Amount of aid put at the disposal of the beneficiary (in gross aid equivalents).

Comments:

1.2. Please explain in detail how the interests to be paid on the amount of aid to be recovered will be calculated?

2. Measures planned and already taken to recover the aid

2.1. Please describe in detail what measures have already been taken and what measures are planned to effect an
immediate and effective recovery of the aid. Please also explain what alternative measures are available under
national law to effect recovery? Please also indicate where relevant the legal basis for the measures taken/planned.

2.2. By what date will the recovery of the aid be completed?

3.

Recovery already effected

3.1. Please provide the following details on the amounts of aid that have been recovered from the beneficiary:

Date(s) (*)

Amount of aid
repaid

Currency

Identity of beneficiary

(*) Date(s) on which the aid has been repaid.

3.2. Please attach information documenting the repayment of the aid amounts specified in the table under point 3.1

above.