Commission of the European Communities v Kingdom of Spain.
Date: 2002-07-02
21 Where a Commission decision requiring the cessation of State aid incompatible with the common market has not been the subject of a direct action or where such an action has been dismissed, the only defence available to a Member State in opposing an infringement action by the Commission under Article 88(2) EC is to plead that it was absolutely impossible for it to implement the decision properly (Case C-348/93 Commission v Italy [1995] ECR I-673, paragraph 16, and Case C-261/99 Commission v France [2001] ECR I-2537, paragraph 23).
24 The Court has held that when, during the implementation of a Commission decision on State aid, a Member State encounters unforeseen and unforeseeable difficulties or becomes aware of consequences unforeseen by the Commission, it must submit those problems to the Commission for its assessment, proposing appropriate amendments to the decision in question. In such a case, under the rule imposing on Member States and Community institutions reciprocal duties of genuine cooperation which underlies in particular Article 10 EC, the Commission and the Member State must work together in good faith with a view to overcoming the difficulties whilst fully observing the provisions of the Treaty and in particular those on aid (Commission v Italy, cited above, paragraph 17; Commission v France, cited above, paragraph 24, and Case C-378/98 Commission v Belgium [2001] ECR I-5107, paragraph 31).
25 However, the condition that it be absolutely impossible to implement a decision is not fulfilled where the defendant government merely informs the Commission of the legal, political or practical difficulties involved in implementing the decision, without taking any real step to recover the aid from the undertakings concerned, and without proposing to the Commission any alternative arrangements for implementing the decision which could have enabled the difficulties to be overcome (see, to that effect, Case 94/87 Commission v Germany [1989] ECR 175, paragraph 10, and Case C-280/95 Commission v Italy [1998] ECR I-259, paragraph 14).
27 Consequently, the Spanish Government, which did not inform the Commission of the measures it proposed to take or of the difficulties it encountered in the implementation of Decision 91/1 and which, in reality, allowed the Autonomous Communities concerned to do nothing more than request the intermediary companies to recover the aid, knowing perfectly well that they were themselves in great financial difficulty, did not seek to reach agreement with the Commission nor demonstrate the absolute impossibility of recovering the aid granted to companies in the Magefesa group, which, as stated in the previous paragraph, continued to operate after Decision 91/1.
28 An infringement must be assessed at the expiry of the time-limit fixed in the Commission's decision by which the Member State must notify the Commission of the measures it proposes to take (see, to that effect, Commission v Belgium above, paragraph 26).  In this case it was 5 May 1990.  The continuation after that date of the activities of the companies in receipt of aid declared illegal therefore invalidates the Spanish Government's argument that the Commission's infringement action is redundant following the order for court-supervised administration of those companies, which, it alleges, for that reason cannot be accused of enjoying any competitive advantage.
31 In its judgment in Case C-480/98 Spain v Commission [2000] ECR I-8717 concerning the action by the Kingdom of Spain for annulment of Decision 1999/509, the Court held, at paragraph 21, that in the particular circumstances of that case the non-payment of taxes and social security contributions by Indosa, Cunosa, Migsa and Gursa during the periods mentioned in the contested Decision constituted illegal aid which was incompatible with the common market within the meaning of Article 87(1) EC.
32 The Court upheld part of the action by the Kingdom of Spain, concerning the recovery of interest due, after the declaration of insolvency of Indosa and Cunosa, on aid illegally received before that declaration, and annulled Decision 1999/509 on that sole point (Spain v Commission, above, paragraphs 34 to 39).
Steps taken by the Spanish Government
Social security debts
38 The Court has already ruled that the fact that, on account of the financial position of the beneficiary of the aid in question, the authorities of the Member State concerned could not recover the sum paid does not constitute proof that implementation was impossible, since the Commission's objective was to abolish the aid, which could have been achieved by the liquidation of the company (Case 52/84 Commission v Belgium [1986] ECR 89, paragraph 14).
45 It follows from the foregoing observations that first, by failing to adopt the measures necessary to comply with Decision 91/1 in so far as it declared the aid granted to Indosa, Gursa, Migsa and Cunosa illegal and incompatible with the common market and with Decision 1999/509 in so far as it declared the aid to Gursa, Migsa and Cunosa illegal and incompatible with the common market, and second, by not informing the Commission within the prescribed period of the measures adopted for the implementation of Decision 1999/509 in so far as it declared the aid granted to Indosa illegal and incompatible with the common market, the Kingdom of Spain has failed to fulfil its obligations under the fourth paragraph of Article 249 EC and Articles 2 and 3 of those decisions.
46 For the rest, the Commission's action must be dismissed.