C-499/99

— MIGS A ceased trading in 1993 and 1 — Original language: French. 2 —OJ 1991 L 5, p. 18. was declared insolvent on 27 May 3 — OJ 1999 L 198, p. 15. 1999 at the request of its employees.

I - 6034

COMMISSION v SPAIN

— GURSA has been inactive since 1994 5. Ficodesa was declared insolvent on but has not been declared insolvent. 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.

4. With a view to allocating the aid at issue, a number of management companies were set up in the autonomous regions con- cerned: Fiducias de la Cocina y Derivados The 1989 Decision SA ('Ficodesa') in the Basque Country, Gestión de Magefesa en Cantabria SA ('Gemacasa') in Cantabria, and Manufac- turas Damma SA ('Damma') in Andalusia. The role played by these companies is 6. The operative part of the 1989 Decision described as follows in the 1989 Decision: 4 reads as follows:

'Article 1 '... These [companies] had two main objec- tives: 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] The public assistance to the companies of Gestiber's directives; on the other, to Magefesa consisting of: ensure the operation of Magefesa's com- panies, 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 (i) loan guarantees amounting to ESP individual companies; at the same time 1 580 thousand million; they administer the funds, raw materials and semi-finished goods needed by the companies whom they provide in propor- tion to work progress or justified expenses.'

Article 2

Accordingly, the aid elements therein involved have to be withdrawn. Therefore, Article 3 the Spanish Government is hereby requested to get the following stipulations complied with:

The Spanish authorities will inform the Commission, within two months of the notification of this Decision, of the meas- ures they have taken to comply therewith. Should the Decision's execution take place (a) the withdrawal of the State loan guar- later than the said period, the national antees given amounting to ESP 1 580 provisions regarding interest on arrears thousand million; payable to the State will be applicable.

I - 6036

COMMISSION v SPAIN

Article 4 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 The Decision is addressed to the Kingdom Country. of Spain.'

OPINION OF MR MISCHO — CASE C-499/99

— a non-refundable grant of ESP 29 The 1998 Decision million 5 in favour of the same parties.

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

— 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. 'Article 1

The aid in the form of the persistent 8. To comply with the 1989 Decision, the non-payment of taxes and social security companies forming part of the Magefesa contributions: 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. — by Indosa and Cunosa until they were declared bankrupt,

9. Concerning the other aid, the Kingdom of Spain informed the Commission, by — by MIGSA and GURSA until their letters of 23 October 1991, 8 April 1994 activities were interrupted, and and 23 April 1997, of the measures taken by the Spanish authorities.

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 13. The Spanish Government informed the has accrued between the granting of the aid Commission, by letters of 21 January and the date on which it is actually repaid. 1998, in the framework of the adversarial The interest shall be calculated on the basis proceedings, and of 21 January 1999 and of the reference rate used to calculate the 22 July 1999, in response to the 1998 net grant equivalent of regional aid in Decision, of the measures taken to recover Spain. the aid granted.

Article 3 14. The Commission disputes the effective- ness of these measures. Spain shall inform the Commission within a period of two months from the date of 6 — Case C-480/98 [1998] ECR I-8717.

I - 6039

OPINION OF MR MISCHO — CASE C-499/99

I I — The action judgment having already been delivered, the Kingdom of Spain's application for a stay has been rendered redundant.

15. The Commission claims that the Court should:

I - 6040

COMMISSION v SPAIN

As at 30 December 1993, the amount The complaint concerning the Basque Gov- recovered pursuant to enforcement pro- ernment's failure to withdraw loan guar- cedures totalled ESP 1 638 315 148...' antees

19. As regards the non-refundable grant and the interest subsidy, the Commission 22. The Commission contends that 'by indicates that 'the Basque Government sent taking over the guaranteed loan and by a letter of formal notice, on 25 January subsequently applying to Ficodesa to reim- 1995, to "the legal representatives of the burse the amounts lent in this way as the company Ficodesa, a member of the due dates specified in the loan schedule Magefesa group...". At that point in time, were reached', 'the Basque Government... Ficodesa, which had applied for suspension simply converted a loan it had itself guar- of payments on 4 May 1994, had been anteed into a loan granted directly by it on legally insolvent for a week (since the same terms, that is to say, at other than 19 January 1995)...'. market conditions, a loan which thus con- stituted aid. Hence, even supposing that Ficodesa had been punctilious about reim- bursing the amounts claimed, the Basque Government would still not have complied with the 1989 Decision. To have done so, the Basque Government would have had to 20. Again according to the Commis- reimburse the loan in full, without waiting sion, 'Ficodesa having been declared in- for payment to fall due, and proceed forth- solvent, the payments made under the with to seek reimbursement from the guarantees and as non-refundable aid were beneficiary'. recognised, by the meeting of that com- pany's creditors, as debts in the total amount of ESP 2 168 717 623'.

25. There can be no doubt that the King- dom of Spain is required under Article 2 of the 1989 Decision to proceed to 'the with- drawal of the State loan guarantees given 28. Acting in this way would indeed have amounting to ESP 1 580 thousand million'. been the only means of putting an end to the effects of the guarantee. Simply with- drawing the guarantee was no longer an option since the guarantee had already been converted into a loan in 1988, that is to say prior to the 1989 Decision. On the other hand, in making payments to the creditor 26. That being so and given the Court's lending institutions between 1988 and consistently held view 8that the obligation 1993, that is as payment fell due, and in on a Member State to withdraw a subsidy then seeking reimbursement from Ficodesa regarded by the Commission as incom- of the amounts paid in this way, the Basque patible with the common market is con- Government did not withdraw the guaran- cerned with re-establishing the previously tee but simply continued to execute it. existing situation, the Basque Government was under an obligation to put an end to any effects arising out of the loan guaran- tees granted by it and declared incom- patible with the common market.

The complaint concerning the Basque Gov- 33. Concerning the aid granted to ernment's failure to take action against Indosa Ficodesa, the Spanish Government replies that that the necessary steps had in fact been taken, the Basque Government having first taken steps to enforce repayment by Ficodesa of the amounts in question and having subsequently, in the course of the 31. Another complaint levelled by the receivership procedure, secured the inclu- Commission at the Kingdom of Spain is sion of those amounts among the debts that the Basque Government could not be recognised by the meeting of Ficodesa's considered to have taken the necessary creditors on its insolvency. steps to secure reimbursement of the amounts paid or to recover the non-repay- able grant and interest subsidy when 'all the measures instituted by it were directed against Ficodesa. And yet Ficodesa was only an intermediary company with no 34. The Spanish Government asserts productive capacity or assets of its own, set further that the Basque Government could up for the sole purpose of channelling not seek recovery of that aid directly from public aid to Indosa'. According to the Indosa since, in its view, 'the aid granted by Commission, 'there can be no doubt that the Basque Government in the form of the true beneficiaries of the aid were the guarantees and non-refundable aid was so companies in the Magefesa group, and in granted in favour of Ficodesa; it followed particular Indosa, rather than Ficodesa'. that reimbursement of that aid could be sought from that company alone, as it alone was the Basque Government's deb- tor'.

42. Further, as the Commission also 37. The Commission's second complaint observes, to decide otherwise would be to gives rise to the following remarks. allow Member States to circumvent the requirements of the Treaty concerning State aid by arranging for such aid to be granted via intermediary companies that are not the real beneficiaries of the aid. For Article 2 of the 1989 Decision, which orders recovery 38. First, concerning the aid granted to of the aid, to be effective, the competent Ficodesa, the Spanish Government does not authorities must therefore take steps to deny that it was granted for use by Indosa recover the aid not only from any manage- and that Indosa was in reality the prime ment company that may have been its beneficiary thereof. initial recipient but also, should it prove necessary in order to abolish the aid entirely, from the company that is the real beneficiary.

39. Nor does the Spanish Government deny that Ficodesa was only an intermedi- ary company with no productive capacity or assets of its own, set up for the sole purpose of channelling public aid to 43. The Spanish Government maintains, Indosa. however, that the Basque Government

I - 6044

COMMISSION v SPAIN

was unable to seek recovery of the aid from and can therefore have no effect on the Indosa, Ficodesa alone being the Basque obligation to recover the aid in question'. 14 Government's debtor. In essence therefore, it pleads that it would be 'absolutely impossible' for it to recover the aid from Indosa as it has no right to recover the aid from that company.

45. More particularly, in Italy v Commis- sion, 11 the Court, responding to the Italian Government's contention that 'under Ita- lian law [the Italian Republic] has no right to recover 12 from the purchasers of the four subsidiaries sums which were not 47. The Spanish Government maintains taken into consideration in the conditions further that the Spanish authorities are of sale of the undertakings in question', 13 required, in taking measures to recover aid, held that 'even if in Italian law ENI cannot to act in accordance with receivership recover sums which were not taken into procedures and hence to comply with the account in the conditions of sale of the four rules governing those procedures. If, in subsidiaries, that cannot stand in the way keeping with the national rules in force, the of the full application of Community law meeting of creditors does not accept a claim, as happened in the case of Magefesa, the creditor can thus make no call on the 10 — See in particular Case C-5/89 Germany v Commission debtor's assets to recover its debt. [19901 ECR I-3437, paragraph 18, and Case C-390/98 Banks [2001] LCR I-6117, paragraph 122. 11 — Case C-303/88 [1991] ECR I-1433. 12 — Emphasis added by author. 14 — Case C-303/88, paragraph 60. 13 — Case C-303/88, paragraph 56. 15 — See section I of the preamble, last paragraph.

I - 6045

OPINION OF MR MISCHO — CASE C-499/99

48. In that connection, the Spanish Gov- the Commission with a view to overcoming ernment merely refers to the Magefesa case, the difficulties whilst fully observing the from which it infers that, in the case of Treaty provisions. There is, however, no Indosa, the Basque Government's claim evidence of the Spanish Government, to would not have been accepted by the which it fell to take the initiative, 17 having meeting of creditors. However, no specific taken any steps whatsoever to submit the steps were taken by the Basque Govern- problem to the Commission. As is apparent ment to have its claim accepted by the from the documents before the Court, it meeting of Indosa's creditors. confined itself to pleading the absence of any right to recover from Indosa on the part of the Basque Government.

50. Moreover, even if the absence of a right to recover or a (hypothetical) refusal to 52. It need only be observed on this point recognise the Basque Government as a that, if the obligation to recover aid is to creditor in the Indosa insolvency proceed- have any meaning at all, difficulties of an ings could be considered as an unforeseen accounting nature concerning the precise and unforeseeable difficulty for the Basque identification of the beneficiary of aid Government, which in itself strikes me as cannot be regarded as rendering recovery highly debateable, the Spanish Government of the aid in question 'absolutely imposs- would still, according to settled case-law, 16 ible'. have been obliged to submit the problem to the Commission for consideration and, in accordance with the principle underlying Article 10 EC in particular, which imposes a duty of genuine cooperation on the Member States and the Community insti- 53.1 therefore take the view that in apply- tutions, work together in good faith with ing for the recovery of the aid only to Ficodesa, which was simply the manage- 16 — See in particular Case C-261/99 Commission v France [2001] ECR I-2537, paragraph 24, and Case C-378/98 Commission v Belgium [2001] ECR I-5107, paragraph 31. 17 — See Case C-378/98, paragraph 50.

I - 6046

COMMISSION v SPAIN

ment company through which the aid was 57. I take the view therefore that the channelled, rather than to Indosa, the real Commission's second complaint is also and main beneficiary of the aid, the Basque well founded. Government failed to do what was necess- ary in order to implement the 1989 Decision properly.

I - 6047

OPINION OF MR MISCHO — CASE C-499/99

casa because these companies were no 63. The Spanish Government observes longer trading and had no assets that would further that, in any event, Cunosa and allow the outstanding debts to be enforced. MIGSA (as also GURSA) have ceased trading or have already been wound up. It follows, according to the Spanish Govern- ment, that 'if the purpose of the obligation to reimburse aid is to re-establish the previously existing situation and thereby ensure that the beneficiary of such aid does not enjoy a competitive advantage over its competitors, then demanding reimburse- 61. The Commission rightly considers that ment does not contribute to achieving the the 1989 Decision was not properly imple- intended result'. mented in respect of the aid granted by the Cantabrian Government. As the Court has consistently held, the condition that it is absolutely impossible to implement a Com- mission decision properly 'is not satisfied where the defendant government merely informs the Commission of the legal and 64. That argument cannot be accepted. practical difficulties involved in implement- ing the decision, without taking any step whatsoever to recover the aid from the undertakings in question, and without proposing to the Commission any alter- native arrangements for implementing the 65. It fails, first of all, to take account of decision which would have enabled the the Court's consistently held view that 'the alleged difficulties to be overcome'. 18 only 19 defence available to a Member State in opposing an application by the Com- mission under Article 93(2) of the Treaty for a declaration that it has failed to fulfil its Treaty obligations is to plead that it was absolutely impossible for it to implement the decision properly'. 20

ditional on an assessment of a company's C — Aid granted by the Andalusian Gov- competitive situation at the time of imple- ernment mentation of a decision ordering that aid be recovered. Such a condition, besides having no legislative basis, would render wholly nugatory a decision which is based pre- cisely on an analysis of the competitive 69. On the question of the loan guarantee, impact of the aid granted. In practice, the Commission submits — and this is not therefore, the effect of the condition would disputed by the Spanish Government — be for the decision to be subject to review that on 6 November 1990 the Instituto de whenever it came to implementing it. Fomento Andaluz ('IFA') paid the guaran- teed sum to the lending institution con- cerned. On 20 November 1990 the IFA sent a letter to Damma seeking prompt reimbursement of the amount concerned. According to the Commission, no other 67. Finally, the Commission quite rightly action was taken, apart from the IFA's points out that 'as long as the undertakings application in June 1992 for this debt to be concerned have not been wound up, there registered as a liability in the Damma will still be a possibility of their starting insolvency proceedings. trading again'. The Commission empha- sises that this is more than just a theoretical possibility, being, in its view, borne out by 'the fact that the companies Idisur SAL, Loe SAL and Vitrinor SAL, set up by the employees of MIGSA, Cunosa and GURSA 70. On the question of the non-refundable respectively, operate in part using those grant, the Commission submits — and this firms' assets, a state of affairs which is not disputed by the Spanish Govern- prompted the Ministry of Finance to initi- ment — that on 21 November 1990 the ate an inquiry into whether one set of firms Andalusian Government instituted, of its had succeeded the other'. own motion, a review procedure with a view to cancelling the grant. It sub- sequently decided not to carry that pro- cedure through on the ground that, as Damma had no assets that could be attached, the procedure might not meet 68. This information is not disputed by the with success. Spanish Government. It merely stated, at the time of its rejoinder, that Cunosa had been wound up. It does not however supply any information about the company's liquidation that would bear out the con- clusion that this had already occurred 71. Specifically, the Commission complains before the present action was commenced that the 1989 Decision was not properly and hence that the argument put forward implemented, the Andalusian Government by the Commission, based as it is on having failed to take any steps in respect of cessation of trading, no longer applies to MIGSA, the real beneficiary of the aid, Cunosa. with a view to recovery thereof.

74. Quite apart from the fact that the present case is concerned not with the validity of the 1998 Decision but with its 77. The Commission acknowledges that on implementation, it should be noted that the 28 December 1998 the SST applied to the Court, in its judgment in Case C-480/98, court dealing with the Indosa insolvency upheld that decision on the essential points, for a winding-up order against Indosa or revising only the basis for calculating the the conclusion of an agreement with its

I - 6050

COMMISSION v SPAIN

79. In foregoing the right to a hearing, the 83. In this instance, there is nothing to Commission has chosen not to state its suggest that the SST could have done more, views on this latest information, provided in order to recover the aid, than apply for in the Spanish Government's rejoinder. I Indosa to be wound up. The SST having take this to mean that the Commission does made such an application, it is my view that not dispute that information. the necessary steps were taken to recover the aid granted Indosa and referred to in the 1998 Decision. The action for failure to fulfil obligations is not therefore, in my view, founded in respect of implementation of Article 2 of the 1998 Decision. 80. It can be concluded from the foregoing that, in the wake of the 1998 Decision, the competent Spanish authorities took practi- 21 — Case 52/84 |1986| ECR 89, paragraph 14. cal measures to have Indosa wound up. 22 — Emphasis added by author.

I - 6051

OPINION OF MR MISCHO — CASE C-499/99

B — Aid granted to Cunosa 90. Similarly, as regards the liabilities towards the national treasury, the Spanish Government fails to explain how the meas- 87. The Commission points out that ure adopted on 23 June 1999 — in any Cunosa was declared insolvent in April case well past the time-limit set in Article 3 of the 1998 Decision — by the National Recovery Office, that of notifying Indus- 23 — See Case C-480/98 Commission v Spain, paragraph 9. trias Domésticas Inoxidables del Sur SAL of

I - 6052

COMMISSION v SPAIN

the hearing and sending it a copy of the sole assets of a company that had ceased documents concerned, there being reason trading in 1994 and had been without to believe the firm was a successor to assets since then. Concerning the liabilities Cunosa in the exercise of its activities, towards the national treasury, the Spanish contributed in any meaningful way to Government simply states that the National recovery of the aid declared incompatible Recovery Office adopted, on 23 June 1999, with the common market. a similar measure to the one it had adopted in the case of Cunosa.

91. I am of the view therefore that the Commission is right in considering the Spanish authorities to have taken no steps to recover the aid granted to Cunosa and 94. The Commission is right in finding that declared incompatible with the common these measures do not suffice to implement market by the 1998 Decision. the 1998 Decision properly.

C — Aid granted to GURSA 95. Where a company does not have the assets that would be required to reimburse aid declared incompatible with the com- mon market, and the Spanish Government does not dispute that this is the case in the 92. The Commission contends that GUR- present instance, abolishing the aid can SA's public creditors made no application only be done by winding the company up, for the firm to be declared insolvent, as the Court held in Case 52/84 Commis- arguing that 'such proceedings were sion v Belgium. In such a situation this is unlikely to meet with success'. the only means available of fully abolishing the aid in question.

97. The Spanish Government argues 100. On the question of the liabilities further that total liquidation of an insolvent towards the social security, the Spanish company's assets and payment of its credi- Government replies that the hostile attitude tors must be carried out in accordance with of the company's workforce and the heavy national regulations concerning insolvency. charges on its assets undermined efforts to It points out in this connection that public achieve a sale. It maintains, however, that creditors cannot, if they have not obtained the SST intends to seize the company's only the required majority, have the company existing asset, which is moreover virtually wound up against the will of the other worthless. The Spanish Government adds creditors. that, by virtue of a decision taken by the SST on 20 January 2000, responsibility for MIGSA's liabilities towards Indosa has been transferred to an administrator brought in to look after MIGSA's affairs. As regards the liabilities towards the 98. In the present instance, however, the national treasury; the Spanish Government non-fulfilment of obligations resides not in reports the same measure as that adopted in a failure on the part of the competent the cases of Cunosa and GURSA. Spanish authorities to have the company wound up against the will of the other creditors but rather in the fact that, unlike in the case of Indosa, they took no steps whatsoever to obtain the winding-up of GURSA. The Spanish Government's argu- ment does not therefore seem to me rel- evant for the purpose of rebutting the finding that the Kingdom of Spain did not properly implement the 1998 Decision as 101. These measures do not allow the aid regards the aid granted to GURSA. granted MIGSA to be recovered and indeed the Spanish Government does not dispute this. It follows, in my view, as the Com- mission also observes, that the competent Spanish authorities should have taken steps to have MIGSA wound up, this being the only means still available of abolishing the aid. D — Aid granted to MIGSA

— declare that, by failing to comply,

— as regards the aid granted by the Basque, Cantabrian and Andalusian Governments, with Articles 2 and 3 of the Commission Decision 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;

I - 6055

OPINION OF MR MISCHO — CASE C-499/99

— as regards the aid granted Cubertera del Norte SA, Manufacturas Gur SA and Manufacturas Inoxidables de Gibraltar SA, with Articles 2 and 3 of the Commission Decision 1999/509/EC of 14 October 1998 concerning aid granted by Spain to companies in the Magefesa group and their successors;

— as regards the aid granted to Investigación y Desarrollo Udala SA, with Article 3 of Decision 1999/509;