Judgments nº T-20/03 of Court of First Instance of the European Communities, September 24, 2008

• Resolution Date: September 24, 2008
• Issuing Organization: Court of First Instance of the European Communities
• Decision Number: T-20/03

In Case T-20/03,

Kahla/Thüringen Porzellan GmbH, established in Kahla (Germany), represented by M. Schütte and S. Zühlke, lawyers,

applicant,

supported by

Freistaat Thüringen (Germany), represented initially by A. Weitbrecht and A. van Ysendyck, and subsequently by A. Weitbrecht and M. Núñez-Müller, lawyers,

and by

Federal Republic of Germany, represented by W.-D. Plessing and M. Lumma, acting as Agents,

interveners,

v

Commission of the European Communities, represented by V. Kreuschitz and V. Di Bucci, acting as Agents, assisted by C. Koenig, professor,

defendant,

APPLICATION for annulment of Commission Decision 2003/643/EC of 13 May 2003 on the State aid implemented by Germany for Kahla Porzellan GmbH and Kahla/Thüringen Porzellan GmbH (OJ 2003 L 227, p. 12), in so far as that decision concerns the financial assistance granted to Kahla/Thüringen Porzellan GmbH,

THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (Fifth Chamber, Extended Composition),

composed of M. Vilaras, President, M.E. Martins Ribeiro, F. Dehousse, D. -váby and K. Jürimäe, Judges,

Registrar: K. Andová, Administrator,

having regard to the written procedure and further to the hearing on 19 October 2006,

gives the following

Judgment

Factual background

1 The undertaking Kahla Porzellan GmbH (-Kahla I-) produced porcelain dishes and china in the Land of Thuringia, one of the regions eligible for aid under Article 87(3)(a) EC.

2 Kahla I was created in 1990 by transforming a combine in the former German Democratic Republic (GDR), VEB Vereinigte Porzellanwerke Kahla, into two companies, one of which became Kahla I, which in turn was privatised in April 1991 by the Treuhandanstalt (-the THA-). Kahla I declared itself insolvent on 9 August 1993 and liquidation proceedings were opened on 29 September 1993.

3 The undertaking Kahla/Thüringen Porzellan GmbH (-Kahla II- or -the applicant-) was created in November 1993 by G. R. In January 1994, it took over the immovable property, machinery and plant as well as 380 employees of Kahla I which was in liquidation.

4 The sale of the immovable property of Kahla I was approved by the THA, to which that property had been reassigned, and by its legal successor, the Bundesanstalt für vereinigungsbedingte Sonderaufgaben (the BvS).

5 The contract for the sale of the assets of Kahla I provided for a total price of DEM 7.391 million. The cost of DEM 2.05 million for plant was to be financed by a grant of DEM 2.5 million from the Land of Thuringia. Legal rights, trade marks, registered patterns and know-how were transferred for the nominal sum of DEM 1, while the list of customers and the order book were handed over free of charge. The price for stock amounted to DEM 2.136 million and the immovable property was to be sold free of charges for DEM 3.205 million. Following a subsequent reduction in the price for stock, the total price paid amounted to DEM 6.727 million.

6 On 5 March 1994, the State-owned undertaking Thüringen Industriebeteiligungs GmbH & Co. KG (-TIB-), controlled by the Land of Thuringia, acquired a 49% stake in the applicant. On 31 December 1999, TIB sold that stake to G. R. and his son, H. R., for a price that was higher than the price TIB had paid in March 1994.

7 After receiving complaints, and following correspondence and meetings with representatives of the Federal Republic of Germany, on 15 November 2000 the Commission initiated the procedure provided for under Article 88(2) EC in relation to ad hoc aid granted to Kahla I and the applicant. The Commission-s decision to initiate the procedure was notified to the Federal Republic of Germany on 9 January 2001 and published in the Official Journal of the European Communities of 30 June 2001 (OJ 2001 C 185, p. 45). The Commission requested the Federal Republic of Germany to submit all documents, information and data necessary to assess the compatibility of the aid. In particular, it requested information that would allow it to determine whether Kahla I and the applicant were independent undertakings or whether the applicant had to be regarded as the successor to an undertaking or as an -Auffanglösung- (-successor solution-). In addition, it requested information that would allow it to determine whether some of the aid measures complied with the terms of approved aid schemes. Finally, it requested all the existing restructuring plans for Kahla I and the applicant, including a description of the investments made or planned and all other restructuring costs financed by State aid, comments on the balance sheets and the profit and loss accounts (for Kahla I), a description of developments in capacity and information to show whether the investor made a contribution. The Commission invited interested parties to submit comments on the aid at issue.

8 By letter of 26 March 2001, the Federal Republic of Germany replied to the request by submitting information on the aid at issue and informing the Commission of further aid. On 28 May 2001, the Commission requested additional documentation, which it received on 30 June 2001 and 9 August 2001. On 31 July 2001, the Commission received comments from the applicant.

9 By letter of 28 November 2001 (OJ 2002 C 26, p. 19), the Commission notified the Federal Republic of Germany of its decision to extend the formal investigation procedure to include those aid measures which did not comply with the terms of approved aid schemes and those aid measures of which the Commission had not previously been informed. The Commission invited interested parties to submit their comments.

10 On 10 December 2001, the case was discussed with representatives of the Federal Republic of Germany and of the company.

11 On 30 January 2002, the Federal Republic of Germany commented on the decision to extend the formal investigation procedure and produced detailed information. By letter of 28 February 2002, the applicant submitted its comments to the Commission.

12 Having received a new complaint alleging that the applicant had received further aid, the Commission, by letter of 30 April 2002, requested additional information from the Federal Republic of Germany, which it received on 29 May 2002.

13 Following a meeting on 24 July 2002 with representative of the Federal Republic of Germany, the latter submitted further comments on 7 August 2002. On 30 July 2002, the applicant sent its comments and, by letter of 1 October 2002, the Federal Republic of Germany submitted further comments.

14 At the end of the formal investigation procedure, the Commission adopted, on 30 October 2002, Decision C (2002) 4040 final on the State aid implemented by Germany for Kahla I and Kahla II, which was notified to Germany on 4 November 2002 and communicated to the applicant on 12 November 2002.

15 After the present action was brought (see paragraph 39 below), the Commission informed the Federal Republic of Germany by letter of 13 May 2003 that it had amended the decision of 30 October 2002, and in particular Article 1 of that decision, in so far as the order to recover aid referred to measure 22, recitals 34, 37, 99, 101, 103 and 171, concerning measure 16, and recitals 146 and 147, concerning measure 32. Consequently, the Commission adopted a new decision, namely Decision 2003/643/EC of 13 May 2003 on the State aid implemented by Germany for Kahla I and Kahla II (-the contested decision-). The contested decision was communicated to the applicant on 16 May 2003 and published on 11 September 2003 (OJ 2003 L 227, p. 12).

The contested decision

16 In the contested decision, the Commission conducts a separate assessment of the financial assistance granted by the public authorities to Kahla I and to the applicant. The Commission notes, in recital 85 of the contested decision, that in extending the investigation procedure it concluded that Kahla I and the applicant were different legal entities and that the latter was regarded as an -Auffanggesellschaft- (successor company), as it had been created by G. R. as a -shell company- to continue the activities and to take over the assets of Kahla I in liquidation.

17 As regards Kahla I, the Commission states in recital 22 of the contested decision that, from the moment it was created until its winding-up, the public authorities granted it financial assistance totalling DEM 115.736 million (measures 1 to 10).

18 As regards the applicant, the Commission identifies 23 items of financial assistance which the applicant was granted between 1994 and 1999, amounting to a total of DEM 39.028 million (measures 11 to 33). Those measures, set out in recitals 34 to 59 of the contested decision, include, in particular, the following:

- measure 11: a 49% stake in the applicant, which TIB took on 5 March 1994, for the payment of DEM 1.975 million;

- measure 12: a shareholder loan of DEM 6 million granted by TIB in March 1994;

- measure 13: a credit guarantee provided by the Land of Thuringia in March 1994 in respect of investment credits, which covered the loans that constitute measures 18 to 22;

- measure 14: a 90% guarantee provided by the Land of Thuringia, in 1994 to cover working capital credits of DEM 6.5 million granted by a private bank in September 1995;

- measure 15: an investment grant in the amount of DEM 2 million, subsequently increased to DEM 2.5 million, disbursed in May 1994 by the Land of Thuringia;

- measure 16: an equity loan by a public bank of DEM 0.2 million (-the EKH loan-) granted in June 1994 to G. R. in the context of the creation of the applicant;

- measure 21: an investment loan of DEM 3.45 million granted in April 1995;

- measure 23: a guarantee mentioned under measure 13 which covered a loan of DEM 1 million granted in February 1996 by a private bank;

- measure 26: employment promotion grants linked to environmental protection investments, which amounted to DEM 1.549 million and were granted by the Federal Labour Office (Bundesanstalt für Arbeit) from 1994 to 1996;

- measure 27: various...