92/321/EEC: Commission Decision of 25 March 1992 concerning aid awarded by Spain to Intelhorce SA (ex Industrias Textiles de Guadalhorce, SA), now called GTE General Textil España, SA, a State-owned producer of cotton textiles (Only the Spanish text is authentic)
Data as of 2026-07-04 · Compiled from an official source version. Later amendments or repeals may not be reflected; the official text prevails. · Read the official text ↗
The aid to Intelhorce in the form of capital contributions of Pta 7 820 million over the period 1986 to May 1989 was granted illegally, since it was granted by the Spanish Government in breach of the procedural rules established in Article 93 (3) of the EEC Treaty. Nevertheless, the said aid meets the conditions which must be fulfilled in order for the Article 92 (3) (c) exception to apply, for which reason it is compatible with the common market.
The State aid element of Pta 4 405 million contained in the capital contribution provided by Patrimonio del Estado to Intelhorce before its privatization in August 1989 is illegal, since it was awarded by the Spanish Government in violation of the provisions of Article 93 (3). Furthermore, the said aid element does not meet any of the conditions which must be fulfilled in order for one of the exceptions of Article 92 (2) and (3) to apply, for which reason it is incompatible with the common market.
The incompatible State aid element shall be withdrawn by way of recovery. Accordingly, Patrimonio del Estado shall recover Pta 4 405 million referred to in Article 2 from GTE General Textil España, SA (ex Intelhorce, SA). The aid element shall be recovered in accordance with the procedures and provisions of national law, in particular those relating to interest on arrears payable on State liabilities, with interest starting to run on the date on which the illegal aid was granted.
The Spanish Government shall inform the Commission within two months of the date of notification of this Decision of the measures taken to comply herewith.
The Decision is addressed to the Kingdom of Spain. Done at Brussels, 25 March 1992. For the Commission Leon BRITTAN Vice-President (1) OJ No C 320, 20. 12. 1990, p. 16. (2) OJ No C 273, 18. 10. 1991, p. 2. (3) [1984] ECR 3809. (4) [1986] ECR 2263. (5) [1986] ECR 2321. (6) [1980] ECR 2688. (7) [1973] ECR 611. (8) [1973] ECR 1471. (9) [1977] ECR 595. (10) [1990] ECR I-307. (11) OJ No C 31, 3. 2. 1979, p. 9. (12) [1973] ECR 813. (13) [1987] ECR 901. (14) [1990] ECR I-959.
(1) of the EEC Treaty provides that aid of the type described therein is in principle incompatible with the common market. The exceptions provided for in Article 92 (2) of the EEC Treaty are not applicable in this case because of the nature of the aid, not directed towards the attainment of such objectives.
(3) of the EEC 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 the 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 recipients towards patterns of behaviour that would serve one of the objectives of the said exceptions. Applying the exceptions to cases which do not contribute to such objectives or where the aid is not necessary for those purposes would amount to conferring advantages on the industries or firms of certain Member States, whose financial position would be artificially strengthened, thereby affecting trade between Member States and distorting competition without any justification based on the common interest, as referred to in Article 92 (3) of the EEC Treaty. The aid to Intelhorce in the form of capital contributions of Pta 7 820 million over the period 1986 to May 1989 represented a big effort to create the basis for a definitive viable restructuring of the company. This is proved by the fact that it was mainly used in practice during that period for investments in rationalization of some Pta 5 000 million, as well as for a cut of 212 in workforce costing over Pta 1 100 million. It should also be noted that the actual production levels of Intelhorce remained for the period in question well below the capacity ceilings previous to the rationalization; this fact confirms that this aid was not used to relaunch artificially the activities of the company, which would have produced an unacceptable negative externality for the sector. On the other hand, the Commission can also share the Spanish authorities' view that the capital contributions in 1986 and 1987 were in response to circumstances which developed prior to Spain's accession to the Communities. The Commission considers that this judgment can also be extended to those contributions that took place in 1989 without a direct link to the arrangements for the sale of the company. Preaccession industrial policy in Spain in respect of public companies was sometimes based on principles radically different from those inspiring the competition policy under the EEC Treaty. At that time, certain loss-making public companies were run according to decisions opposed to sound managerial principles and were kept artificially in business thanks to the financial assistance of the State. After the accession of Spain to the Communities, these companies have been forced to adapt themselves to an environment of fair competition. The aid to Intelhorce here in question was mainly aiming at facilitating that adaptation. In the light of the foregoing considerations, the Commission has arrived at the conclusion that the capital contributions of Pta 7 820 million in the period 1986 to May 1989 can be considered as compatible with the common market pursuant to the exception provided for in Article 92 (3) (c) of the EEC Treaty, for they contributed to implement a genuine restructuring for the activities of Intelhorce without having unacceptable effects contrary to the common interest. In respect of the State aid element to Intelhorce of Pta 4 405 million contained in the capital contribution made just before the company's sale, Article 92 (3) (a) lays down an execution for aid that promotes the development of areas where the standard of living is abnormally low or where there is serious underemployment. In this respect, although Intelhorce is situated in Malaga, which is an assisted area pursuant to Article 92 (3) (a) qualifying for regional aid, the aid measure to Intelhorce in question was not granted under the corresponding regional aid schemes but on the bais of ad hoc decisions of the Spanish Government, taking the form of discretionary capital contributions. Even if the aid in question here were to be considered as regional, it would not however be eligible for compatibility under Article 92 (3) (a), because aid granted pursuant to the provisions of that Article must contribute to the long-term development of the region - this notably means in this case that the aid must at least serve for restoring the company's viability, objective not attained for Intelhorce in the light of the information submitted so far to the Commission (this aspect is discussed further below) - without having unacceptable negative effects on competition conditions within the Community. On the other hand, even though the Pta 4 405 million aid element was explicity granted by the State on the condition that at least Pta 3 200 million (80 % of the last three sections of the capital contributions - see Part IV above) be used by Intelhorce in investments - a requisite feature for aid to facilitate the development of certain economic areas as established in the 1979 Commission communication (11), on the principles of coordination of regional aid systems - this aid to Intelhorce cannot be considered automatically as compatible since, in view that its grant was made outside the scope of aid regimes approved by the Commission, the Commission must assess its compatibility on its own merits verifying, amongst other aspects, both that the aided investment projects are in line with the interest of the Community for the sector concerned and that they contribute to a sound restructuring of the company (both aspects are also discussed further below). In any case, the aid of Pta 4 405 million largely surpasses the level of investments of Pta 3 200 million committed by the company, situation which is in any case unacceptable for investment aid. As regards the exceptions provided for in Article 92 (3) (b) the aid measures in question were not intended to nor have the features 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 exception in their observations to the Commission. As regards the exception provided for in Article 92 (3) (c) of the EEC Treaty, for aid to facilitate the development of certain economic activities, where such aid does not adversely affect trading conditions to an extent contrary to the common interest, it should firstly be noted that the aid to Intelhorce falls under the category of aid to companies in difficulties, as both the company's financial position and financial record have ever been precarious. 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. For this reason the Commission takes a strict approach in assessing the compatibility of aid for restructuring firms in difficulty. In particular, the Commission requires that such public intervention be strictly conditional on the implementation of a sound restructuring or conversion programme capable of restoring the long-term viability of the beneficiary, that must also contain a compensatory justification for the aid 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 EEC Treaty. In this respect, as regards aid in the textile sector, the Commission worked out with the help of national experts a number of criteria to guide the Governments of the Member States on the interventions they might possibly wish to make therein. These criteria were defined in the Community guidelines of 1971 and 1977 on aid to the textile and clothing sectors which are still in force. The major principles set out therein are that aid should be such as to assist the adaptation of the industry by eliminating excess capacity, by facilitating joint R& D activities and by assisting structural changes. Genuine restructuring and adaptation is a prerequisite under the guidelines for the granting of any specific funds for investment purposes. In any case, aid should not simply seek to maintain uncompetitive position. In the light of the foregoing considerations, it should be noted that the State aid element to Intelhorce of Pta 4 405 million will produce its effect on competition mainly in future, as the disposal of at least Pta 3 200 million is linked to the realization by the company of future investments within the framework of the restructuring plan presented by the buyers. In these circumstances the Commission must verify carefully the characteristics of the planned restructuring programme. In connection with this, it should be remarked that the Commission is suitably placed not only to anticipate and adjust the potential negative effects that this aid element could have on competition, but also to correct the negative effects that the increase in capacity caused by the aid in the period 1986 to May 1989 could have in future if Intelhorce relaunches artificially its activities. In this respect, after detailed examination of the initial restructuring programme for Intelhorce and of its revised version, the Commission noted that none of them envisaged a commitment for reducing production capacities that could be considered as a compensatory justification for the aid. On the contrary, the initial programme even foresaw a relaunching of the company's activities by a substantial increase in its global sales, both in traditional products and in the shops network, by 91 %, from Pta 7 754 million in 1990 to Pta 14 787 million in 1994. This relaunching was abandoned as hypothesis in the revised programme, which, in a more realistic estimate, foresaw a slight sales reduction by 6,5 % from Pta 7 200 million in 1990 to Pta 6 732 million in 1992. Nevertheless, even in this case, nothing prevented Intelhorce from expanding its activities after 1992 to take advantage of the idle capacity it still owns, with the corresponding highly distorting effects this strategy could cause on competition. In this respect, it should be noted that in 1988 and 1989 the idle capacity rates of Intelhorce in spun, woven and finished products were, respectively: 21, 25 and 35 %; and 18, 25 and 31 %. Taking this into consideration, in the course of a meeting held on 18 March 1991, the Commission officially requested the Spanish authorities to present, by 10 May 1991, a newly-revised restructuring plan for Intelhorce involving reductions in both production capacity and market share, whilst also ensuring the company's viability. Concerning the last requirement, it should be remarked that the Commission had also serious doubts as to the possibilities of the restructuring programme presented to secure Intelhorce's viability, as in both its initial and revised versions, the company recorded persistent negative financial results. Having received no reply, by letter of 27 May 1991, the Commission reminded the Spanish authorities of its request, warning them that in the absence of an alternative restructuring plan by 31 May 1991, the Commission would be obliged to take a final position on the basis of the information available to that date. By letter of 27 May 1991, the Spanish authorities submitted further financial data on the past industrial activities of Intelhorce. By letters dated 12 June and 18 July 1991, the Spanish authorities requested the Commission to postpone any decision on the case until they could submit an alternative restructuring plan that was currently being negotiated with the new owners. By letter dated 6 August 1991, the Commission informed the Spanish authorities that, in view that even two additional months had already elapsed since the expiration on 31 May 1991 of the last deadline for the submission of an alternative restructuring plan, it could not delay further its taking a final decision. The Spanish authorities not having submitted to date a revised restructuring plan, the Commission is obliged to conclude that the State aid element to Intelhorce of Pta 4 405 million involved in the capital contribution before the company's sale has to be considered as incompatible with the common market, as it affects trading conditions within the Community to an extent contrary to the common interest, for it does not contribute to a genuine restructuring fully ensuring the viability of the company. VIII In case of aid which is incompatible with the common market, the Commission, making use of a possibility given to it by the Court of Justice in its judgment in Case 70/72 (Kohlegesetz) (12), confirmed in Case 310/85 (Deufil) (13), can require Member States to recover from recipients aid granted illegally. Consequently, Intelhorce must repay the Pta 4 405 million illegally received. Repayment must be made in accordance with the procedures and provisions of Spanish law, in particular those relating to interest on arrears on State liabilities, with interest starting to run on the date on which the illegal aid was granted. This measure is necessary in order to restore the status quo by removing all the financial benefit which the firm receiving the unlawful aid has improperly enjoyed since the date on which the aid was paid (see judgment in Case 142/87 (Tubemeuse (14)), HAS ADOPTED THIS DECISION:
Source: EUR-Lex (Publications Office of the EU), © European Union, reuse permitted under Commission Decision 2011/833/EU.