C-480/98
ECLI:EU:C:2000:305
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OPINION OF MR MISCHO — CASE C-480/98
O P I N I O N OF ADVOCATE GENERAL MISCHO delivered on 8 June 2000 *
1. The Magefesa group and its successor 3. In its first decision, 1 which was not companies manufacture household goods contested by the Spanish Government, the in Spain, such as pressure-cookers, pans Commission declared that the aid, consist- and stainless steel cutlery. Until 1983 it held ing of loan guarantees amounting to ESP 1 a significant share of the Spanish market, 580 thousand million, a loan of ESP 2 085 but from then onwards it began to experi- thousand million at other than market ence financial difficulties, and in 1984 it conditions, non-refundable subsidies was organised into a complex network amounting to ESP 1 095 thousand million comprising two holding companies and a and an interest subsidy estimated at ESP 9 commercial group (the parent company million, was illegal and incompatible with plus the production companies Curiosa, the common market. The decision also Migsa, Indosa and Gursa). requested the Spanish authorities to with- draw the loan guarantees, to convert the soft-loan into a normal loan and to recover the non-refundable subsidies.
2. At the end of 1985 the Magefesa group was on the brink of insolvency. In order to prevent it from having to cease trading, an action programme was proposed, the main elements of which were a reduction in the 4. In 1997, the Commission received seven workforce and the granting of assistance by complaints about the advantages which the the central government and the govern- undertakings in the Magefesa group had ments of the autonomous regions where the gained as a result of their failure to repay various factories in the group were located the aid declared incompatible in 1989 and (Basque Country, Cantabria and Andalu- their failure to meet their financial and tax sia). The governments of those autonomous obligations. It decided to initiate the pro- regions themselves set up three intermedi- cedure provided for by Article 93(2) of the ary companies (Ficodesa, Gemacasa and EC Treaty (now Article 88(2) EC) in Manufacturas Damma) to monitor how the respect of the aid granted to those under- aid was used and to ensure the continued operation of the Magefesa undertakings. 1—Commission Decision 91/1/EEC of 20 December 1989 concerning aids in Spain which the central and several autonomous governments have granted to Magefesa, pro- ducer of domestic articles of stainless steel, and small * Original language: French. electric appliances (OJ 1991 L 5, p. 18).
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takings or those which had succeeded them The first plea in law: incorrect application since 1989. 2 Subsequently, in Decision of Article 92(1) of the Treaty 1999/509/EC of 14 October 1998 concern- ing aid granted by Spain to companies in the Magefesa group and their successors 3 (hereinafter 'the contested decision'), the Commission declared that the persistent non-payment of taxes and social security contributions by Indosa and Cunosa until Arguments of the parties they were declared insolvent, by Migsa and Gursa until their activities were suspended, and by Indosa after its declaration of insolvency and until May 1997, was illegal and incompatible with the common mar- 6. The applicant claims that the Commis- ket. The decision also requested the Spanish sion misapplied Article 92(1) of the Treaty authorities to take the necessary measures in deciding that the non-payment by to recover the aid from the beneficiaries, Indosa, Cunosa, Migsa and Gursa of cer- specifying that the sums to be recovered tain sums to the social security fund and the should include the interest which had Spanish Treasury constituted aid incompa- accrued between the granting of the aid tible with the common market. and the date on which it was actually repaid.
7. It relies on two arguments.
8. First, it submits that the rules on court- supervised recovery schemes which had been applied to those companies were a general law applicable to any undertaking in insolvency proceedings or which had incurred debts to the social security autho- 5. In its application for annulment of the rities or the treasury. contested decision the Spanish Government relies on four pleas in law alleging infringe- ment of Article 92 of the EC Treaty (now, after amendment, Article 87 EC), breach of the principle of legal certainty, failure to state reasons, and the impossibility of recovering interest. 9. Such a general law, it argues, could not, by definition, constitute State aid. The Court has consistently held that the 2 — See Communication' 97/C 330/02 (OJ 1997 C 330, p. 2). requirement that the national measure in 3 — OJ 1999 L 198, p. 15. question be of a specific nature is one of the
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defining characteristics of the concept of 13. First of all, it should be noted that the State aid. Spanish Government does not dispute, and even confirms, the Commission's view that under the provisions relating to court- supervised recovery schemes and the recov- ery of debts, public creditors have broad discretion in choosing the methods they wish to use to recover the debts owed to them. 10. The parties refer here to the Piaggio judgment, 4in which the Court held that the national scheme in question could be covered by Article 92 of the Treaty since it introduced, for a certain category of under- takings, rules which derogated from ordin- ary insolvency law. 14. Therefore, the measures criticised by the Commission — the decision by the public creditors not to call for the compa- nies in question to be wound up — do not automatically flow from the application of a general law, but from the discretion 11. It must be noted, however, that the exercised by the authorities in question. Commission does not dispute that Spanish insolvency legislation is of a general nature. But it argues that it is not that legislation in itself that should be classified as State aid. What constitutes State aid is the systematic non-payment of certain debts by the under- takings in the Magefesa group and the accumulation of further debts following the 15. We must examine whether, as the decision by the public creditors not to ask contested decision states, the way in which for those companies to be wound up. the public authorities exercised their rights under general legislation in the specific case of the undertakings in question could be classified as aid within the meaning of Article 92 of the Treaty.
12. It follows that there is no need, in this case, to pursue the question of the general nature of the legislation at issue, since the contested decision does not relate to the legislation itself, but to how it was applied 16. It is at this point that the applicant's by the authorities in this case. second argument becomes relevant. It ana- lyses the public authorities' conduct in the procedures criticised by the Commission as 4 — Case C-295/97 Piaggio [1999] ECR I-3735. follows.
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17. According to the applicant, the compa- their best chance of obtaining repayment of nies in question were not accorded any the debts owed to them. For example, the favourable treatment. Spanish law allows a authorities could use enforcement proceed- company to continue to operate while ings to seize and enforce the sale of the subject to a court-supervised scheme and debtor's assets, in other words to obtain a does not require creditors to apply for it to similar result to that produced by a wind- be wound up or to apply for the com- ing-up order. mencement of insolvency proceedings. The relevant provisions merely allow creditors to make such an application in certain situations.
21. This being the case, it argues, it was perfectly reasonable for the public autho- rities not to have applied for the com- mencement of insolvency proceedings in 18. It is for the creditors, it argues, to assess respect of the companies in question. whether such a step would be likely to increase their chances of recovering all or part of the debts owed to them, or whether, on the contrary, the prospects for recovery would be better if the creditors allowed the company to continue operating without 22. According to the applicant, this view is applying for it to be wound up or com- borne out by the fact that, far from mencement of insolvency proceedings. according the debtor companies favourable treatment, the authorities had taken all legal steps to obtain payment of the sums due to them.
19. Account must also be taken of the fact that the creditors have a wide range of other methods available to them for obtain- ing repayment. In particular, there are 23. The applicant gives a long list of the various enforcement procedures which they various measures taken, unsuccessfully, by can apply in order to obtain repayment or both the tax authorities and the social guarantees. security fund to obtain repayment of the debts owed to them.
20. This, the applicant contends, particu- larly applies to public authorities, which 24. The applicant also stresses that none of enjoy a number of special advantages the companies had any debts remitted, and conferred upon them by the law. Insolvency that assets were seized and sold as a result proceedings are therefore not necessarily of the non-payment of debts.
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25. It therefore considers that there can be operating simply by agreement between its no question of aid having been granted in creditors, without court approval, and that this case, since the companies concerned the insolvency proceedings remained open did not receive any advantage whatsoever for five years. This unusual and unortho- through State funding. dox situation underlines the 'special' nature of the action taken by the authorities in this case.
26. The Commission disputes the appli- cant's argument that the authorities took all possible legal steps to recover the debts 30. It adds that Indosa ran up further debts owed to them. after it was declared insolvent.
27. It stresses that for years the undertak- ings in the Magefesa group failed to pay the Assessment sums due to the social security fund and the treasury without the authorities taking any steps to have insolvency proceedings com- menced or succeeding in obtaining payment of the sums due by other means. 31. What are we to make of these various arguments?
28. Although Cunosa and Indosa were 32. According to the case-law of the Court, finally declared insolvent, that was at the in order to assess whether the conduct of request of private creditors, which clearly the public authorities constitutes State aid, shows that the public authorities did not it must be compared with how a private act in this case as a private creditor would investor would have behaved in the same in a similar situation, a test used in the case- circumstances. law of the Court to determine the existence of State aid.
33. In this context, as the parties to the proceedings submit, account must be taken 29. The Commission also submits that of the fact that public creditors enjoy a Indosa was given indefinite and apparently number of privileges which the law does unconditional authorisation to continue not necessarily give to private creditors for
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the purpose of recovering the debts owed to creditor would take whatever steps were them. necessary to limit his losses.
34. The comparison to which I refer should therefore be with what the Commission describes as a 'hypothetical private cred- 38. An examination of the circumstances of itor', who has all the legal remedies avail- the case shows that the Commission was able which the law confers on public right to consider that the public authorities creditors. allowed debts to be run up in circumstances which would not have been acceptable to a private creditor in a similar situation.
35. It must be assumed that such a creditor will aim to recover the sum due to him or, at the very least, to minimise his losses. He will therefore try to assess the chances of a recovery by the company, and the risk of 39. In particular, the applicant itself admits his losses increasing, if the company is that the non-payment of sums due to the allowed to continue to operate. treasury and the social security fund con- tinued for years and that it was at the initiative of private creditors that Indosa and Cunosa were finally declared insolvent.
36. If we assume a similar approach by the public authorities, we are forced to con- clude that they cannot be expected to demand that the company should be declared insolvent as soon as it fails and 40. Similarly, the Spanish Government not to take any account of its longer-term does not dispute that the continuance in potential. operation of Indosa, far from reducing its pre-insolvency liabilities, actually produced new losses of more than ESP 2 000 million, which seem unlikely ever to be repaid since, according to the Commission's statements, which have not been challenged, by 37. Conversely, however, it is not accepta- 14 December 1998 the company had ble for the public authorities passively to repaid only some 2.5% of that sum, and allow debts to be run up over long periods its continued operation had proved to be without the slightest prospect of improve- harmful to the interests of the regional ment — a situation in which a private treasury.
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41. As the contested decision explains, in 44. It follows from the above that the view of the size of their claims, the public applicant has not proved that the Commis- creditors were in a position to oppose sion infringed Article 92 of the Treaty, and Indosa's continued operation, which had, that this plea must be rejected. moreover, not been ordered by a court. It was for them to take due account of the company's background, and particularly of the fact that it had not paid any social security contributions or taxes for five years and that all the proceedings instituted in order to recover those sums had failed because the company did not have suffi- The second plea in law: breach of the cient assets. principle of legal certainty
45. The applicant argues that the principle of legal certainty, which is enshrined in the case-law of the Court, demands that any Community measure which produces legal effects, particularly where it is likely to have financial implications, must be suffi- 42. The public authorities should therefore ciently clear and precise to enable those have been aware that it was unlikely that concerned to ascertain the exact scope of the company's continued operation would their obligations. enable it to repay its liabilities. Nor could they have been unaware of the risk that the company would run up new debts, which would further reduce the likelihood of the initial debts being paid. 46. It considers that, in the present case, the Commission has breached this principle by declaring aid of an unknown sum to be illegal and by requiring the applicant to recover the aid without knowing the sum to be repaid.
43. The contested decision is therefore right to conclude that, by allowing Indosa to continue operating without, at the very 47. I do not agree with the applicant's least, making that subject to payment by analysis. Indosa of its outstanding tax and social security obligations in order to prevent its debts from increasing, the public authori- ties' conduct was likely to reduce their chances of recovering the debts due to them, whereas a private creditor would not 48. As the Commission explains, the con- have adopted such conduct. tested decision gives a detailed description
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of the measures constituting the aid in the defendant which the applicant has not question and the period during which they contradicted, a lack of cooperation on the occurred. It also gives precise estimates of part of the authorities concerned prevented almost all the sums involved, in addition to the Commission from obtaining certain a description of the obligations relating to items of information. them.
49. The applicant, to which the contested 53. It follows that the second plea must be decision was addressed, was therefore per- rejected. fectly able to determine the scope of the obligations imposed upon it.
50. This is particularly true here in that the calculation of the sums to be repaid must The third plea in law: failure to state necessarily cover all the elements determin- reasons ing the tax debt of the companies in question and their social security contribu- tions, in other words amounts fixed by national legislation which are perfectly ascertainable by the competent national 54. The applicant claims that the contested authorities. decision does not include a statement of reasons explaining why the non-payment of certain unspecified sums to the Spanish Treasury and the social security fund by four undertakings, two of which are insol- vent and the other two of which are not 51. The Commission is therefore right to trading, constitutes public aid which is refer to the case-law 5 to the effect that the incompatible with the common market, Commission does not have to determine the affects intra-Community trade and distorts amount of aid to be repaid where such a competition, when the State in question calculation involves the taking into account merely applied its national regulations on of elements determined by national law. insolvency and exercised all legal remedies.
52. This is particularly true where, as in the present case, according to a statement by 55. It therefore argues that there has been a breach of the obligation to state reasons 5 — Case T-67/94 Ladbroke Racing v Commission [1998] ECR provided for in Article 190 of the EC II-1. Treaty (now Article 253 EC).
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56. As we saw earlier, however, in the The fourth plea in law: the charging of present case the national authorities cannot interest be considered to have merely applied the legislation in force and exhausted all pos- sible legal remedies.
Arguments of the parties
60. The applicant contends that the Com- 57. Furthermore, the undertakings in ques- mission was not entitled to require, in the tion were active at the time when the context of the obligation to recover the aid disputed aid was granted, and they were at issue, interest to be charged on the debts therefore capable of distorting competition. owed by undertakings which are the subject The contested decision refers here to Mage- of insolvency proceedings. fesa's share of the market and the volume of intra-Community trade.
61. It argues that, according to the case- law of the Court, illegal aid should be recovered in accordance with the proce- dural rules laid down by national law, 58. Finally, even if, as a result of the lack of provided that they are not applied in such a cooperation from the authorities in ques- way that the recovery of aid required under tion, the contested decision gives an incom- Community law becomes impossible in plete estimate of the amount of the aid practice. concerned, it stresses the significant amount of the sums owed in each case, 6 thus giving a clear indication of how they might affect competition.
62. Under Article 884 of the Spanish Com- mercial Code, 'from the date on which insolvency is declared, the debts of the insolvent party shall cease to incur interest', with the single exception of mortgage loans and secured loans. This rule, the applicant 59. It follows from the above that the argues, is justified by the creditors' com- contested decision contains a sufficient mon interest in preventing new liabilities statement of reasons. This plea must there- from attaching to the assets of the company fore be rejected. concerned at the time of the declaration of insolvency, which would be likely to exacerbate the situation of existing cred- 6 — See in particular the tables given in the contested decision. itors.
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63. The above article, it is claimed, is 67. The argument put forward by the therefore a rule of national law which must applicant must therefore be deemed to be observed in the context of the recovery apply only to the interest which accrued of aid, since it does not make such recovery after the declaration of insolvency on the impossible and it is not discriminatory in debts of Indosa and Cunosa. relation to similar situations governed solely by national law.
Assessment 64. The applicant adds that the relevant case-law of the Court 7 merely requires interest to be charged 'where appropriate'. 68. It should first of all be pointed out that the Commission is right to assert that the rule laid down in Article 884 of the Spanish Commercial Code is not a procedural rule.
65. The Commission first of all points out, and is not challenged on this point by the Spanish Government, that Article 884 of the Spanish Commercial Code does not preclude the payment of interest by the 69. The aim of the article is to determine undertakings Migsa and Gursa, since they the sum which is ultimately owed to the have not been declared insolvent. creditors, and it is therefore bound to concern the substance of the law.
66. Nor, as regards Indosa and Cunosa, do 70. The Commission is also right to state the parties dispute that Article 884 does that, if the interest on the sums illegally not preclude a claim for the interest due up granted were not repaid, the beneficiary to the declaration of insolvency, or pay- would obtain a financial advantage com- ment of interest on aid granted after that parable to an interest-free loan. declaration, in so far as that interest constitutes debts of the assets in the insol- vency rather than 'debts of the insolvent party'.
71. Must we therefore deduce that the plea 7 — See Case C-348/93 Commission v Italy [1995] ECR I-673 submitted by the applicant must be rejected and Case T-459/93 Siemens v Commission. [1995] ECR II-1675. in its entirety?
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72. I do not believe so. lysed in my examination of the first plea, speaks for itself.
73. Account must be taken of the fact that, unlike the circumstances in the judgments referred to above, in the case in point the 77. The article in question must therefore repayment would have to be made in the be seen as expressing a choice by the context of an insolvency, and would thus be national legislature, whose task it is to lay competing with the claims of all the down insolvency rules and to find a balance insolvent company's creditors, both private between the various interests involved. and public.
78. It follows that such a rule must be 74. The rule requiring the public authori- regarded as falling within the scope of the ties to forego the interest referred to above institutional autonomy which Community is a general rule in that it applies to all law confers on the Member States. creditors, private and public, in all insol- vency proceedings.
79. Furthermore, the national rule in ques- 75. It therefore by no means constitutes tion does not make it impossible in practice favourable treatment for an undertaking or to implement the repayment obligation, category of undertakings. It also leaves no since it relates to only part of the interest margin of discretion for the creditors, who due, and only applies if the undertaking automatically forfeit the sums in question. which has received the aid is declared This applies, I should point out, for both insolvent. private and public creditors. The waiver imposed in favour of the debtor is thus not solely at the expense of the public purse.
80. Nor can it be claimed that the rule involves an element of discrimination con- 76. The contrast between the effect of the trary to Community law, since it applies in provision in question and the conduct of the same manner in all insolvency proceed- the public authorities, which I have ana- ings and to all creditors.
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81. I would add that, if the Commission's 85. In its rejoinder, however, the Commis- argument were followed, a Member State sion added that the obligation to demand would be required to make an additional payment of interest was laid down in exception to the principle of equality of Article 14(2) of Council Regulation (EC) creditors, to the benefit of the public No 659/1999 of 22 March 1999 laying authorities and at the expense of private down detailed rules for the application of creditors. The interpretation of Article 92 Article 93 of the EC Treaty. 8 It argues that proposed by the Commission would be there are no exceptions to this obligation tantamount in practice to conferring a type and that it should therefore apply even if of privilege on certain claims of the public the recipient company is the subject of authorities. insolvency proceedings.
82. Even if a number of exceptions may be 86. However, it should be pointed out that made to it, that principle of equality is of Article 14(1) of Regulation No 659/1999, fundamental importance, since the aim of which was not in force at the time when the insolvency proceedings is to establish an contested decision was adopted, states that ordered framework for the repayment of '[t]he Commission shall not require recov- debts, which the law has introduced instead ery of the aid if this would be contrary to a of competition between creditors, in their general principle of Community law'. common interest.
83. Furthermore, altering the scope of 87. This provision also applies to the creditors' rights in insolvency proceedings repayment of interest, since that obligation would affect the system of property own- is an element of the recovery of the aid. ership in the Member States, whereas Article 222 of the EC Treaty (now Arti- cle 295 EC) specifically makes this area the responsibility of the Member States.
88. It is apparent from the above that, in the present case, the repayment of the interest accrued by Indosa's and Cunosa's debts after the declaration of insolvency 84. I therefore consider that the interpreta- would be contrary to the principles flowing tion proposed by the Commission in this from the Treaty. case would endow Article 92 of the Treaty with effects on a scale which I feel were not intended by the authors of the Treaty. 8 — OJ 1999 L 83, p. 1.
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89. This plea should therefore be upheld in insolvency, on the aid illegally received by so far as it relates to the repayment of Indosa and Cunosa before that declaration. interest accrued, after the declaration of
Conclusion
90. For the reasons set out above, I propose that the Court should annul Commission Decision 1999/509/EC of 14 October 1998 concerning aid granted by Spain to companies in the Magefesa group and their successors in so far as it requires the Kingdom of Spain to obtain repayment of the interest accrued after the declaration of insolvency on aid illegally received by Indosa and Cunosa before that declaration; that it should dismiss the remainder of the action and that it should require the applicant to pay two thirds of the Commission's costs in addition to its own.
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