Wednesday, July 12, 2000

EC to probe Spanish shipyard aid

The European Commission is launching a formal investigation into the acquisition by the Spanish state agency SEPI of two shipyards (Juliana and Cadiz) and the Manises diesel plant from its Astilleros Españoles SA subsidiary.

SEPI (Sociedad Estatal de Participaciones Industriales), paid Astilleros Españoles 10 billion pesetas (about $60 million) for the three units(.

The Commission has doubts whether the transaction can be regarded as a commercial transaction, particularly given that SEPI was already the ultimate shareholder of the acquired entities. In view of the financial difficulties of the yards, it is difficult to see how SEPI's behavior could be regarded as comparable to that of a private investor in similar circumstances.

The Commission therefore considers at this stage that the measure is a capital injection that constitutes state aids within the meaning of article 87.1 of the EC Treaty. On the basis of the information currently available, the measure does not appear to be compatible with Council Regulation 1540/98 on state aids to shipbuilding. It also appears to be in breach of the Commission's 1997 decision approving the last restructuring aid package for the Spanish yards. One of the key conditions attached to that aid was that the yards would not receive any further aid for restructuring, rescue, loss compensation or privatization. This was also underlined in article 5.1 of Council Regulation 1540/98 establishing new rules on state aids for shipbuilding with effect from 1 January 1999, which prohibits the yards concerned from benefiting from restructuring aids.

The Commission says SEPI is reportedly planning to privatize the two yards and the engine plant or merge them with its military shipyards at Bazan at a later stage. It would subsequently acquire some or all of the remaining publicly-owned merchant shipyards with the same end in mind.

Despite several requests from the Commission, the Spanish authorities have failed to supply any information about the transaction. The Commission has therefore decided to act on the basis of the information available.

At the same time as opening the investigation procedure, the Commission issued an injunction enjoining Spain to provide all relevant information within one month. The Commission has also reminded Spain of its obligation to notify it of any other measures--such as the reported possible merger with Bazan-- before they are put into effect.

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