AuthorTh. Jestaedt; J. Derenne; T. Ottervanger
ProfessionJones Day; Lovells; Allen & Overy

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8. Spain
8. 1 Actions available for enforcement of negative Commission Decisions

* Responsibility for recovery

In Spain, a variety of national and regional bodies can be responsible for the recovery of aid. In the recovery cases described below, the Central State, the Spanish Ministry of Tourism, Commerce and Industry, the Official Credit Institute ("Instituto Oficial de Crédito"), the County Councils ("Diputación Foral") and the competent offices of the different regional authorities have been involved in the recovery of aid. Potentially, any organ of the Public Administration, be it a territorial Administration (Autonomous Community, local Authority or the State Administration), or an institutional Administration (public autonomous entities or State-owned companies) may be involved in recovery proceedings if it has been the source of, or has acted as the instrument for the payment or execution of, State aid.

* Relationships with the Commission

Concerning relationships with the Commission, the competent authorities file their reports and communications through the Permanent Representation of Spain to the European Union, who, in turn, files them with the Commission.

* Means of effecting recovery

Recovery of aid will be done through administrative law means or private law enforcement. The Spanish Courts have confirmed that a Commission decision has an enforceable nature, and therefore an appeal before the ECJ against a Commission decision ordering recovery does not suspend the execution of such decision, unless the ECJ expressly determines such suspension.

However, the Commission decision will not, in most cases, allow the immediate initiation of an executory action (i.e. a legal action intended to obtain the payment due, where coercive measures, for instance seizure of property, may be adopted). On 22 February 2001, the Council of State ("Consejo de Estado") issued Resolution 2690/2000, which clarified some points regarding the recovery proceedings. This resolution concerned State aid granted by the Spanish State to State-owned shipyards, which was declared by the Commission as incompatible with the Common Market (Decision 2000/131/EC, of 26/10/1999). The Council of State concluded that the Commission decision at issue could not be considered as a writ of execution (i.e. a document delivered by certain public authorities enabling obligations such as, for example, the payment of a sum of money, to be automatically dealt with and which allows the immediate enforcement of the right) in favour of the entity that had granted such aid, since neither that entity had been mentioned, nor had the concrete debtors (those persons/entities who had benefited from the aid) or the amounts to be recovered beenPage 632 specified in the decision. However, the Council of State did not contest the possibility, in theory, for a Commission decision to constitute a writ of execution. Therefore, in that particular case, the Council of State concluded that, in order to initiate execution against beneficiaries of State aid, a writ of execution specifying all of the above-mentioned elements should be issued, either by the State or by the Commission, but a different outcome should not be excluded in all cases.

The choice of administrative or private means will depend on the nature of the instrument through which the aid was granted. In the case referred to above, the Council of State concluded that the public law/administrative proceedings were best suited (since the recovery of public funds was at issue).

8. 2 Public law measures by national authorities

* Problem: inexistence of an ad hoc procedure

The recovery of illegal aid in Spain poses a significant, although not insurmountable, problem, relative to the inexistence in the Spanish legal system of provisions establishing an ad hoc procedure for the execution of an order for the recovery of State aid arising from a Community decision.

* Possible means of recovering aid

Where the absence of appropriate national regulatory tools has been evident, execution procedures have been exercised in the light of the principle of the supremacy of EC law, according to which an interpretation of the national legal systems assuring compliance with an order for the recovery of aid is necessary. The use by the Spanish authorities of the principle of the supremacy of EC law can be a useful tool which may help overcome deficiencies in national law, and judges should be ready and willing to fill in gaps in the national procedure rules to comply with that general principle (see below).

Given the absence of procedural tools of national law specifically aimed at the recovery of illegal State aid, it should be expected that any payment (or advantage granted) which has been declared to be illegal State aid will be claimed by the public entity that granted the State aid in the form of a claim for payment of moneys due (this is the criterion provided for in Law 38/2003 of 17 November on Subventions). Likewise, where no national rule is available, interested parties must be heard in the recovery proceedings (in accordance both with national and EC law).

It is generally accepted that legal interest payments are due in the event of delay in complying with the recovery order.

It is expected that the Spanish authorities should use generally applicable (regulatory or legislative) measures whenever the State aid at stake affects wide categories of persons orPage 633 entities: That has been the case of the general State aid granted by the Basque country, which is discussed below. For instance, State aid case 51/1999, discussed in section 8.2(3) below, shows that the Navarra Authority ordered recovery by means of individual acts ("Orden Foral") addressed to the beneficiaries.

Ultimately, the recovery of aid could depend on the instruments generally used by the State to enforce the payment of debts with the Public Administration, such as executive proceedings that include coercive charges, as well as interest for delay ("vía de apremio").

Under Spanish legislation, tax debts may be collected either by their voluntary payment by the taxpayers, or through an enforced collection procedure. The collection of the tax debts managed by the Spanish Tax Authorities is carried out through the "vía de apremio", or compulsion procedure.

Articles 160 to 173 of Spanish Law 58/2003 of 17 December on General Tax (hereinafter the "Spanish General Tax Law"), and the Spanish General Regulation of the Collection of Tax Revenue ("Reglamento General de Recaudación"), passed by Royal Decree 1684/1990 of 20 December, regulate the compulsion procedure, which is a purely administrative procedure handled exclusively by the Spanish Tax Authorities.

The procedure is initiated the day after the expiry of the voluntary period established by the corresponding legislation to settle the tax debts cleared by the Spanish Tax Authorities.

Therefore, the procedure can only be initiated when the Spanish Tax Authorities have cleared the corresponding tax liquidation or assessment requesting the taxpayer to pay the sum owing, and the taxpayer has failed to settle the tax debts within the period set by law.

In order to ensure the collection of the tax debt, the Spanish Tax Authorities in charge of the collection procedures are entitled to examine and investigate the existence and location of the taxpayer's assets and rights, and to adopt precautionary measures, as in the case of tax audit procedures.

The procedure must be initiated by notifying the taxpayer of the compulsion decision ("providencia de apremio") which must include where and when payment must be made, indicating that if the payment is not satisfied, the Spanish Tax Authorities shall proceed to the seizure of the goods or execution of the guarantees granted. It must also expressly mention the delay interest and costs that could be charged, as well as the possibility of requesting an adjournment of the payment. Finally it will also mention that the procedure may not be suspended, except in the cases specifically provided for by the law.

* The new Law on Subventions

Law 38/2003 of 17 November on Subventions provides, under Article 37(1)(h), that repayment of granted subventions is due (plus interest accruing from the moment of paymentPage 634 of the subvention until the date of the decision ordering repayment) in the event that a decision ordering repayment is issued under Articles 87 to 89 EC. The procedure must follow the general rules on administrative proceedings provided for by the Law on Administrative Procedure ("Ley de Régimen Jurídico de las Administraciones Públicas y del Procedimiento Administrativo Común").

The competent body to order repayment to the beneficiary is the same one which granted the aid (Article 41(1) of Law 38/2003). In the event that recovery is ordered by an EC institution, the competent body to enforce such order is the one responsible for managing the appeal (Article 41(2) of Law 38/2003). This procedure must be initiated by the competent body, of its own initiative, further to an order from a superior body, further to a reasoned request addressed by another organ or upon complaint. Interested parties must be heard in the proceedings (Article 42 of Law 38/2003).

This Law on Subventions has not really filled the current gap. First, it applies to 'subventions' (direct money payments by the Public Administration), which is a far narrower concept than that of 'State aid'. Secondly, Law 38/2003 refers to the general laws on administrative procedure as far as the recovery procedure is concerned (Article 42(1)). Nonetheless, Law 38/2003 reminds that a Commission decision ordering repayment creates a legal obligation to carry out the repayment (Article 37(1)h of Law 38/2003). Law 38/2003 may provide some guidance and/or indications regarding the issue of recovery of State aid.

* Interim measures

Interim measures are available in the course of the administrative procedure under Article 72 of Law 30/1992 of 26 November on Administrative Procedure (Article 35 of Law 38/2003 regulates the suspension of payments, as far as the State aid concerned fits the notion of subvention). This may be useful in particular to interrupt payments by the relevant Public Administration, provided that the State aid has been partially given and that it is of a nature (for example, payment of sum of money, loans, etc.) that renders the interruption of payments an effective means of action.

Pursuant to the rules on court procedure, interim measures may also be granted by a court on review, when necessary to ensure the success or effectiveness of a legal action (Article 129 of the Spanish Act governing judicial review of administrative action -Law 29/1998 of 13 July on Administrative Court Procedure -"reguladora de la Jurisdicción Contencioso- Administrativa").

Article 129 allows suspension of the administrative act (which is the measure most commonly granted). Any other measures deemed necessary to ensure effectiveness may also be granted, although it is to be noted that goods or assets belonging to the Public Administration (to the extent the interim measures requested affect them) may in principle not be frozen or appropriated.

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The substantive requirements for the grant of interim measures (both in the administrative and judicial phases) are:

* the existence of a prima facie case (a case where there is a high probability regarding the existence of the right) which deserves judicial protection (fumus boni iuris); and

* the existence of a risk that the effectiveness of the final judgment may be jeopardised if there is not an immediate judicial decision ensuring preservation (periculum in mora).

Audience must be granted within ten days of filing the petition of interim measures and decided upon within the following five days. The interim measures remain in force until a final judgment is given, although the judge may decide to modify them during the course of the procedure.

Decisions on interim measures may be appealed before the court that issued the decision in first instance and, ultimately, before the Supreme Court, administrative division.

(43) State aids C48/99 to C50/99, C52/99 to C54/99 and C58/00 to C/60/00, regarding illegal State aid granted to several companies located in the Basque Country

In accordance with the information provided, tax aids were granted to more than one hundred companies located in Vizcaya, Álava, Guipuzcoa and Navarra. The competent authorities had adopted measures to enforce recovery but it does not appear that they had informed the Commission of these measures.

The "Consejo de Estado" (highest consultative body of the government) has issued two warnings in the context of the ongoing proceedings, indicating that there are not any express provisions under Spanish law that enable the review ex officio of administrative acts enforcing a Commission decision finding State aid to be illegal. Nevertheless, the authorities should overcome that problem by resorting to the principle of the supremacy of Community law as developed by the case law of the ECJ. Pursuant to that legal principle, national authorities must act to recover the illegally granted amounts, even if there is no legal procedure devised to that end under the national laws on procedure.

The County Council ("Diputación Foral") of Vizcaya has appealed before the CFI the Commission decision in the cases referred to above. We are not aware of any information on the merits or substance of the judicial decision on the matter.

Further to the failure to recover the aid by the Spanish Authorities, the Commission, on 19 November 2003, brought Article 88(2) EC infringement proceedings before the ECJ on cases C48/99 to C50/99 and C52/99 to C54/99 (Court cases C-485-490/03), which are still pending.

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(44) State aid C/70/2001 ES, in connection with Hilados y Tejidos Puigner, S A. ("Puigner")

The Commission started a procedure to investigate aid (in the form of securities and tax breaks) granted by the Catalonian Institute of Finances ("Instituto Catalán de Finanzas") ("CIF") to Puigneró for restructuring purposes, in response to a formal complaint filed by another interested party in the textile industry. In the meantime, other interested parties filed formal complaints.

The Commission reviewed the guarantees granted by the CIF to Puigneró. In order to determine whether these guarantees provided a selective advantage to the company, the Commission used the principle of the private operator. The Commission concluded that these constituted illegal State aid, incompatible with the Common Market. The case also focused on the persistent non-payment of social security contributions and tax obligations by Puigneró.

At the moment when the Commission issued its decision, Puigneró suspended payments (suspension of payments ("suspensión de pagos") is provided for by Articles 870 to 873 of the Commercial Code, and consists of the possibility that a company requests the suspension of the payments to its creditors in the event that it cannot make the payments on the dates they are due). However, the financial situation of the company worsened still and it was declared bankrupt.

At the time of the suspension of payments (and prior to the declaration of bankruptcy), Puigneró had initially suspended payments. During this part of the procedure, the Generalitat de Catalunya attempted to explain to the Commission that recovering the aid could lead the company to insolvency, which could have a negative social impact on the area where the company was located. The Commission's understanding, however, was that the recovery could not be challenged for social reasons.

The CIF requested the amounts due to Puigneró by means of notarised notifications. During this procedure, the company could not recover from its negative financial situation and it was declared bankrupt by an order of 29 December 2003 issued by the court of first instance, number 2, of the city of Vic.

(45) State Aid C51/1999 ES, in favour of Paneles Elctricos, S A. in the region of Navarra

This case refers to illegal aid granted to Paneles Eléctricos, S.A. by the Government of Navarra. The Commission declared the illegality of such aid by Decision 11 July 2001, and requested recovery. The aid consisted of a tax benefit of a 50% deduction to the total tax due from those companies initiating their activity and in compliance with several requirements related to investment and the creation of jobs.

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Although several companies profited from this measure and were ordered to return the aid, Paneles Eléctricos, S.A. was the only company which appealed against the recovery order before the national jurisdiction.

The Government of Navarra ordered the recovery of the aid by decrees addressed to the affected companies and issued by the members of the Council of Navarra ("Orden Foral"). These decrees established the reimbursement of the aid to the public funds of Navarra.

Paneles Eléctricos, S.A. applied for an administrative remedy, but the Government of Navarra issued an Agreement ("Acuerdo de Gobierno"), rejecting the appeal brought by the company.

In the meantime, the Government of Navarra controlled the tax behaviour of Paneles Eléctricos, S.A. and kept the monetary and financial situation of the company under review.

At the time of the adoption of these measures, the Government of Navarra also applied for review of the Commission decision of 11 July 2001 before the ECJ, but has since withdrawn that appeal.

(46) State Aid C95/2001 ES granted by two public offices of the Regional Government of Galicia to Siderrgicas An

In this case, the aid, consisting of several measures (such as a beneficial loan with low interest, the participation in the share capital of the company, and different subsidies) was granted by the government of the region of Galicia by means of a cooperation agreement with the government and was declared illegal by a decision of 16 June 2004. The beneficial loan with no interest was granted to Siderúrgicas Añón by two other bodies (SODIGA, S.A. and IGAPE), by virtue of a cooperation agreement with the government for the carrying out of some works.

The Commission ordered the recovery of the aid by a decision of January 2004 (on 20 October 2004, a corrigendum was issued in order to reduce the interest rate to be applied to one of the subsidies granted).

The measures adopted by the competent authorities were (i) complete divestiture of the participation in the beneficiary company by SODIGA, S.A.; and (ii) the cautionary stay of any payment related to the ownership files affected by the Commission decision.

(47) State aid C3/2002, ex NN 160/2001, to Refractarios Especiales, S A

This State aid was generated by the lack of initiative on the part of the relevant organs of the Public Administration to recover social security debts against Refractarios Especiales, S.A., a lack of initiative which is interpreted as being an economic advantage granted to that company.

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In this particular case, recovery of the debt seemed to be taking place in an effective manner by means of the vía de apremio. Nonetheless, the legal remedies and appeals available (both administrative and judicial) have largely had the effect of delaying the procedure. For instance, Refractarios Especiales, S.A. filed an administrative appeal against the decision to recover the moneys which was rejected by the Ministry of Labour. However, Refractarios Especiales, S.A. applied for judicial review of the confirming decision by the Ministry of Labour, which is, to our knowledge, currently pending. It will not be possible to know with certainty when the aid will be recovered until a decision on that procedure is reached by the administrative courts.

8.2. 2 Private law measures

Actions for recovery have been brought under private law (private action) rather than under administrative law. This is the case when the State aid has taken the form of a loan, guarantee or comparable agreement governed by commercial law.

The general regulation on private law obligations is contained in the Spanish Civil Code. Pursuant to Article 6.3 of the Civil Code, private acts or agreements contrary to imperative rules (such as the rules on State aid) are null and void. Therefore, acts or payments made in contravention of State aid law would be forbidden and this may form the basis for a private action. Furthermore, pursuant to Article 1895 of the Civil Code, a party who has received moneys without being legally entitled to a payment may be subject to a duty to repay the amount received on the basis of the doctrine of 'unjust enrichment'.

If a private agreement or instrument is executed before a notary public (as would normally be the case with loans and financial guarantees), the agreement is regarded as a writ of execution: the affected party may file an application for judicial execution of the agreement and, in principle, that party does not have to go through the entire 'declaratory procedure' (judicial proceedings where the parties engage on discussion and production of evidence regarding the merits of the claim). This type of instrument may be an effective tool to ensure immediate compliance with recovery orders, by regulating a negative Commission decision as an event of default, the occurrence of which would subject the beneficiary to an executory obligation to repay, without discussion of the merits of the repayment claim.

The case below illustrates a situation of private enforcement.

In State aid case C39/2001 ES, in favour of Minas de Río Tinto, S.A., the actions brought before the courts were civil, not administrative, procedures. The Commission stated in its decision that the restructuring aid granted by Spain to Minas de Rio Tinto was not compatible with the Common Market. The aid consisted of (i) a loan granted by the Instituto de Crédito Oficial ("ICO"), the State financial agency attached to the Ministry of Economic Affairs and (ii) the extension of the guarantee granted by the Government of Andalusia on loans granted by private banks to Minas de Rio Tinto.

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Regarding the measures adopted in relation to the recovery of aids, it is necessary to distinguish between the measures adopted by the Andalusian Assembly ("Junta de Andalucía") and the Official Credit Institute ("Instituto de Crédito Oficial").

* the Official Credit Institute agreed to the early termination of the loan agreement dated 28 March 2001 granted to Minas de Río Tinto. Once early termination was agreed, the Official Credit Institute claimed the amounts due under the loans and, on 29 July 2004, the Official Credit Institute initiated legal action. The credit that the Official Credit Institute holds against Minas de Rio Tinto is a post-insolvency credit (and therefore a credit against the mass of assets in insolvency proceedings). This means that the liquidation commission must repay the credit with the amounts obtained from the liquidation.

* The Andalusian regional Authority (Autonomous Community) granted two guarantees in favour of Minas de Rio Tinto. The regional Authority had claimed the amounts paid due to these guarantees before the courts and the courts issued two rulings ordering the re-payment to the regional Authority. The enforcement of these rulings is still pending.

8.2. 3 Possible interim measures in enforcement proceedings

For relevant cases on interim proceedings, see the decisions summarised under section 8.8.3 below.

The law applicable to interim measures is set out under section 8.2 above.

There seems to be a tendency not to accept suspension of repayment orders on the grounds that an application for judicial review before the Community courts has been filed. The Spanish courts seem to be ready to grant suspension occasionally (see appeal 1260/2003, under section 8.3.1 below); however, they seem reluctant to accept suspension of a repayment order on the grounds that the negative Commission decision has been appealed before the Community Courts, unless suspension has been granted by the Community Court in the procedure for judicial review of the Commission decision (see below).

8. 3 Actions of the beneficiary to oppose a recovery order
8.3. 1 Actions based on the illegality of national recovery orders

* Appeal 1260/2003 Superior Court of Justice of Navarra (see section 8.8.3(1) below.) The beneficiary requested the annulment of the administrative order of recovery, on the grounds that: (i) the body that had issued such order was incompetent; (ii) the adequate procedure had not been applied; and (iii) had the aid not been granted, it would have been entitled to other tax incentives. It also requested the suspension of execution of the contested order. The Superior TribunalPage 640 of Justice of Navarra consented to stay the execution, but in the end dismissed the appeal.

* Appeal 2824/1999 Central Economic-Administrative Court (see section 8.8.3(2) below.) The beneficiary alleged that the administrative act of recovery infringed the national law under which the aid (consisting of the cancellation of the debt) had been granted and that the action for recovery would infringe the national principle under which the Public Administration may not act against its own actions. The tribunal dismissed the appeal.

8.3. 2 Actions based on the illegality of the Commission's negative decision

In Appeal 2824/1999 (see section 8.8.3(2) below), the beneficiary asked for the suspension of the national recovery proceedings on the grounds that an action for annulment against the Commission decision was pending before the ECJ, the suspension of the execution of such decision having been requested. The Central Economic-Administrative Court denied the petition since the Commission decision was executory, the appeal before the ECJ only leading to suspension should the court expressly allow it.

8.3. 3 Actions based on legitimate expectations

This argument has been used, although it is unlikely to be successful (see section 8.3.1, in particular the reference to Appeal 2824/1999). In principle, it is unlikely that a legitimate expectation may arise out of an illegal situation (unless the facts merit the application of the principle of legitimate expectations narrowly defined by the case law of the ECJ. See, for instance, the conclusions of the AG in case C-5/89, Rec. 1990, in particular at point 3445). For similar reasons, claims of damages against the national Public Administration pursuant to Article 139 of Law 30/1992 on Administrative Procedure are unlikely to succeed unless the facts of the case are such that they adequately support a finding of a legitimate expectation.

8. 4 Enforcement in insolvency proceedings

Insolvency proceedings are brought before the commercial courts. Insolvency proceedings are governed in Spain by Law 22/2003 of 9 July. Pursuant to Article 91 of Law 22/2003, amounts due to the Treasury ("retenciones tributarias") and social security, owed in connection with the fulfillment of a legal obligation, are regarded as privileged. This means that they are given preference over other obligations that the bankrupt party may have and which do not enjoy privileged status.

Once a company has been declared bankrupt, individual creditors are precluded from seeking satisfaction of their individual debts independently. Each creditor is entitled only to claim its debt from the overall mass of assets, in accordance with the ranking and the amount of its credit.

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A summary of the measures adopted to enforce recovery actions under national insolvency laws may be found below.

8.4. 1 State Aid C/70/2001 ES, in favour of Puigner and State Aid C 39/2001, in favour of Minas de Ro Tinto

In connection with the enforcement of the decision of the Commission regarding State aid C/70/2001 ES, in favour of Puigneró and State aid case C 39/2001 (see 8.2(2) above), in favour of Minas de Río Tinto, the recovery actions were made in accordance with the national insolvency laws.

8.4. 2 State aid case C22/90, in favour of Hilaturas y Tejidos Andaluces, S A. ("Hytasa")

The beneficiary went bankrupt and recovery of the aid had to comply with the procedures applicable to bankruptcy. In this particular case, the State requested the judge dealing with the bankruptcy proceedings to regard the aid as a preferential credit for the purposes of recovery. The judge dealing with bankruptcy proceedings did not allow the inclusion of the aid in the creditors' list and declared that (i) no claim for payment in that regard had taken place prior to the bankruptcy and (ii) the Commission decisions annulling the aid had been admitted for review by the ECJ. Subsequently, the Spanish Authorities initiated common judicial proceedings for the recognition of the credit. This demand was dismissed by the court of first instance. The Authorities appealed to the Audiencia Provincial de Sevilla, which upheld the decision. Proceedings are now pending before the Supreme Court.

Enforcement in the framework of insolvency is, in practice, a long procedure. From the information provided, we understand that the relevant authorities are taking all the necessary measures to recover the illegal State aid granted to insolvent companies.

8. 5 Enforcement against third party beneficiary

No case law has been found in this regard. Nonetheless, there are some statutes that may provide legal solutions to this type of situation.

* Acquirers of businesses that have benefited from aid

In the case of claims being addressed to beneficiaries which are independent legal entities purchased by a third party, the responsibility remains, in principle, with the autonomous legal entity. Arguably (although very unlikely), the doctrine of lifting of the corporate veil may become applicable in order to invoke the responsibility of the owner of a legally autonomous company. However, in the context of bankruptcy or insolvency, the applicable bankruptcy laws state that sales or other divestments undertaken by a company may be rescinded if they took place up to two years prior to the declaration of bankruptcy (for example, a company that disposed of a given business may see the disposal rescinded if it took place up to two years before bankruptcy).

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* Merger by absorption

In the case of merger by absorption of the beneficiary entity, the absorbing entity would, pursuant to the general rules on companies, assume all of the assets and liabilities of the purchased company.

* Extinction or dissolution of the beneficiary company

In the case of the extinction or dissolution of a beneficiary company, one possible interpretative rule would be that the partners or shareholders of the former entity be deemed jointly and severally responsible for the repayment (this is the solution given by Law 38/2003 of 17 November on Subsidies, subsidies being, as discussed, a far narrower concept than that of State aid, but the law may provide useful guidance). Another possibility is that the liability is transferred to the successor entities or the entities that have in fact benefited (rule on transfers regarding tax obligations, Law 58/2003, General Tributaria of 17 September). It is uncertain, however, what would happen should the situation arise in the context of State aid as contemplated by EC law, and the situation has not, to our knowledge, arisen.

* Spin-off

In the case of spin-off, the spin-off project regulated under the relevant statute (in particular in case of Sociedades Anónimas, Article 225 of Royal Legislative Decree 1564/1989), should state which rights and liabilities go to which of the companies that benefit from the spin-off. If the spin-off project does not clarify which company assumes the obligations, all the companies that benefit from the spin-off will be jointly and severally liable.

8. 6 Obstacles to immediate and effective recovery

The following may be considered to be obstacles:

- Delay of the Spanish authorities in providing the information requested and their sending incomplete responses.

- Length of proceedings is also a very common obstacle. Sometimes, the length of proceedings is due to the lack of an ad hoc procedure in place to recover State aid; sometimes, it is due to the lack of cooperation of the Spanish authorities; sometimes is due to the length of administrative and/or judicial proceedings.

- In some of the files reviewed, the beneficiary had gone bankrupt and recovery of the aid had to comply with the procedures applicable to bankruptcy.

- The fact that, in most cases, the same regional authority which grants the aid is the authority in charge of enforcement of the decision may be one of the reasons for the delay in the recovery. The procedures could benefit from a clear allocation by a centralised, co-ordinated power, which currently does not exist.

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- No specific legislation exists in Spain to regulate the procedure according to which public entities may enforce negative Commission decisions and recovery obligations.

8. 7 Best recovery practices

As it has been discussed, there are no ad hoc procedures that enable us to give a judgment on whether or not Spanish national practices on recovery are appropriate. Law 38/2003 was a lost opportunity for introducing a more comprehensive regulation on recovery. It remains to be seen to what extent this will be an effective tool for recovery.

One possible means of assessing Spanish practice may be based on the distinction between private law and public/administrative law measures for recovery.

Another measure that may possibly help improve co-ordination between the different authorities (i.e. at the national, regional and local levels) involved at national level may be to confer authority to a central administrative organ, be it the Comisión interministerial para asuntos de la Union Europea, or another well-suited body for that purpose. We are aware that such centralisation may have implications in the internal distribution of powers within Spain. Nonetheless, devolution to a central organ seems in principle the best way to ensure that the system is workable in practice.

8.7. 1 Recovery through administrative law means

(1) The administrative body that advanced the aid should seek repayment by means of an administrative act, complying with the appropriate formalities, to order repayment. Other administrative acts, such as formal claims for repayment and administrative interim measures, if still applicable, could be included here.

(2) Execution, if necessary, using coercive means.

8.7. 2 Recovery through private law enforcement

(1) Formal request for payment as regulated by the underlying contract.

(2) Judicial action against beneficiaries.

- In the case of executory obligations (those where there is already a writ of execution) the creditor may initiate executory proceedings, which are quicker and more effective.

- Otherwise, a declaratory action with full discussion of the merits must be commenced. This may include, if applicable, interim measures. The judgment recognising the obligation to reimburse the State aid may be used to start executory proceedings, in the event that the beneficiary does not voluntarily pay the appropriate amount.

- In both cases, execution may need to be coupled with coercive measures.

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8. 8 Description of cases
8.8. 1 Action by the State

No published case law has been found in this regard.

8.8. 2 Action by competitors

See section 8.1 above.

8.8. 3 Action by the beneficiary (opposition)
(48) Superior Court of Justice, Administrative Section, 4 May 2005, regarding State aid granted to Paneles Elctricos, S A

Facts and legal issues: As referred to above, this case refers to illegal aid granted by the Regional Government of Navarra, consisting of a tax benefit of a 50% of deduction in the total tax due for those companies initiating their activity and complying with several requirements relating to investment and the creation of jobs. The illegality of such aid was declared by the Commission in its decision of 11 July 2001. Although this decision affected different companies located in the region of Navarra, Paneles Eléctricos, S.A. was the only company which appealed against the recovery order deriving from a Regional Decree of the competent authority.

Regarding the specific actions of the beneficiary company to oppose the recovery action, in this case, Paneles Eléctricos, S.A. firstly applied for an administrative remedy against Decree 53/03 of 26 February regarding recovery of the aid, in order to exhaust the available administrative procedures ("recurso de alzada"), which is compulsory under Spanish law in order for the administrative courts to review the administrative action.

After this appeal was rejected by an agreement of 15 September 2003 issued by the Regional Government, the company initiated judicial proceedings and asked for the suspension of execution of the contested decree. The Court, in this case, consented to stay the execution, but required security from a bank, in order to guarantee the purpose of the proceedings.

Paneles Eléctricos appealed again, this time against the order for bank security. Given that the Government of Navarra did not oppose this appeal, the Court decided to continue with the proceedings.

Decision: Decision 446/2005, issued by the Court on 4 May 2005, finally settled the judicial proceedings initiated by Paneles Eléctricos, S.A. against the order for recovery contained in Decree 53/03. The Court decided to reject this appeal based on different arguments.

Once the jurisdiction of the Court had been affirmed, the Court considered the General Decree to have been an appropriate measure for enforcing the Commission decision.

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Although under Spanish law there is no common procedure established for the recovery of illegal aid, the decision has to be considered an executory order, binding on the State.

The appellant applied for the annulment of Decree 53/03, alleging that the benefit obtained from the State aid prevented Paneles Eléctricos, S.A. from obtaining other economic incentives under Spanish law that were incompatible with the illegal aid (which the company had renounced in order to obtain the aid). The Court stated that this argument was not valid and that Paneles Eléctricos, S.A. would be able to claim for the other incentives in the event that the granting of the State aid damaged the company. In fact, the agreement of 15 September 2003 showed the favourable position of the Government of Navarra regarding the availability of those incentives.

Finally, regarding the applicability to this case of the statute of limitations, declared by Paneles Eléctricos, S.A. for the fiscal years of 1998 and 1999, the Court stated that the time limits to be followed in the proceeding were those applicable under the Community legal order. That meant a time limit of ten years from the date the aid was granted, and not the four-year period established under Spanish law for this kind of proceedings.

For all of the above reasons, the Court decided in Resolution 446/2005 to reject the appeal of Paneles Electricos, S.A. and to regard the agreement adopted by the government as compliant with the law.

(49) Resolution of the Central Economic-Administrative Court number 368/2001, of 24 May, Appeal number 2824/1999

Facts and legal issues: As part of an arrangement with creditors within a temporary receivership process, the Spanish Central Government cancelled a debt against the company, subject to such process. The Commission declared this cancellation of the debt as illegal State aid and ordered the Spanish State to recover the aid. This case concerns the appeal filed by the beneficiary of the aid against the decision issued by the National Tax Authority ("Agencia Estatal de Administración Tributaria") ordering payment of the debt cancelled.

Decision: The Tribunal found that the beneficiary could not oppose the execution of the Commission decision by means of the fact that an appeal against this decision had been filed before the ECJ and that suspension of the Commission decision had been requested to the ECJ (Articles 256 and 243 EC). Also, the beneficiary could not rely on the argument that cancellation of the debt was an act covered by the national legislation on temporary receivership. The Tribunal held that actions for recovery would infringe the national principle according to which the Public Administration may not act against its own actions ("doctrina de los actos propios de la Administración", a variant of the principle of legitimate expectations) (Articles 10 and 256 EC). Finally, the Tribunal stated that the competent entity for the recovery of illegal State aid resulting from a negative decision of the Commission isPage 646 the National Tax Authority (Article 8.4 of Royal Decree 225/1993, Articles 4 and 7 of the General Regulation on Tax Collection and Article 103.1 of Law 31/1990).

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