Judgments nº T-127/99 of Court of First Instance of the European Communities, March 06, 2002

• Resolution Date: March 06, 2002
• Issuing Organization: Court of First Instance of the European Communities
• Decision Number: T-127/99

JUDGMENT OF THE COURT OF FIRST INSTANCE (Third Chamber, Extended Composition)

6 March 2002 (1) (State aid - Concept of State aid - Tax measures - Selective nature - Justification owing to the nature or overall structure of the tax system - Compatibility of the aid with the common market)

In Joined Cases T-127/99, T-129/99 and T-148/99,

Territorio Histórico de Álava - Diputación Foral de Álava, represented by A. Creus Carreras and B. Uriarte Valiente, lawyers,

applicant in Case T-127/99,

Comunidad Autónoma del País Vasco,

Gasteizko Industria Lurra, SA, established in Vitoria (Spain),

represented by F. Pombo García, E. Garayar Gutiérrez and J. Alonso Berberena, lawyers, with an address for service in Luxembourg,

applicants in Case T-129/99,

Daewoo Electronics Manufacturing España, SA, established in Vitoria, represented by A. Creus Carreras and B. Uriarte Valiente, lawyers,

applicant in Case T-148/99,

v

Commission of the European Communities, represented by F. Santaolalla, G. Rozet and G. Valero Jordana, acting as Agents, with an address for service in Luxembourg,

defendant,

supported by

Asociación Nacional de Fabricantes de Electrodomésticos de Línea Blanca (ANFEL), having its registered office in Madrid (Spain), represented by M. Muñiz and M. Cortés Muleiro, lawyers, with an address for service in Luxembourg,

intervener,

and by

Conseil européen de la construction d'appareils domestiques (CECED), represented by A. González Martínez, lawyer, with an address for service in Luxembourg,

intervener in Case T-148/99,

APPLICATION for the annulment of Commission Decision 1999/718/EC of 24 February 1999 concerning State aid granted by Spain to Daewoo Electronics Manufacturing España SA (Demesa) (OJ 1999 L 292, p. 1),

THE COURT OF FIRST INSTANCE

OF THE EUROPEAN COMMUNITIES (Third Chamber, Extended Composition),

composed of: J. Azizi, President, K. Lenaerts, V. Tiili, R.M. Moura Ramos and M. Jaeger, Judges,

Registrar: J. Plingers, Administrator,

having regard to the written procedure and further to the hearing on 26 June 2001,

gives the following

Judgment

Legal context

Maximum aid intensity allowed in the Basque Country

1.

According to the Spanish regional aid map proposed by the Commission (OJ 1996 C 25, p. 3), the maximum limit for aid in the Basque Country is 25% net grant equivalent (NGE).

Ekimen regional aid scheme for the Autonomous Community of the Basque Country

2.

By decision of 12 December 1996 [SG (96) D/11028 (State aid N 529/96), the notice of which was published (OJ 1997 C 189, p. 7)], the Commission authorised the Ekimen regional aid scheme for the Autonomous Community of the Basque Country which was notified to it at the planning stage by Spain on 28 June 1996. The scheme was introduced by Decree No 289/1996 of 17 December 1996 (hereinafter ‘the Ekimen Decree’), published in Boletín Oficial del País Vasco No 246 of 23 December 1996, p. 20138.

3.

The scheme covered the period 1996 to 1998. It was designed to promote regional development and job creation in the Autonomous Community of the Basque Country (Article 1 of the Ekimen Decree). The aid could take the form of non-refundable grants or soft loans for the creation of new production facilities or the extension or modernisation of existing infrastructure (Article 9 of the Ekimen Decree). The eligible costs included land, buildings and plant (Article 7(a) of the Ekimen Decree).

4.

The beneficiaries of the aid were, inter alia, industrial companies (Article 3 of the Ekimen Decree). Article 5 of the Ekimen Decree provided that, in order to qualify, investments had to comply with the following conditions:

- the investment project has to be technically, economically and financially viable and has to be implemented within a period of three years from the date when the aid is granted;

- the amount of the investment has to exceed 360 million Spanish pesetas (ESP);

- it must entail the creation of at least 30 jobs;

- both the investment and the job creation involved must be achieved by a single legal entity and, in the case of undertakings which have several production centres, in one of those centres, unless it is duly established that only one investment is concerned;

- at least 30% of the investment has to be financed from the beneficiary's own resources.

5.

In accordance with Article 10 of the Ekimen Decree, aid granted under the aid programme must not exceed 25% of the investment (see paragraph 112 below).

Tax concessions in force in the Territorio Histórico de Álava

6.

The tax arrangements in force in the Basque Country are governed by the Economic Agreement established by Spanish Law 12/1981 of 13 May 1981, as last amended by Law 38/1997 of 4 August 1997. Under the Economic Agreement, the Diputación Foral de Álava (Álava Provincial Council) may, under certain conditions, organise the tax system within its territory.

7.

On that basis, the Diputación Foral de Álava has adopted several tax aid measures, in particular a tax credit of 45% and a reduction of the basis of assessment to corporation tax.

Tax credit of 45%

8.

The Sixth Additional Provision of Norma Foral 22/1994 of 20 December 1994 (regional regulations) implementing the 1995 budget of the Territorio Histórico de Álava [Boletín Oficial del Territorio Histórico de Álava (hereinafter ‘BOTHA’) No 5, of 13 January 1995] reads as follows:

‘Investments in new fixed assets made between 1 January 1995 and 31 December 1995, which exceed ESP 2 500 million, in accordance with the Diputación Foral de Álava agreement, will receive a tax credit of 45% of the cost of investment determined by the Diputación Foral de Álava, to be applied to the definitive amount of tax payable.

Any tax credit not used up because it exceeds the amount of tax liability may be applied in the nine years following the year during which the Diputación Foral de Álava agreement was concluded.

The Diputación Foral de Álava agreement will lay down the time-limits, and any restrictions applicable in each case.

The advantages granted under this provision will be incompatible with any other fiscal advantage in respect of the same investment.

The Diputación Foral de Álava will also determine the length of the investment process, which may include investments made during the preparation of the project which is at the root of the investment.’

9.

The validity of that provision was extended, for the year 1996, by the Fifth Additional Provision of Norma Foral 33/1995 of 20 December 1995 (BOTHA No 4 of 10 January 1996), as amended by point 2.11 of the only derogating provision of Norma Foral 24/1996 of 5 July 1996 (BOTHA No 90 of 9 August 1996). For 1997, the fiscal measure was extended by the Seventh Additional Provision of Norma Foral 31/1996 of 18 December 1996 (BOTHA No 148 of 30 December 1996). The tax credit of 45% of the amount of the investments was retained, in an amended form, for the years 1998 and 1999 by the Eleventh Additional Provision of Norma Foral 33/1997 of 19 December 1997 (BOTHA No 150 of 31 December 1997) and by the Seventh Additional Provision of Norma Foral 36/1998 of 17 December 1998 (BOTHA No 149 of 30 December 1998) respectively.

Reduction of the basis of assessment to corporation tax

10.

Article 26 of Norma Foral 24/1996 of 5 July 1996, referred to in the previous paragraph, provides as follows:

‘1. Undertakings starting their business activity shall be entitled to a reduction of 99%, 75%, 50% and 25% respectively in the positive basis of assessment deriving from their economic activity, before this is offset by any negative bases of assessment arising in tax periods, for the four consecutive tax periods running from the first period in which, within four years of starting their business activity, they generate a positive basis of assessment.

...

2. To qualify for this reduction, businesses shall fulfil the following conditions:

   (a) They shall start their business activity with a minimum paid-up capital of ESP 20 million;

   (b) ...

   (c) ...

   (d) The new activity shall not have been carried on previously, either directly or indirectly, under different ownership;

   (e) The new business activity shall be performed on premises or in an establishment where no other activity is carried on by any natural or legal person;

   (f) They shall during the first two years of their activity invest at least ESP 80 million in tangible fixed assets, all of which assets shall be assigned to the activity and shall not be hired out or transferred for use by third parties. For the purposes of this requirement, goods acquired by leasing shall also be deemed to be investments in tangible fixed assets, provided that the business undertakes to exercise the purchase option;

   (g) They shall create at least 10 jobs within six months of starting their business activity and shall maintain the annual average workforce at that level from that point and until the year in which their entitlement to the reduction in the basis of assessment expires;

   (h) ...

   (i) They shall have a business plan covering a period of at least five years.

3. ...

4. The minimum amount of investment referred to in subparagraph (f) and the minimum number of jobs created referred to in subparagraph (g) of paragraph 2 above shall be incompatible with any other tax concession established for the same investment or job creation.

5. The reduction provided for in this Article shall be requested by means of an application lodged with the tax administration, which, after checking that the initial requirements are satisfied, shall where appropriate notify the applicant company of its provisional authorisation, to be formally adopted by decision of the Álava Provincial Council.

   ...’.

   The facts

   11.
   On 13 March 1996 the Basque authorities and Daewoo Electronics Co. Ltd (hereinafterDaewoo Electronics) concluded a Cooperation Agreement in which Daewoo Electronics undertook to establish...