Commission of the European Communities v Kingdom of Spain.

• Jurisdiction: European Union
• Celex Number: 61999CC0499
• ECLI: ECLI:EU:C:2002:44
• Court: Court of Justice (European Union)
• Date: 24 January 2002
• Procedure Type: Recurso por incumplimiento – fundado
• Docket Number: C-499/99

Important legal notice

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61999C0499

Opinion of Mr Advocate General Mischo delivered on 24 January 2002. - Commission of the European Communities v Kingdom of Spain. - Failure by a Member State to fulfil its obligations - State aid - Aid granted to companies in the Magefesa group - Commission Decisions 91/1/EEC and 1999/509/EC - Non-performance. - Case C-499/99.

European Court reports 2002 Page I-06031

Opinion of the Advocate-General

1. The Commission claims that the Court should declare that, by failing to adopt and bring into force within the prescribed period the laws, regulations and administrative provisions necessary to comply with the Commission Decisions 91/1/EEC of 20 December 1989, concerning aids in Spain which the central and several autonomous governments have granted to Magefesa, producer of domestic articles of stainless steel and small domestic appliances (the 1989 Decision), and 1999/509/EC of 14 October 1998, concerning aid granted by Spain to companies in the Magefesa group and their successors (the 1998 Decision), the Kingdom of Spain has failed to fulfil its obligations under the fourth paragraph of Article 249 EC and Articles 2 and 3 of the aforementioned decisions.

I - Background

The companies concerned

2. The Magefesa group consists essentially of four industrial companies, namely Investigación y Desarrollo Udala SA (Indosa), based in the Basque Country, Cubertera del Norte SA (Cunosa) and Manufacturas Gur SA (GURSA), both based in Cantabria, and Manufacturas Inoxidables de Gibraltar SA (MIGSA), based in Andalusia.

3. The situation of these companies can be summarised as follows:

- Indosa was declared insolvent on 19 April 1994 at the request of its employees but has continued to trade.

- Cunosa ceased trading in 1994 and was declared insolvent on 13 April 1994 at the request of its employees. Winding-up operations began in March 1998.

- MIGSA ceased trading in 1993 and was declared insolvent on 27 May 1999 at the request of its employees.

- GURSA has been inactive since 1994 but has not been declared insolvent.

4. With a view to allocating the aid at issue, a number of management companies were set up in the autonomous regions concerned: Fiducias de la Cocina y Derivados SA (Ficodesa) in the Basque Country, Gestión de Magefesa en Cantabria SA (Gemacasa) in Cantabria, and Manufacturas Damma SA (Damma) in Andalusia. The role played by these companies is described as follows in the 1989 Decision:

... These [companies] had two main objectives: on the one hand, to enable the public authorities to monitor both the use of the aids to be granted, and the implementation of [the Spanish private consulting firm] Gestiber's directives; on the other, to ensure the operation of Magefesa's companies, mostly by preventing the seizure by creditors of their financial resources and inventories. For this latter purpose, on the basis of joint agreements these interposed societies market the entire production of Magefesa previously acquired from the individual companies; at the same time they administer the funds, raw materials and semi-finished goods needed by the companies whom they provide in proportion to work progress or justified expenses.

5. Ficodesa was declared insolvent on 19 January 1995 at the request of the employees of the Magefesa group. Damma has been inactive since 1993 but has not been declared insolvent.

The 1989 Decision

6. The operative part of the 1989 Decision reads as follows:

Article 1

The public assistance to the companies of Magefesa consisting of:

(i) loan guarantees amounting to ESP 1 580 thousand million;

(ii) a loan of ESP 2 085 thousand million at other than market conditions;

(iii) non-repayable subsidies amounting to ESP 1 095 thousand million;

(iv) an interest subsidy estimated at ESP 9 thousand million;

were granted illegally, and moreover are incompatible with the common market within the meaning of Article 92 of the EEC Treaty.

Article 2

Accordingly, the aid elements therein involved have to be withdrawn. Therefore, the Spanish Government is hereby requested to get the following stipulations complied with:

(a) the withdrawal of the State loan guarantees given amounting to ESP 1 580 thousand million;

(b) either the conversion of the soft-loan into a normal credit at both interest and repayment market conditions, or its withdrawal, or any other appropriate measure to ensure that the aid elements are wholly abolished. Whatever measure is adopted, it must take effect from the time the loan was initially granted;

(c) in case of conversion, the assurance that the instalments related to the abovementioned loan will be recovered in accordance to the schedule fixed;

(d) the recovery of ESP 1 104 thousand million corresponding to the non-repayable subsidies granted.

Article 3

The Spanish authorities will inform the Commission, within two months of the notification of this Decision, of the measures they have taken to comply therewith. Should the Decision's execution take place later than the said period, the national provisions regarding interest on arrears payable to the State will be applicable.

Article 4

The Decision is addressed to the Kingdom of Spain.

7. The aids declared to be incompatible with the common market were granted by the following entities :

- The Basque Government:

- a loan guarantee of ESP 300 million granted directly to Indosa;

- a guarantee of ESP 672 million granted to Ficodesa for use by those companies in the Magefesa and Licasa sub-groups that were based in the Basque Country, one of those companies being Indosa;

- aid, in the form of a non-refundable grant amounting to ESP 794 million and an interest subsidy amounting to ESP 9 million, also granted to Ficodesa for the benefit of those companies in the Magefesa and Licasa sub-groups that were based in the Basque Country.

- The Cantabrian Government:

- a loan guarantee amounting to ESP 512 million granted to Gemacasa for use by Cunosa and GURSA;

- a non-refundable grant of ESP 262 million in favour of the same parties.

- The Andalusian Government:

- a loan guarantee amounting to ESP 96 million granted to Damma for use by MIGSA;

- a non-refundable grant of ESP 29 million in favour of the same parties.

- The Fogasa (the national fund for the safeguarding of employees' rights in the event of insolvency of their employers): a loan of ESP 2 085 thousand million at other than market conditions.

8. To comply with the 1989 Decision, the companies forming part of the Magefesa group and Fogasa concluded an agreement for repayment of the loan granted by the latter; that refund agreement was modified to meet the requirements of the decision. The Commission does not challenge this measure.

9. Concerning the other aid, the Kingdom of Spain informed the Commission, by letters of 23 October 1991, 8 April 1994 and 23 April 1997, of the measures taken by the Spanish authorities.

10. The Commission considers those measures to be inadequate.

The 1998 Decision

11. The operative part of the Decision reads as follows:

Article 1

The aid in the form of the persistent non-payment of taxes and social security contributions:

- by Indosa and Cunosa until they were declared bankrupt,

- by MIGSA and GURSA until their activities were interrupted, and

- by Indosa after its declaration of bankruptcy and until May 1997,

is illegal, as it was granted by Spain in breach of its obligations under Article 93(3) of the EC Treaty.

The aid is considered to be incompatible with the common market within the meaning of Article 92(1) of the Treaty, as it does not meet any of the necessary conditions for the application [of] any of the derogations provided for by Article 92(2) and (3).

Article 2

1. Spain shall take the necessary measures to recover from the beneficiaries the aid referred to in Article 1 which was granted to them illegally.

2. The aid shall be recovered in accordance with the procedures and provisions laid down in Spanish law. The sums to be recovered shall include the interest which has accrued between the granting of the aid and the date on which it is actually repaid. The interest shall be calculated on the basis of the reference rate used to calculate the net grant equivalent of regional aid in Spain.

Article 3

Spain shall inform the Commission within a period of two months from the date of notification of the present Decision of the measures to be taken to comply therewith.

12. The 1998 Decision was the subject of an action for annulment brought by the Kingdom of Spain. In Commission v Spain, the Court dismissed the main submissions, while annulling the contested decision in so far as it included in the amount of aid to be recovered interest falling due after Indosa and Cunosa were declared insolvent on aid unlawfully received prior to that declaration.

13. The Spanish Government informed the Commission, by letters of 21 January 1998, in the framework of the adversarial proceedings, and of 21 January 1999 and 22 July 1999, in response to the 1998 Decision, of the measures taken to recover the aid granted.

14. The Commission disputes the effectiveness of these measures.

II - The action

15. The Commission claims that the Court should:

- declare that, by failing to adopt and bring into force within the prescribed period the laws, regulations and administrative provisions necessary to comply with the Commission Decisions of 20 December 1989 and 14 October 1998 declaring certain aid to undertakings belonging to the Magefesa group to have been granted unlawfully and to be 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 the aforementioned Decisions;

- order the Kingdom of Spain to pay the costs.

16. The Kingdom of Spain contends that the Court should dismiss the action for failure to fulfil obligations and order the Commission to pay the costs.

17. The Kingdom of Spain requests further that the...