2008/767/EC: Commission Decision of 2 April 2008 on State aid C 41/07 (ex NN 49/07) which Romania has implemented for Tractorul (notified under document number C(2008) 1102) (Text with EEA relevance)
Date: 2008-04-02
Institutions: European Commission
Subjects: Romania, State aid, agricultural machinery, control of State aid, privatisation, tractor

2.10.2008

EN

Official Journal of the European Union

L 263/5

(Acts adopted under the EC Treaty/Euratom Treaty whose publication is not obligatory)

II

DECISIONS

COMMISSION

COMMISSION DECISION

of 2 April 2008

on State aid C 41/07 (ex NN 49/07) which Romania has implemented for Tractorul

(notified under document number C(2008) 1102)

(Only the Romanian version is authentic)

(Text with EEA relevance)

(2008/767/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

meeting with the Romanian authorities was held on
3 May 2007.

Having regard to the Treaty
Community,
and in particular
Article 88(2) thereof,

establishing the European
subparagraph of
the

first

(2)

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
to those provisions (1), and having regard to their
pursuant
comments,

By letters of 5 July 2007 and 30 July 2007,
the
Commission urged the Romanian authorities to annul
specific conditions attached to the privatisation contract
of Tractorul, indicating at the same time that the failure
to suspend any unlawful aid might lead the Commission
to adopt a decision on the basis of Article 88(2) of the
EC Treaty and of Article 11(1) of Council Regulation (EC)
No 659/1999 of 22 March 1999 laying down detailed
rules for the application of Article 93 of the EC Treaty (2)
(suspension injunction).

Whereas:

(3)

By letters of 8 August 2007 and 10 August 2007, the
information.
Romanian authorities submitted additional

1. PROCEDURE

(1)

On 17 January 2007, the Commission requested general
information on several Romanian public undertakings,
including SC Tractorul U.T.B. SA Brașov (hereinafter
Tractorul),
in the context of the voluntary liquidation
procedure. Romania submitted information by letter
dated 15 February 2007. The Commission requested
further information on 8 March 2007 and 22 May
2007, which Romania
submitted by letters dated
21 March 2007, 25 May 2007 and 31 May 2007. A

(4)

By letter dated 25 September 2007, the Commission
informed Romania that it had decided to initiate the
procedure laid down in Article 88(2) of the EC Treaty
in respect of unlawful aid and to issue a suspension
injunction. The Commission decision to initiate the
injunction was
procedure with
published in the Official
European
of
Union (3). The Commission invited interested parties to
submit their comments on the aid.

suspension
Journal

the

the

(1) OJ C 249, 24.10.2007, p. 21.

(2) OJ L 83, 27.3.1999, p. 1.
(3) See footnote 1.

(5)

(6)

(7)

(8)

(9)

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By letter of 27 November 2007, Romania submitted its
comments. By letter of 28 November 2007, Flavus
Investiții
its
SRL
comments, which were
forwarded to Romania on
5 December 2007. Romania submitted its observations
on Flavus’ comments by letter dated 4 January 2008.

(hereinafter

submitted

Flavus)

By letter of 12 December 2007,
the Commission
requested further information, which was submitted by
letters of 14 and 15 January 2008.

On 19 December 2007, the Commission services met
with the Romanian authorities, accompanied by repre­
sentatives of Flavus.

AVAS organised a public tender for the appointment of a
liquidator, determining at the same time in the tender
documents the object of the liquidation: two ‘functional
modules’ (4),
tractors and the
the production of
production of iron forged components. The liquidator
Casa de Insolvență Transilvania (hereinafter CIT) won
the tender and was assigned the management of the
sale of Tractorul.

i.e.

(14) After identifying the assets which were the object of the
liquidation, on 5 July 2007, CIT organised the tender in
the form of an open bid for all the company’s assets,
land) plus factory
comprising real estate (126 ha of
buildings, offices and apartments, machinery, intellectual
property rights and trademarks. The starting price for the
block sale was EUR 77 035 000.

2. DESCRIPTION

2.1. The undertaking concerned

(15)

is a state owned company. The Romanian
Tractorul
public privatisation agency, AVAS, holds 80,17 % of
the shares, 17,15 % being held by a private investment
fund, SIF Transilvania, and the remaining 2,67 % by
private natural and legal persons. Until
the end of
2006, Tractorul was a large producer of tractors and
agricultural machinery,
located in an industrial area
close to the city centre of Brașov. It employed around
2 300 people.

In 2006, Tractorul made losses of EUR 46 million and
accumulated debts of around EUR 250 million, of which
EUR 200 million were owed to the State budget. Due to
this high level of losses and debts, on 23 February 2007
Tractorul ceased its activities and entered into voluntary
liquidation under Government Emergency Ordinance
3/2007.

(10) AVAS had previously tried several times to privatise the

company, however, without any success.

(11)

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

is situated in Brașov, an area eligible for

2.2. Description of the measures

(12) At the beginning of 2007, Tractorul had accumulated
repay. The
significant debts, which it
Romanian
the
insolvency proceeding for 6 months, by adopting GEO
3/2007, during which time AVAS as shareholder had to
decide either to privatise or voluntarily liquidate the
company.

government,

could not

postponed

however,

Several undertakings announced their participation, but
only two accepted the starting price of EUR 77 million.
Since Flavus was the first undertaking to submit its offer
and the other competitor did not offer a higher price,
Flavus won the tender. The sales framework contract and
the sales purchase agreement were signed shortly after.

The tender documents stipulated various obligations for
the buyer: maintaining the object of
i.e.
production of tractors, for the next 10 years; rehiring
ensuring
with priority former Tractorul
spare parts
two years
(warranty) and 10 years (post-warranty); supplying cast
iron components for the next 5 years.

and service

employees;

the next

activity,

for

3. DECISION TO OPEN THE FORMAL INVESTIGATION
AND TO ISSUE A SUSPENSION INJUNCTION

The formal
investigation procedure was opened due to
concerns that the liquidation process was in fact a priva­
tisation with conditions attached requiring the conti­
nuation of
the company,
thus, might have
which lowered the sale price and,
conferred an advantage on the sold entity or the buyer.

the production activity of

to assume

First, according to the information available at
that
moment, which was mostly based on press articles, the
Commission had grounds
that AVAS
envisaged attaching to the sale of Tractorul certain
conditions which would ensure the maintenance of the
production and the current employment
level. The
Commission suspected that these conditions were liable
to lower the sale price and might have deterred other
potentially interested parties from even submitting a bid.

(16)

(17)

(18)

(13) On 23 February 2007, AVAS decided to voluntarily
in May 2007,

liquidate the company. To this end,

(4) The Commission used in its opening decision the expression ‘viable
activity’. However, this wording was contested by Romania, with the
argument that the assets of Tractorul are not in a state which would
allow the performance of an activity which is economically self-
sustainable. Romania proposed the term ‘functional asset’.

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(19)

(20)

(21)

(22)

(23)

(24)

Second, the Romanian authorities failed to provide any
conclusive information that
the voluntary liquidation
involving the sale of the functional modules would be
the most advantageous outcome for the State as share­
liqui­
holder and the creditors as opposed to judicial
dation. The Commission had doubts whether a market
economy operator would have bundled valuable land
close to the Brașov city centre with obsolete factory
buildings and machinery instead of parcelling up the
land which is not necessary for the production activity
and selling it off separately, thereby possibly obtaining a
higher price.

Since, despite the Commission’s repeated warnings, the
Romanian authorities carried out the public tender for
the viable modules and concluded the sales contract with
the winner of
the
Commission issued a suspension injunction at the same
time.

shortly afterwards,

tender

the

assessment the sale of the entire industrial platform as
a whole, as it would be more advantageous than a piece-
by-piece sale, in particular since the industrial platform
contains also some unattractive assets (i.e. plots of land
infrastructure
which do not have access to any local
and/or are located near
the
buildings are outdated etc.), which could probably not
be sold individually.

the city waste dump,

In order to avoid additional

(26) According to this evaluation report, the sum of the total
assets included in Tractorul amounted to around EUR
100 million.
liquidation
and maintenance costs of selling the assets individually,
the liquidator offered the assets as a whole (functional
module) and calculated a discount of 23 %. Thus, the
starting price was of EUR 77 million and represented
the market value. Moreover, no competitor offered a
higher price.

4. COMMENTS SUBMITTED BY ROMANIA

Romania argues that, when selling the viable modules of
Tractorul, AVAS acted like a market economy operator,
obtaining the highest possible price. Thus, no State aid
was involved.

(27)

Finally, Romania explained that the voluntary liquidation
the national company law (Law
was allowed under
31/1990) and under the special
law for speeding up
privatisations (Law 137/2002). Romania gave assurances
that
faster procedure
implying lower costs for the undertaking. At the same
time, the creditors have identical control tools at their
disposal
rights are not being
breached.

liquidation was

to ensure that

voluntary

their

a

First, Romania argues that Tractorul was not privatised,
but in fact went into voluntary liquidation. While priva­
tisation involves the sale of the company’s shares from
the State to third parties and the company continues to
exist, voluntary liquidation involves
the
company’s assets,
to the
the payment of
creditors according to the order established by law and
the distribution of any surplus amount to shareholders.
At the end of the operation the company ceases to exist
and is deleted from the company register.

the sale of
its debts

5. COMMENTS SUBMITTED BY THIRD PARTIES

(28)

By letter of 24 October 2007, Flavus intervened in the
Commission proceedings as an interested party.

(29)

First, Flavus argues that the tender of Tractorul was open,
transparent
It was widely
advertised in the local and national press.

and non-discriminatory.

Further, Romania explains that the voluntary liquidation
of the company was organised by means of an open,
transparent,
unconditional
tender. This tender was widely publicised in the local
and national press.

non-discriminatory

and

(30)

The tender of the viable modules was unconditional, so
that the sale price was not lowered. The sale purchase
agreement between Tractorul and Flavus does not
stipulate any obligation for the buyer to maintain the
activity for a period of 10 years or to employ a particular
number of employees from the former company. Thus,
the sale price represents the market value of Tractorul.

that

Flavus

substantiates

Second,
there were no
conditions attached to the sale of Tractorul’s viable
to maintain the object of
modules. The requirement
activity (i.e. production of
for the next 10
tractors)
years could not qualify as a condition since it did not
imply the obligation to effectively produce tractors.
Moreover, Flavus explains that it has bought the viable
modules because of the economic potential of the land
for real estate development and has no intention to
restart
the
requirement was not onerous, but a mere administrative
procedure to register the object of activity with the Trade
Registry.

tractor production on the

site. Thus,

(25)

Second, Romania argues that, although AVAS intended
to sell the two functional modules separately, the inde­
liquidator, CIT, recommended after an initial
pendent

(31) Also, as regards the obligation to rehire as a priority
former Tractorul employees, Flavus argues that this was
not an onerous condition liable to lower the sale price.

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(32)

In conclusion, Flavus argues that the alleged conditions
attached in the tender document did not lower the sale
price. This is also reflected by the evaluation report
drafted by an independent expert appointed by the
liquidator to carry out an evaluation of Tractorul.

mation to carry out a proper valuation of the assets
forming the basis for their bid (7). In other cases, trade
sales must be examined for possible aid implications and
must therefore be notified.

6. ASSESSMENT

6.1. Existence of State aid within the meaning of
Article 87(1) of the EC Treaty

(33) Article 87(1) of

the EC Treaty states that, save as
otherwise provided in the Treaty, any aid granted by a
Member State or through State resources which distorts
or threatens to distort competition by favouring certain
is
undertakings or
incompatible with the common market,
insofar as it
affects trade between Member States.

the production of certain goods

(34) Article 295 of the EC Treaty provides that Community
rules are neutral as regards public and private ownership.
According to Article 86(1) of
the EC Treaty, public
undertakings are equally subject to State aid rules.

(35)

(36)

In accordance with consistent European Court (5) case
law and Commission rules and practice on State aid in
the context of privatisations (6), when a Member State
owns or sells undertakings, or otherwise purchases or
sells shares of undertakings, no State aid is present if
the Member State’s behaviour is consistent with that of
a private market economy investor.

the

following conditions

Therefore, when the privatisation takes place by sale of
shares on the stock exchange, it is generally assumed to
be under market conditions and not
to involve aid.
When the privatisation is carried out through a trade
sale, it can similarly be assumed that no aid is involved
if
the
company is sold by a competitive tender that is open
to all
and non-discriminatory;
second, no conditions are attached which are not
customary in comparable transactions between private
parties and which may potentially reduce the sale price;
third, the company is sold to the highest bidder; and
fourth, bidders must be given enough time and infor­

transparent

fulfilled:

comers,

first,

are

(37)

(38)

(39)

In such cases, assessing whether a transaction concerning
State assets involves an aid generally requires evaluating
whether a market economy operator placed in a similar
situation would have behaved in the same way, i.e. would
have sold the company at the same price. In applying the
market
economy investor principle, non-economical
considerations, such as for example industrial policy
reasons, employment considerations or regional develop­
ment objectives, which would not be acceptable to a
market
taken into
account as reasons for accepting a lower price and, on
the contrary, point to the existence of aid. This principle
has been repeatedly explained by the Commission (8) and
consistently confirmed by the Court (9).

economy operator,

cannot be

fulfilled,

the Commission considers that

if any of the requirements mentioned above
Therefore,
the
are not
public sale must be examined for possible aid impli­
thus, must be notified (10). Consequently,
cations and,
the State would be
by respecting these requirements,
sure to obtain the highest price,
i.e. the market price,
for its assets and, thus, no State aid is involved.

By imposing certain conditions on the buyer, the State
potentially lowers the sale price and thus forgoes addi­
tional revenues. Also, conditions can deter potentially
interested investors from submitting a bid in the first
the
place,
tender is disturbed and even the highest of the offers
eventually submitted does not necessarily represent the
actual market value (11).

the competitive environment of

so that

(7) Points 402 et seq. of XXIIIrd Report on Competition Policy (1993).
See also point 248 of XXIst Report on Competition Policy (1991):
‘No aid is involved where shareholdings are sold to the highest
a
bidder
an open and unconditional bidding
as
procedure.
If shareholdings are sold under other conditions, aid
elements may be present’.

result of

(8) See for example Commission Decision of 3 May 2000, TASQ, OJ
L 272, 25.10.2000, where the Commission found that ‘The French
authorities also showed that the invitation to tender was transparent
and unconditional […]. In particular, the documents submitted to
the Commission showed that the sale of TASQ was not conditional
locations or continuation of
on,
activity’. This allowed the Commission to conclude that no aid
was present in the privatisation.

job maintenance,

for example,

(9) See,

for example, Cases T-228/99 and T-233/99, WestLB v
Commission; Case T-366/00, Scott SA, Cases C-328/99 and
and SIM 2 Multimedia v Commission; Case
C-399/00,
T-358/94, Air France v Commission; Case T-296/97 Rec, Alitalia.

Italy

(5) See, for example, Case T-296/97 Rec, Alitalia, Cases T-228/99 and
T-233/99, WestLB v Commission; Case T-366/00, Scott SA, Cases
C-328/99 and C-399/00, Italy and SIM 2 Multimedia v Commission;
Case T-358/94, Air France v Commission.

(6) XXIIIrd Report on Competition Policy, 1993, p. 255.

(10) See XXIIIrd Report on Competition Policy, 1993, p. 255.
(11) In Commission Decision of 15 February 2000, Dessauer Gerätein­
dustrie (OJ L 1, 4.1.2001, p. 10), the absence of conditions, i.e. the
unconditional nature of a tender led the Commission to conclude
that no aid was involved in the privatisation procedure.

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(40)

(41)

By imposing such conditions and thus accepting that it
will not receive the best price for the owned shares or
assets, the State does not act like a market economy
operator, who would try to obtain the highest possible
price. Instead the State chooses to sell the undertaking at
a price below the market value. A market economy
operator would not have an economic interest
in
attaching comparable conditions (in particular such as
the level of employment, conditions
maintenance of
region concerned or
beneficial
ensuring a certain investment level) but would sell the
company to the highest bidder, who would then be free
to determine the future of
the acquired company or
assets (12).

the geographical

for

transactions between private parties

This does not mean that all conditions in a privatisation
automatically lead to State aid elements being present.
First, conditions which are also common for such kind
of
certain
standard indemnities, proof of the financial standing of
the bidder, or compliance with national
labour market
rules) are not problematic. Second, even conditions
which appear to be unusual between private parties
only show the existence of state aid if they are liable
to reduce the sale price and provide an advantage. The
fact that such conditions do not amount to aid needs to
be demonstrated on a case by case basis (13).

(i.e.

buyers, as they were mere formal requirements. The
condition to maintain the object of activity for the
next 10 years referred to the registration of the object
i.e. production of tractors and other agri­
of activity,
in the Trade Registry, and does not
cultural devices,
oblige the buyer to continue the actual production of
tractors. The acquirer, Flavus, explained that their legal
advisor had also confirmed that the clause would not
imply the necessity to carry out any productive activity.
intend to re-start any
they do not
In any event,
production activity at the site.

(44)

Similarly,
the obligation to give priority to former
employees of Tractorul or to provide spare parts and
components are not onerous obligations. They were
included in the tender documents as best-effort clauses,
and thus are not mandatory and binding for the new
owner.

(45)

The Romanian authorities explained that AVAS was
motivated to attach these symbolic requirements by the
wish to maintain the renown of the undertaking and its
products, which can still be found to a large extent on
the Romanian market.

Conditions attached to the sale of Tractorul

(46)

(42) When initiating the procedure under Article 88(2) of the
Treaty, the Commission had doubts whether the sale of
Tractorul was conducted on the basis of an open, trans­
tender.
parent, non-discriminatory and unconditional
that stage,
According to the information available at
which was based mostly on press
the
Commission suspected that, according to the tender
documents published by AVAS in order to appoint the
liquidator, AVAS decided to sell off Tractorul as func­
tional modules and already at an early stage attached
conditions to ensure the maintenance of the production
activity for the next 10 years and the re-hiring of former
these
employees. The Commission considered that
conditions were liable to lower
the sale price, and,
thus, by attaching them, the State did not act like a
market economy operator. In conclusion, the conditions
might have resulted in State aid.

articles,

(43) On the basis of the information provided by Romania,
the Commission notes that the conditions attached to the
sale of Tractorul were formulated in such a manner that
they did not impose any onerous obligations on potential

(12) See Commission Decision of 27 February 2008, Privatisation of

Automobile Craiova, Romania, not yet published.

(13) Such an analysis was,

for example, carried out in Commission
Decision of 20 June 2001, Sale of shares in GSG — Land Berlin,
OJ C 67, 16.3.2002, p. 33, and allowed the Commission to
conclude that no aid was
involved even given the unusual
conditions, because it found that the conditions were not liable
to reduce the sale price.

In view of the above considerations, the Commission
concludes that, since these conditions did not have an
onerous character and this was obvious for all potential
buyers from the formulation of the tender documents,
they did not lower the sale price and did not have the
potential to deter potential investors from submitting a
involve the loss of state
bid, and therefore did not
resources
also
conclusion is
supported by the fact
the four bidders
participating in the tender were even remotely involved
in
the Commission
considers that
the conditions attached did not entail
State aid.

tractor manufacturing. Thus,

that none of

State. This

the

for

Block sale

(47) When initiating the procedure under Article 88(2) of the
EC Treaty, the Commission expressed doubts that the
voluntary liquidation involving the sale of
the viable
modules would be the most advantageous outcome for
the State as shareholder and the creditors as opposed to
judicial liquidation or a piece by piece sale.

(48)

Romania argues that AVAS acted like a market economy
operator and obtained the highest possible price for
Tractorul. To this end, AVAS appointed an independent
liquidator by means of an open, transparent, non-discri­
minatory and unconditional tender, who would carry out
the voluntary liquidation.

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(49) On the basis of the information provided by Romania,
the Commission notes that, initially, AVAS intended to
sell separately the two viable modules — the tractor
plant and the cast-iron forge and foundry. However,
based on its own evaluation of the 37 individual assets,
CIT,
the
industrial platform as a whole in order to maximise
the proceeds, and only in the event that no potential
buyer expressed interest
in acquiring the area as a
whole would it proceed to a piece by piece sale of the
company’s assets.

recommended the

liquidator

sale of

the

(50)

The liquidator substantiated the advantages of such a
the maps provided by the
comprehensive sale. First,
Romanian authorities show that several
land plots are
situated at the back of the industrial platform, near the
city waste dump, and are not connected to any road, so
that in fact they are not individually accessible. Second,
the value of
the industrial
the individual assets of
platform varied significantly depending on their indi­
the buildings and the
vidual
existence of access to local
the
majority of potential
investors were interested in the
area for
real estate development; out of 26 tender
documents acquired in total, 17 were bought for the
entire Tractorul platform.

infrastructure. Third,

the state of

location,

to the procedural

established in
rules
According
Government Decision No 577/2002,
if at a certain
stage there are at least two bidders, and no one bids
higher at that stage (which was predetermined before
the bid at 5 %), the bidder with the lowest registration
number wins the tender (14). Since Flavus and a second
investor accepted the starting price, but none of them
was willing to overbid, Tractorul was sold for EUR 77
registration
million to the bidder with the lowest
liquidator
the
Flavus. Consequently,
number,
obtained the market price for the company’s assets and
did not therefore forego state resources.

i.e.

(55)

In view of the above, the Commission concludes that,
given the particularities of this case, by selling the assets
of Tractorul as a whole, AVAS obtained the market price
for them, did not therefore forego state resources, and
behaved like a market economy operator.

6.2. Classification as State aid: conclusion

(56)

(51)

Consequently, the liquidator considered that it was most
likely that the less attractive assets could not be sold on
an individual basis to a potential
investor. As a result,
such assets would generate additional administration and
maintenance costs for Tractorul and ultimately for AVAS
as the owner. Also, the parcelling of the land would
generate substantial administrative costs, e.g. expenses
for cadastral measurement and land registration.

Based on the above assessment, no conditions were
attached to the sale of Tractorul which were liable to
lower the sale price or deter potential
investors from
submitting a bid. By selling all the assets as a whole
liquidation procedure, AVAS
under
obtained the highest price on the market, did not
forego state resources and acted like a market economy
operator. Consequently, the sale of Tractorul does not
involve State aid.

voluntary

the

(52)

The strategy of selling Tractorul as a whole was also
subsequently approved by AVAS.

(57)

The Commission finds that the sale of Tractorul by the
Romanian privatisation Agency, AVAS, on 6 July 2007
does not constitute aid,

7. CONCLUSION

(53) As regards the price obtained, the Commission notes that
according to the evaluation report commissioned by the
liquidator, the asset value of Tractorul (i.e. the sum of the
value of the 37 individual assets) was around EUR 100
million, on which the liquidator applied a 23 % discount
for bundled assets, thereby giving a starting sale price of
EUR 77 million. Such a discount is based on the liqui­
dator’s experience and on the fact that a block sale bears
significant advantages as opposed to a piece by piece
sale.

(54)

The procedure chosen by the liquidator for the sale of
tender.
Tractorul was

the method of

competitive

HAS ADOPTED THIS DECISION:

Article 1

The sale by Romania to Flavus Investiții SRL of the Tractorul
industrial platform does not involve aid within the meaning of
Article 87(1) of the Treaty.

(14) The registration number corresponds to the order in which the

tender documentation was submitted.

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This Decision is addressed to Romania.

Article 2

Done at Brussels, 2 April 2008.

For the Commission

Neelie KROES
Member of the Commission