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IP/10/1214

Brussels, 30 September 2010

State aid: Commission refers Spain to Court for failure to respect Court ruling to recover illegal aid

The European Commission has decided to refer Spain to the Court of Justice for failure to implement a previous Court ruling, which confirmed a Commission decision finding that aid granted to the Magefesa group was illegal and had to be recovered. Although over eight years have elapsed since the 2002 Court judgement, Spain has yet to complete the recovery procedure as regards Magefesa's Indosa subsidiary and the latter's own subsidiary CMD. Given that this is a referral to Court for failure to respect a previous Court ruling, the Commission has decided to ask the Court to impose a daily penalty payment of €131.136 for each day after the second Court ruling until the infringement ends and a lump sum based on €14.343 per day elapsed since the 2002 Court judgement until the second Court ruling. These payments would act as an incentive to ensure that the illegal aid were recovered rapidly from Magefesa's subsidiaries.

The original Commission decision dates back to 1989 (see IP/89/976). The Commission had found that loan guarantees, loans at non-market conditions, non-refundable subsidies and interest subsidies granted to Migasa, Gursa, Cunosa and Indosa, all subsidiaries of Spanish household appliances group Magefesa, were in breach of EU state aid rules and required Spain to recover the illegal aid. The Court confirmed the Commission decision in 2002. The Commission considers that the aid has been recovered from three of the former subsidiaries of Magefesa group, but not from Indosa or Indosa's subsidiary CMD. The Commission last year started formal infringement proceedings for failure to respect the 2002 Court ruling by sending a letter of formal notice (see IP/09/1789).

With today's decision, the Commission is asking the Court to impose fines composed of a daily penalty payment of €131.136 from the date of the second Court ruling until compliance with the state aid decision, and a lump sum corresponding to € 14.343 per day from the date of the first Court ruling until the second Court ruling. This is in accordance with Article 260 of the Treaty on the Functioning of the EU.

The fines proposal takes into consideration the seriousness of the infringement, the very significant period which has already elapsed since the previous Court judgement and the situation of the Member State.

Background

Art 260 of the Treaty says that if a Member State fails to comply with a Court of Justice ruling confirming a violation of EU law, the Commission may refer the Member State concerned back to the Court and seek the imposition of daily penalties and/or a lump sum to bring the infringement to an end.

With regard to the recovery of illegal state aid, the Commission in 2007 adopted a Notice setting out best practices to ensure that state aid decisions are complied with more rapidly and in full (see IP/07/1609). For this, the beneficiaries of the aid and the amounts involved must be clearly identified. Member States must have in place rapid and effective recovery procedures, including in their national legal systems. The Notice recalls the principles applying in case of litigation before European and/or national courts and details the rules applying in the case of insolvent beneficiaries. It also recalls that a company may not receive any new aid until the illegal subsidies have repaid.

Recovery of illegal state aid has improved in recent years. In the last ten years the Commission declared roughly €12 billion worth of subsidies illegal, of which close to 90% have been successfully recovered by Member States to their budgets. In the case of companies that cease to exist (and not necessarily because of the aid being declared illegal), Member States are expected to make their best efforts to recover the aid, including by staking claims alongside other creditors.

More general information on infringements is available at:

http://ec.europa.eu/community_law/infringements/infringements_228_en.htm

For more information on EU infringement procedures, see MEMO/10/457.


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