91/1/EEC: Commission Decision 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 electric appliances (Only the Spanish text is authentic)
Data as of 2026-07-04 Β· Compiled from an official source version. Later amendments or repeals may not be reflected; the official text prevails. Β· Read the official text β
(1) of the Treaty provides that aid meeting the criteria laid down therein is in principle incompatible with the common market. The exceptions provided for in Article 92 (2) are not applicable in this case because of the nature of the aid, not directed towards the attainment of such objectives.
(3) of the Treaty lists aid which may be compatible with the common market. Compatibility with the Treaty must be determined in the context of the Community as a whole and not in that of a single Member State. In order to ensure the proper functioning of the common market, and having regard to the principle embodied in Article 3 (f), the exceptions provided for in Article 92 (3) must be construed narrowly when any aid scheme or individual aid award is scrutinized. In particular, they may be invoked only when the Commission is satisfied that, without the aid, market forces alone would be insufficient to guide the recipients towards patterns of behaviour that would serve one of the objectives of the said exceptions. With regards to the exceptions provided for in Article 92 (3) (a) and (c) for aid that promoted or facilitates the development of certain areas, save San Roque (CΓ‘diz), none of the areas where the plants of Magefesa are located - Derio (Vizcaya), Guriezo and Limpias (Cantabria) - presents a standard of living abnormally low, or serious underemployment, within the meaning of Article 92 (3) (a). For its part, even though these latter locations are situated in assisted areas pursuant to Article 92 (3) (c), the assistance to Magefesa does not have the requisite features of aid to facilitate the development of certain economic areas within the meaning of this Article, inasmuch as it was granted in the form of operating aid, that is to say, not conditional on investment or job creation as explained in the 1979 Commission communication on the principles of coordination of regional aid systems (1). As regards the aid in San Roque (CΓ‘diz), the assistance was not granted under the corresponding regional aid scheme but on the basis of an ad hoc decision of the autonomous government. Moreover, operating aid in Article 92 (3) (a) areas can only be covered by this exception when granted under restricted and controlled conditions; in particular, when related to companies in difficulties, the assistance, among other requirements, must be strictly conditional on the implementation by the beneficiaries of restructuring measures which lead to their being truly viable. This requirement is not fulfilled by the aid in question as explained below. As regards the exemptions provided for in Article 92 (3) (b), the aid measures in question were not intended to nor have the featues of 'a project of common interest' or of a project likely to 'remedy a serious disturbance' in the Spanish economy. Moreover, the Spanish authorities have not invoked this.
(3) (c) also lays down an exemption for 'aid to facilitate the development of certain activities'. The aid to Magefesa falls under aid to companies in difficulties, as the group's financial situation was on the verge of bankruptcy at the moment the aid was awarded. Aid to firms in difficulties carries the greatest risk of transferring unemployment and industrial problems from one Member State to another; it acts as a means of preserving the status quo by preventing forces at work in the market economy from their normal consequences in terms of disappearance of uncompetitive firms in their process of adaptation to changing conditions in competition; at the same time, such aid may bring about disruptive effects on competition and trade by its induced influence upon the pricing policies of beneficiaries opting for undercutting strategies to stay on the market. For this reason, the Commission has developed a special approach for the assessment of aid to firms in difficulty. Although the Commission has expressed its reservation in principle as to the compatibility of operating aid with the common market, it however does not condemn all assistance to troubled companies. On numerous occasions the Commission has stated its views on such measures, formulating the basic conditions to be observed. In general, such interventions must be restricted to the aid needed to keep the company in business till the necessary measures to restore viability are put into effect; on the other hand, they must be strictly conditional on the implementation of a sound restructuring or conversion programme capable of restoring the long-term viability of the beneficiary. On its assessment about the compatibility of such aid proposals, the Commission takes into account the conditions giving rise to the State interventions, and judges whether, in return for the aid, the proposals contain a compensatory justification in the form of a contribution by the beneficiary, over and above the normal play of market forces altered by the aid, to the achievement of Community objectives as established in Article 92 (3) of the Treaty. In the case at issue, the Spanish authorities have even failed to provide the Commission with the evidence that the aid granted to the companies of Magefesa is linked to a restructuring programme aimed to restore their long-term viability. By its letter communicating the initiation of the Article 93 (2) procedure, the Commission informed the Spanish Government that the strategy transmitted by Magefesa without official endorsement did not fulfil the necessary requirements to consider it a sound restructuring plan. This strategy, informally transmitted, outlined the measures undertaken to that date to rescue the companies of Magefesa. In particular, it set out the nature and application of the State aid received, as well as the degree of completion in the labour force reduction, where 1 780 out of the 2 027 jobs initially proposed had already been cut back. As regards future actions, on the marketing side the strategy described certain measures to boost the global sales in order to restore them to satisfactory levels; on the industrial side, it only proposed certain investments, improvements in production and exchanges of equipment between factories, whose costs were not even quantified except for the investments estimated at Pta 439 million that could be financed by selling idle properties. The strategy submitted did not contain definite commitments regarding the necessary measures to undertake to scale down the companies' activities in accordance with the new situation after the slump in sales. No undertakings were made as regards definite reductions in production capacity and eventual close-downs of industrial facilities. Furthermore, in the light of the information submitted to the Commission the financial viability and self-sufficiency of the group was in any case seriously endangered because apparently the future draft budget presented had not taken into consideration the reimbursement of a significant part of the liabilities postponed during the rescue phase. According to the explanations to the strategy, Magefesa could only meet these expenses with capital contributions or further postponements that could only be possible in case of State guarantee. In consequence, the Commission concluded that the strategy submitted by Magefesa was not capable of being well and truly viable in the long term. It should also be noted that the Spanish authorities refused to endorse the abovementioned strategy, for which reason they were not even bound as regards the implementation of the actions proposed. These reservations were transmitted to the Spanish authorities by the abovementioned letter of 28 November 1988. In its telex dated 15 February 1989 submitting comments under the procedure, the Spanish Government did not make any reference to the abovementioned reservations concerning the viability of Magefesa, but only focussed its attention on formal aspects of the aid granting. For that reason, by letter of 27 February 1989 the Commission once again reminded the Spanish authorities of its reservations and warned them that the eventual compatibility of the aid to Magefesa could only be inferred if such aid formed part of a sound restructuring plan that, duly endorsed by the public authorities concerned, were communicated to the Commission. The Spanish authorities answered by telex dated 31 March 1989, where they stated that to that date the authorities concerned had not approved any restructuring programme for Magefesa. This statement proves that the aid to Magefesa was granted regardless of any consideration about the group's future viability and restructuring with the apparent purpose of keeping its companies artificially in operation. Under the current principles of the Community State aid policy, this fact absolutely disqualifies the aid for the application of the Article 2 (3) (c) exemption. VIII Accordingly, in conclusion, the aid in question is illegal because the Spanish Government did not fulfil its obligations under Article 93 (3). Moreover, it does not meet the conditions which must be fulfilled in order for one of the exceptions of Article 92 (2) and (3) to apply. For these reasons the aid to Magefesa at issue is incompatible with the EEC Treaty. In consequence, the aid elements therein involved must be withdrawn, HAS ADOPTED THIS DECISION: Article 1 The public assistance to the companies of Magefesa consisting of: (i) loan guarantees amounting to Pta 1 580 million; (ii) a loan of Pta 2 085 million at other than market conditions; (iii) non-repayable subsidies amounting to Pta 1 095 million; (iv) an interest subsidy estimated at Pta 9 million; were granted illegally, and moreover are incompatible with the common market within the meaning of Article 92 of the EEC Treaty. Article 2 Accordingly, the aid elements therein involved have to be withdrawn. Therefore, the Spanish Government is hereby requested to get the following stipulations complied with: (a) the withdrawal of the State loan guarantees given amounting to Pta 1 580 million; (b) either the conversion of the soft-loan into a normal credit at both interest and repayment market conditions, or its withdrawal, or any other appropriate measure to ensure that the aid elements are wholly abolished. Whatever measure is adopted, it must take effect from the time the loan was initially granted; (c) in case of conversion, the assurance that the instalments related to the abovementioned loan will be recovered in accordance to the schedule fixed; (d) the recovery of Pta 1 104 million corresponding to the non-repayable subsidies granted. Article 3 The Spanish authorities will inform the Commission, within two months of the notification of this Decision, of the measures they have taken to comply therewith. Should the Decision's execution take place later than the said period, the national provisions regarding interest on arrears payable to the State will be applicable. Article 4 The Decision is addressed to the Kingdom of Spain. Done at Brussels, 20 December 1989. For the Commission Leon BRITTAN Vice-President (1) [1987] ECR, p. 901. (2) [1973] ECR, p. 611. (3) OJ No C 31, 3. 2. 1979, p. 9.
Source: EUR-Lex (Publications Office of the EU), Β© European Union, reuse permitted under Commission Decision 2011/833/EU.