Kingdom of Spain v Commission of the European Communities.
Date: 1994-09-14
13 According to Article 93(3) of the Treaty "the Commission shall be informed, in sufficient time to enable it to submit its comments, of any plans to grant or alter aid. If it considers that any such plan is not compatible with the common market having regard to Article 92, it shall without delay initiate the procedure provided for in paragraph 2. The Member State concerned shall not put its proposed measures into effect until this procedure has resulted in a final decision."
14 It follows from the case-law of the Court that the objective pursued by that provision, which is to prevent the implementation of aid contrary to the Treaty, implies that the prohibition laid down to that effect by the last sentence of Article 93(3) is effective during the whole of the preliminary period, which the Court considers to be of two months (judgment in Case 120/73 Lorenz [1973] ECR 1471, paragraph 4, and Case 84/82 Germany v Commission [1984] ECR 1451, paragraph 11).
17 The Kingdom of Spain argues in the three cases that the capital contributions provided to the undertakings in question do not constitute aid within the meaning of Article 92(1) of the Treaty. It considers that the Commission incorrectly applied the private investor test as laid down by the Court (judgments in Case 234/84 Belgium v Commission [1986] ECR 2263, paragraph 14 et seq., and Case 40/85 Belgium v Commission [1986] ECR 2321, paragraph 13 et seq.; Case C-305/89 Italy v Commission [1991] ECR I-1603, paragraph 19 et seq.). In particular, it contests the Commission' s conclusion that privatization of the undertakings was not the most economically advantageous solution.
20 The Court has consistently held that investment by the public authorities in the capital of undertakings, in whatever form, may constitute State aid where the conditions set out in Article 92 are fulfilled (Case C-305/89, cited above, paragraph 18).
21 In order to determine whether such measures are in the nature of State aid, it is necessary to consider whether in similar circumstances a private investor of a size comparable to that of the bodies administering the public sector might have provided capital of such an amount (same judgment, paragraph 19).
22 In that respect a distinction must be drawn between the obligations which the State must assume as owner of the share capital of a company and its obligations as a public authority. Since the three companies in question were constituted as limited companies, the Patrimonio del Estado, as owner of the share capital, would only have been liable for their debts up to the liquidation value of their assets. That means in the present case that the obligations arising from the cost of redundancies, payment of unemployment benefits and aid for the restructuring of the industrial infrastructure must not be taken into consideration for the purpose of applying the private investor test.
25 The Court has held (judgment in Case C-303/88 Italy v Commission [1991] ECR I-1433, paragraph 21) that a parent company may also, for a limited period, bear the losses of one of its subsidiaries in order to enable the latter to close down its operations under the best possible conditions. Such decisions may be motivated not solely by the likelihood of an indirect material profit but also by other considerations, such as a desire to protect the group' s image or to redirect its activities.
28 In the sixth paragraph in part IV of Decision 92/317 and the sixth paragraph of part V of Decision 92/321, the Commission states, with regard to the sale terms of Hytasa and Intelhorce that:
° the company in fact went to the highest bidder;
° nevertheless, that fact is not sufficient to ensure that no State aid element is involved in the sale of the company;
° in order to arrive at that conclusion, it has to be proved that the sale took place in an unconditional open bid; that is to say, through a tendering process where any potential buyer is invited to bid for the company and where the State does not impose any condition for settling the sale;
° in that respect, the information provided by the Spanish authorities indicates that the State imposed certain conditions on the buyers, limiting temporarily the disposal of the shareholding acquired and their right to request authorization to carry out temporary lay-offs.
30 In Case C-278/92 the Kingdom of Spain observes that the sale contract for Hytasa requires that it formally waive a claim of PTA 822 750 396 against the Patrimonio del Estado, which was upheld by a judgment of the Spanish Supreme Court on 22 March 1990, which has the force of res judicata. That amount should in any event be deducted from the contribution of PTA 4 200 million since that claim was abandoned solely on account of the sale and made it possible to avoid public expenditure which would otherwise have been inescapable. The cost of the intervention which should therefore be taken into account is PTA 3 377.3 million.
31 That view cannot be accepted. As the Commission rightly points out, it could hardly infer from the term used in the contract of sale ("waiver of possible rights") that Hytasa had a claim of PTA 822 750 396 against the State. The Kingdom of Spain cannot rely on that element since it was put forward for the first time in the application to the Court rather than in the course of the pre-litigation procedure laid down in Article 93 of the Treaty.
40 According to the case-law of the Court, when State financial aid strengthens the position of an undertaking compared with other undertakings competing in intra-Community trade the latter must be regarded as affected by that aid (judgment in Case 730/79 Philip Morris v Commission [1980] ECR 2671, paragraph 11). For that purpose, it is not necessary for the beneficiary undertaking itself to export its products. Where a Member State grants aid to an undertaking, domestic production may for that reason be maintained or increased with the result that undertakings established in other Member States have less chance of exporting their products to the market in that Member State (judgment in Case 102/87 France v Commission [1988] ECR 4067, paragraph 19).
41 Having regard to the specific difficulties of the markets in cotton and wool textiles and in footwear, the Commission' s assertion that any aid granted to a particular competitor runs the risk of seriously distorting the conditions of competition does not appear to be mistaken.
42 It should be added that the relatively small amount of aid or the relatively small size of the undertaking which receives it does not as such exclude the possibility that intra-Community trade might be affected (judgment in Case C-142/87 Belgium v Commission [1990] ECR I-959, paragraph 43).
51 The Court has consistently held that, as regards the application of Article 92(3) of the Treaty, the Commission enjoys a wide discretion, the exercise of which involves assessments of an economic and social nature which must be made within a Community context (judgment in Case C-303/88 Italy v Commission, cited above, paragraph 34). However, the reasoning followed by the Commission must remain consistent.
63 The Kingdom of Spain considers that the aid granted to Imepiel and Intelhorce must be classified as sectoral aid within the meaning of Article 92(3)(c) of the Treaty, by virtue of which aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest may be considered to be compatible with the common market. That aid was necessary in view of the situation of the industry concerned. The object of the aid was to restore the long-term viability of the undertaking. It was bound up with a restructuring of the sector in so far as it formed part of the viability plan drawn up by the Patrimonio del Estado and by the buyers. Moreover, it complied with the principle of proportionality since the distortion of the market was minimal.
75 The Court has consistently held that the recovery of State aid unlawfully granted for the purpose of re-establishing the previously existing situation cannot in principle be regarded as disproportionate to the objectives of the Treaty in regard to State aids (judgment in Case C-142/87, cited above, paragraph 66).
78 As regards the obligation to state reasons, it should be borne in mind that in the judgment in Case C-310/85 Deufil v Commission [1987] ECR 901, paragraph 24, to which the decisions at issue refer, the Court held that where, contrary to the provisions of Article 93(3), the proposed aid has already been granted, the decision may take the form of an order to the national authorities to recover the aid. In those circumstances, the Commission need not provide specific reasons in order to justify the exercise of the power which the Court has thus held it to have.
80 It follows from the case-law of the Court that any procedural or other difficulties in regard to the implementation of the contested measure cannot have any influence on the lawfulness of the measure (judgment in Case C-142/87, cited above, paragraph 63). The fact that Imepiel was the subject of insolvency proceedings subsequent to the decision at issue has no bearing on the present dispute.