2008/141/EC: Commission Decision of 25 September 2007 on the measures C 47/2003 (ex NN 49/2003) implemented by Spain for Izar (notified under document number C(2007) 4298) (Text with EEA relevance)
Date: 2007-12-19
Institutions: European Commission
Subjects: Spain, State aid, carrier, control of State aid, gas, shipbuilding

20.2.2008

EN

Official Journal of the European Union

L 44/33

COMMISSION DECISION

of 25 September 2007

on the measures C 47/2003 (ex NN 49/2003) implemented by Spain for Izar

(notified under document number C(2007) 4298)

(Only the Spanish text is authentic)

(Text with EEA relevance)

(2008/141/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Spain were received in letters dated 12 January 2004 and
10 May 2004, respectively.

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

Whereas:

I. PROCEDURE

(1)

(2)

(3)

that

the Commission learnt

In March 2000,
three
delivery guarantees had been granted by the Spanish
public holding company Sociedad Estatal de Participa-
ciones Industriales (SEPI) to Repsol/Gas Natural (Repsol)
in relation to the construction and delivery of three LNG
tankers contracted to two public shipyards belonging at
the time to Astilleros Españoles (AESA), and subse-
quently transferred to the Izar group. AESA and Izar
were wholly owned by SEPI.

By letter dated 9 July 2003, the Commission notified
Spain of
its decision to initiate proceedings under
Article 88(2) of the Treaty concerning the three non-
notified measures.

By letters dated 5 August 2003 and 22 October 2003,
the Spanish authorities submitted their comments on the
Commission’s letter. The Commission received comments
from one interested party (Repsol) in October 2003 and
February 2004. It forwarded them to Spain, which was
given the opportunity to react. The comments from

(1) OJ C 209, 4.7.2003, p. 24.

(4)

(5)

(6)

In the context of two State aid decisions not related to
the present procedure (2), adopted during 2004 (i.e. after
the opening of the formal investigation concerning the
LNG tanker guarantees), the Commission found State aid
of EUR 864 million granted to Izar by Spain to be
incompatible with the Treaty, and ordered its recovery.

By letter dated 5 August 2004, Spain invoked Article
296 of the Treaty (3) with the objective of rescuing the
military shipbuilding activities from a foreseeable bank-
ruptcy of Izar, as a consequence of that recovery order.
In subsequent correspondence,
the Spanish authorities
also explained to the Commission how the new
military shipbuilding company formerly known as
Bazán
their
commitments in relation to the competition concerns,
and proposed a methodology for
the follow-up of
those commitments.

(Navantia) would

function,

outlined

In view of

In the meanwhile, the pending recovery orders on Izar,
for a total of EUR 1,2 billion (4), had led the company to
a situation of negative net worth, and technical bank-
this, on 1 April 2005 Spain put
ruptcy.
into liquidation the civil shipyards that
remained in
Izar (i.e., shipyards outside the perimeter of the newly
created Navantia: Gijón, Sestao, Manises and Seville), and
launched a privatisation procedure for those yards.

II. DESCRIPTION OF THE AID MEASURES

(7)

In 1999, Repsol awarded three shipowners one contract
each for the chartering of one LNG tanker each, plus the
option for one extra tanker each, under a long-term
time-charter arrangement.

(2) Cases C 38/2003 and C 40/2000.
(3) This Article allows a Member State to ‘take such measures as it
considers necessary for the protection of the essential
interests of
its security which are connected with the production of or trade in
arms, munitions and war materials’.

(4) In addition to the two 2004 decisions, an older decision from 1999
(Case C 3/99) also requested from Izar recovery of a further EUR
111 million.

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(8)

(9)

Subsequently, negotiations were undertaken between the
shipowners and shipbuilders, including Korean yards, for
the construction of the three LNG tankers. On 31 July
2000, two public Spanish shipyards that had just been
transferred from AESA to Izar (1) were awarded the three
contracts for the construction of the LNG tankers and
the final shipbuilding contracts were signed.

On the same day, AESA signed an additional clause to
each shipbuilding contract whereby it committed to
indemnify Repsol for all the costs Repsol would incur
if
ships were not delivered according to the
contractual terms for reasons for which the shipyards
could be held liable.

the

(10) On the same day (31 July 2000), SEPI granted Repsol
delivery guarantees for each of the three shipbuilding
contracts, covering the same damages and prejudices
for which AESA undertook to indemnify Repsol (2).
The losses were capped to a maximum of approximately
EUR 180 million per ship, i.e. for a maximum aggregate
total of approximately EUR 540 million. The guarantees
were granted for a period starting on 31 July 2000 until
the end of the period terminating 12 months after the
delivery of each ship (3).

(11)

III. REASONS FOR INITIATING THE PROCEDURE

(the opening decision),

In its decision of 9 July 2003 to initiate the formal
investigation procedure
the
Commission concluded that
the three aid measures
constituted State aid within the meaning of Article
87(1) of the Treaty, and questioned their compatibility
with the common market. The Commission considered
that the beneficiaries of the aid were the yards, but did
not exclude the possibility that Repsol could have also
benefited from the aid, and decided that the Article 88(2)
procedure should include Repsol, in order to allow for
the submission of the additional information needed to
dispel those doubts.

IV. COMMENTS RECEIVED AFTER THE INITIATION OF
FORMAL PROCEEDINGS

(12)

In its observations, Repsol insists on the distinction that
must be drawn between its position as contractual ben-

eficiary of
deriving from the state aid. According to Repsol:

the guarantees, and any alleged benefits

under

entitled

Spanish civil

— The guarantees from SEPI covered benefits to which
and
Repsol was
commercial
law. The guarantees corresponded to
Repsol’s creditor position vis-à-vis the shipowners,
Izar and the shipyards. Repsol was not due to pay
any premium for the guarantees, as it is not market
practice that companies obtaining a security for the
respect of contractual obligations must pay for this
security.

received from the

— In addition, the guarantees did not provide Repsol
with any economic advantage within the meaning
the Treaty. Similarly to the
of Article 87(1) of
guarantees
shipowner parent
companies, SEPI’s counter-guarantees only ensured
that the contractual terms of the vessels’ chartering
contracts would be
contracts
complied with, thereby enabling Repsol to comply
with the LNG transportation contracts signed with
other parties.

and shipbuilding

— Repsol would have required additional guarantees to
those given by Izar, irrespective of whether they had
been granted by SEPI or any other entity. Those
guarantees are a requirement
in accordance with
market practice, in view of the size and risks of the
investments and commercial commitments at stake.

(13)

The submission from Spain concurred with the above
the position of Repsol. The
arguments as
therefore concluded that Repsol
Spanish authorities
could not be deemed to be a beneficiary of State aid.

regards

V. ASSESSMENT

The position of Repsol as a potential beneficiary of
the aid

(14) One of the aims of the opening decision was to identify
the beneficiary of any State aid involved in the delivery
guarantees granted by SEPI.

(1) On 20 July 2000, AESA sold to Izar the two shipyards responsible
for the construction of the LNG tankers. By letter dated 13 February
2003, the Spanish authorities confirmed that Izar had taken over
responsibility for AESA’s commitments in relation to the ship-
building contracts.

(15)

(2) Under the terms of the guarantee, SEPI would indemnify Repsol at
first request for all the direct and indirect costs and consequent
losses Repsol would incur
ships were not delivered
according to the contract terms for reasons for which Izar could
be held liable.

the

if

(3) Pursuant

to the shipbuilding contracts,

the vessels had to be
delivered on 15 September 2003, 15 December 2003 and
15 March 2004, respectively.

is

for

liable

service

a good or

The Commission notes that, according to civil law, the
provider of
the
performance of
the contract signed with the buyer.
This liability covers both the quality of the product and
the agreed time of delivery. Thus,
if a contractual
agreement is not respected and the buyer suffers loss
or damage as a result, the latter can claim compensation.
In the case at hand, this compensation would have been
borne by the yard or its parent company Izar.

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(16)

(17)

(18)

(19)

In view of this, it appears that Repsol, which rented the
vessels produced by (yards that are owned by) Izar, was
in a creditor position vis-à-vis the shipowners and Izar.
it cannot be held liable under the charter and
Hence,
including the additional clause
shipbuilding contracts,
thereto.

In consideration of the above, and in accordance with the
observations from Repsol and Spain, the Commission
concludes that Repsol cannot be regarded as a beneficiary
of the aid, since it did not obtain any benefit to which it
would not have been entitled on the basis of general civil
or commercial law.

Conclusion

The Commission considers that the voluntary liquidation
Izar’s assets was an appropriate measure for the
of
the three
purpose of
implementation by Spain of
pending recovery decisions.
it considers
that the commitments and actions undertaken by Spain
were sufficient to prevent distortion of competition.

In particular,

The Commission is also of the opinion that the tendering
procedure for the sale of the four civil shipyards was
carried out by Spain in a satisfactory manner, through
an open, transparent and unconditional procedure.
In
particular, on 3 November 2006 the Spanish Council
of Ministers authorised the sale of
the Sestao, Gijón
and Seville yards to the successful bidders. The privati-
sation contracts were signed on 30 November 2006. As
regards the remaining yard (Manises),
it was concluded
that the option which maximised the liquidation value
consisted in the closure of the yard, and the transfer of
assets to SEPI.

(20) As a result of

the liquidation and sale of

the
company definitively ceased all economic activity. The
sole reason why Izar still exists is so that it can carry
out the tasks relating to the cessation of its activities, in
particular the termination of employee contracts. Once
these tasks have been completed, Izar will be liquidated.

Izar,

These activities are not of a kind to justify applying the
competition rules provided for in the Treaty. Conse-
quently, even assuming that the measures in question
had entailed a benefit for Izar and a distortion of compe-
tition, the Commission considers that any such distortion
ceased at
the moment when Izar ceased economic
activities and closed its yards. Under these circumstances,
a Commission decision on the classification of such
measures as aid and on their compatibility would not
have any practical effect.

(21)

Consequently,
investigation initiated under
Article 88(2) of the Treaty no longer serves any purpose.

the formal

VI. CONCLUSION

(22) On the

the

basis of

the
Commission finds that Repsol cannot be deemed a ben-
eficiary of
the procedure
the disputed aid, and that
against the Izar yards no longer serves any purpose,

considerations,

above

HAS ADOPTED THIS DECISION:

Article 1

The formal investigation procedure under Article 88 (2) of the
Treaty is closed.

Article 2

This Decision is addressed to Spain.

Done at Brussels, 25 September 2007.

For the Commission

Neelie KROES
Member of the Commission