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17.11.2012 Official
Journal
of
the
European
Union L
320/27
DECISIONS
COMMISSION DECISION
of 13 July 2011
on the State aid SA.28903 (C 12/10) (ex N 389/09) implemented by Bulgaria in favour of Ruse
Industry
(notified under document C(2011) 4903)
(Only the Bulgarian text is authentic)
(Text with EEA relevance)
(2012/706/EU)
THE EUROPEAN COMMISSION,
(4) The
Commission
decision
to
initiate
the
procedure
was
published in the Official Journal of the European Union ( 3 ).
Having regard to the Treaty on the Functioning of the European
Union, and in particular the first subparagraph of Article 108(2)
thereof,
(5) The
Commission
received
no
comments
from
interested
parties.
Having regard to the Agreement on the European Economic
Area, and in particular Article 62(1)(a) thereof,
(6) Bulgaria
submitted
comments
to
the
Commission’s
opening decision by letter dated 10 May 2010, sent to
Having called on interested parties to submit their comments
the Commission and registered by it on 17 June 2010.
pursuant to the provisions cited above ( 1 ),
On 7 June 2010 the Bulgarian authorities provided
further information.
Whereas:
(7) A
further
request
for
information
was
sent
by
the
I PROCEDURE
Commission on 29 October 2010, to which the
Bulgarian authorities replied by letter dated 12 November
(1) On
30
June
2009
the
Bulgarian
authorities
notified
the
2010, sent to the Commission and registered on
Commission a restructuring measure in favour of Ruse
23 November 2010 and by letter dated 3 December
Industry AD (hereinafter ‘Ruse Industry’ or ‘the
2010, sent to the Commission and registered on
company’), in form of deferral and rescheduling of
6 December 2010.
public debt amounting to EUR 9,85 million.
(2) A
detailed
information
request
was
sent
to
the
Bulgarian (8) On
11
November
2010
the
Bulgarian
authorities
filed
authorities on 28 July 2009. Bulgaria replied partially on
bankruptcy proceedings against the company.
24 August 2009 and asked for an extension of delay by
the same letter, which was granted by letter of 28 August
2009. Bulgaria submitted further information on
(9) By
letter
dated
14
June
2010
sent
to
the
Commission
on
30 September 2009. The Commission asked further
23 November 2010, the Bulgarian authorities withdrew
clarification on 27 November 2009 to which Bulgaria
their notification of 30 June 2009.
replied on 15 December 2009. A further extension to
complete the missing information was granted on
20 December 2009. Bulgaria submitted further
II DESCRIPTION
information on 17 February 2010.
The beneficiary
(3) By
letter
dated
14
April
2010
the
Commission
informed (10) The
beneficiary
of
the
aid
measure
is
Ruse
Industry.
The
Bulgaria that it had decided to initiate the procedure laid
company (initially called Ruse Shipyard (
down in Article 108(2) of the Treaty on the Functioning

4 )) was created in
1991 and is located in Ruse, Bulgaria, a region eligible
of the European Union ( 2 ) (‘TFEU’) in respect of the aid.
for aid under Article 107(3)(a) TFEU. The company was
privatised in April 1999, when 80 % of its shares were
( 1 ) OJ C 187, 10.7.2010, p. 7.
sold to the German firm Rousse Beteiligungsgesellschaft
( 2 ) With effect from 1 December 2009, Articles 87 and 88 of the EC
mbH.
Treaty have become Articles 107 and 108, respectively, of the TFEU;
the two sets of provisions are, in substance, identical. For the
purposes of this Decision, references to Articles 107 and 108 of
( 3 ) Cf. footnote 2.
the TFEU should be understood as references to Articles 87 and 88,
( 4 ) On 4 April 2009 the trade register of Bulgaria recorded the change
respectively, of the EC Treaty where appropriate.
of the name of Ruse Shipyard into Ruse Industry

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L 320/28
EN
Official Journal of the European Union
17.11.2012
(11) Ruse
Industry
is
engaged
in
the
production
and
repair
of
reimbursement of the company’s public debt ( 8 ), plus the
metal structures as well as the manufacturing of cranes,
interest accrued, was deferred until 30 September 2015,
ships and marine equipment ( 5 ). The company had 196
with a grace period (with payment of only interest, not
employees in 2009.
principal) until 31 March 2006 (‘the 2001 rescheduling’).
(12) Financially,
the
company
showed
a
constant
trend
of
(17) According to the 2001 rescheduling the entire debt was
declining turnover and growing losses over several
as follows: the principal was set at EUR 7,97 million and
years prior to the notification, as indicated in the table
the interest (accrued until 1 April 1999) set at EUR 2
below. In 2008 the company featured a negative
million. According to this agreement, the principal was
operating profit and negative cash flow.
subject to an interest of 1 % p.a., whereas penalty interest
of 3 % p.a. was applicable on overdue amounts (i.e. in
case the company is late with the reimbursement).
Table 1
Ruse Industry’s annual turnover and profit
(18) In September 2005, just before the end of the grace
period, the beneficiary requested a new rescheduling of
in million
BGN (
its public debt (in addition to the 2001 agreement). In

1 )
2005 2006 2007 2008
December 2006 the Bulgarian Competition Commission
Annual
76 239 65
086 17
963 7
035
found this request inadmissible under Bulgaria’s State aid
turnover
rules. Ruse Industry lodged an appeal against the
Competition Commission’s decision before the Supreme
Profit
(2 091) 1
977 (827) (3
924)
Administrative Court, which was rejected in July 2007. A
before tax
further appeal against this decision was ruled out as well.
Nevertheless, the State did not attempt to effectively
( 1 ) The exchange rate EUR/BGN is fixed at 1,9558 as of 5 July 1999 due
to the currency board regime operating in Bulgaria.
enforce the debt overdue in accordance with the 2001
rescheduling.
The debt of Ruse Industry to the State
(19) In
July
2008
the
beneficiary
offered
voluntarily
to
pay
(13) Ruse
Industry
owed
EUR
9,85
million
to
the
Bulgarian
EUR 1 million of the amount overdue in two equal
State at the time of the notification.
instalments. According to this offer the first instalment
was to be paid by October 2008 and the second one by
February 2009. When Ruse Industry did not pay any of
(14) The
debt
originates
from
loan
agreements
(
these, the State – upon the company’s request —

6 ) dating back
to 1996 and 1997 between the State Reconstruction and
extended twice the deadline of the first instalment,
Development Fund and Ruse Shipyard concerning a
until December 2008 and until January 2009, respect
principal at the time of USD 8,45 million.
ively.
(15) In
April
1999
an
agreement
(‘the
1999
rescheduling‘)
(20) Given
that
no
reimbursement
of
the
amounts
promised
was concluded between the Ministry of Finance (here
by Ruse Industry took place, the Bulgarian authorities
inafter ‘MoF’) which has taken over the claims of the
sent a reminder for payment in February 2009.
State Reconstruction and Development Fund, under
Additional reminders for reimbursement of the
which USD 8 million out of the debt described above
amounts overdue were filed in April and twice in June
plus interest accrued were renominated ( 7 ) in EUR and
2010. Nevertheless, the State failed to effectively enforce
Rousse Beteiligungsgesellschaft mbH undertook to repay
the debt which was not paid in respect to the 2001
this sum between 1 December 2000 and 30 June 2006
rescheduling.
under a rescheduled reimbursement plan.
(21) By
letter
dated
4
June
2009
Ruse
Industry
asked
further
(16) On
21
May
2001
the
MoF
and
Ruse
Industry
concluded
the Bulgarian authorities to reschedule the public debt
a further agreement, according to which the full
until 2019 with a grace period until 2012. Upon this
request and in accordance with Article 108(3) of TFEU
( 5 ) This was the information received in the notification. It shall be
Bulgaria notified the envisaged debt rescheduling as
noted, that at a later stage Bulgaria claimed that the company
restructuring aid.
does not manufacture vessels, only metal parts.
( 6 ) Agreement of 15.11.1996 on a foreign currency loan of
USD 1 402 341,08; agreement of 22.11.1996 on an amount of
USD 450 131,17; and agreement of 27.1.1997 on the repayment
(22) By
letter
dated
28
June
2010
Ruse
Industry
offered
again
of the company’s earlier debt of USD 6 597 658,92 (principal) and
to the State to repay its outstanding liabilities according
USD 365 575,86 (interest payable as of 1.11.1996). All these debts
were transferred to DFRR from Stopanksa Banka (State bank which
went bankrupt).
( 8 ) I.e. the entire debt which originally amounted to USD 8 450 131,17
( 7 ) The Bulgarian authorities did not indicate the exchange rate of this
and out of which they have already redenominated/rescheduled
transaction.
USD 8 million on 8.4.1999.

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EN
17.11.2012 Official
Journal
of
the
European
Union L
320/29
to the repayment arrangements of the 2001 resche
(30) On
11
November
2010
the
Bulgarian
authorities
filed
for
duling. In July 2010 the company undertook to cover
bankruptcy proceedings against the beneficiary.
all amounts overdue and unpaid in two equal instal
ments: the first one due by the end of July 2010 and
the second by the end of August 2010. However, the
III THE OPENING DECISION
company failed to fulfil this arrangement.
(31) As
mentioned
above
(see
paragraph
(21))
in
June
2009,
the beneficiary submitted further request for rescheduling
(23) According to the information submitted by the Bulgarian
the debt outstanding under the 2001 agreement. This
authorities, by the end of 2010 the beneficiary has
planned rescheduling was the measure that was notified
reimbursed EUR 1 million out of the total amounts due
to the Commission as restructuring aid on 30 June 2009.
under the 2001 rescheduling. At the end of 2010, the
unpaid and overdue debt in respect of the total sum
owed amounted to EUR 3.7 million.
(32) According to the notification, the plan would have
provided for the repayment of the debt of EUR 9,85
million over a period of 10 years (i.e. until 2019), with
Non-enforcement of the public debt
a grace period until 30 June 2012.
(24) It
results
from
the
correspondence
between
Ruse
Industry
and the Bulgarian authorities that the latter have been
(33) Bulgaria
was
of
the
view
that
the
planned
measure
is
sending several reminders for the payment of the
compatible with the Internal Market on the basis of the
amounts due but unpaid. Although the beneficiary
Communication from the Commission Community Guidelines
expressed willingness, or voluntarily offered repayment,
on State aid for rescuing and restructuring firms in
in practice it never covered in full the outstanding
difficulty ( 10 ) as restructuring aid.
amounts under rescheduling 2001. Apart from
reminders, there is no evidence that the Bulgarian auth
orities took any steps to seek to enforce effectively their
(34) The
Commission
had
doubts
with
regard
to
the
compati
claims.
bility of the notified aid. Accordingly, on 14 April 2010
the Commission initiated the procedure laid down in
Article 108(2) of TFEU.
(25) With
regard
to
the
principal,
Ruse
Industry
did
not
pay
the stipulated amounts ( 9 ) and thus did not comply with
the half-yearly repayment schedule. Besides, the ordinary
(35) In
addition,
the
opening
decision
raised
doubts
as
to
interest was paid only until July 2008.
whether the past non-enforcement of the company’s
liabilities overdue under the 2001 rescheduling
(26) As regards the penalty interest, the Bulgarian authorities
agreement might constitute further State aid.
indicated that the contractually stipulated 3 % (see
paragraph (17) above) was charged on the due
(36) The
Bulgarian
authorities
withdrew
this
notification
on
instalments as from 2006, when the company was
23 November 2010, therefore the formal investigation
supposed to start repaying the instalments. These
with regard to the notified measure became without
penalty interests were paid by Ruse only between
object.
August 2006 and July 2008. Since July 2008 the
company did not pay the charged penalty interest.
IV BULGARIA’S COMMENTS TO THE OPENING
(27) On
3
November
2010
the
Bulgarian
authorities
made
an
DECISION
official request for repayment. At the time of this request
the overdue debt amounted to EUR 3,7 million (of which
(37) Concerning the non-enforcement of the debt, Bulgaria
EUR 3,4 million principal, EUR 151 000 interest and
merely asserts that the State behaved in a private
EUR 140 000 penalty interest).
market economy investor manner, which maximises the

chances to recover its debt by allowing for voluntary
repayment. No detailed arguments were submitted by
(28) At the time of this request the beneficiary had
Bulgaria in this regard.
reimbursed in total EUR 1 million due under the 2001
rescheduling (of which EUR 245 000 principal, EUR
705 000 interest and EUR 50 000 penalty interest).
V ASSESSMENT
The latest actual reimbursement that Ruse Industry
made was on 11 July 2008.
The notified restructuring aid
(38) Bulgaria
withdrew
the
notification
of
the
rescheduling
of
(29) Following
the request and the company’s failure to
the public debt of Ruse Industry in November 2010. As
comply with its obligations the national authorities
a result, the formal investigation with regard to the
filed for insolvency proceedings against the beneficiary
notified restructuring aid measure has become without
on 11 November 2010 (i.e. nine years after the 2001
object pursuant to Article 8(2) of Council Regulation
rescheduling, more than four years after the end of the
(EC) No 659/1999 of 22 March 1999 laying down
grace period and over two years since the last payment
detailed rules for the application of Article 93 of the EC
of any kind by Ruse Industry).
Treaty ( 11 ).
( 9 ) Ruse Industry only paid, in 2008, a part of the first instalment due
( 10 ) OJ C 244 1.10.2004, p. 2.
in 2006 (EUR 245 000). The other instalments were never paid.
( 11 ) OJ L 83, 27.3.1999, p. 1.

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L 320/30
EN
Official Journal of the European Union
17.11.2012
Non-enforcement of past debt
With regard to the non-enforcement of the debt under
the 2001 rescheduling and the company’s previous
Existence of State aid
failures to meet its obligations, no private creditor
would have behaved like the Bulgarian State. Indeed,
(39) The
measure
under
assessment
is
the
non-enforcement
of
from the information available it results that no
the debt in compliance with the 2001 Rescheduling.
concrete steps were taken to enforce the debt as from
30 March 2006, when the grace period ended and the
(40) With
regard
to
Bulgaria’s
accession
to
the
EU
and
thus
first instalments of the principal became due but were
whether this non-enforcement of the debt as of 1 January
not paid. Moreover, the company’s financial situation was
2007 potentially constitutes new aid in the sense of
weak (see Table 1 above) as it showed diminishing
Article 1(e) of the Procedural Regulation, the
turnover and increasing losses, and there was no
Commission notes that the failure of the beneficiary to
prospect of the company returning to profitability.
repay the amounts due under the 2001 rescheduling and
Furthermore, it has to be also noted that even if part
the lack of State action led to changes in the total
of the debt (BGN 1,13 million ( 13 )) was secured with
exposure of the State under the 2001 rescheduling.
collaterals ( 14 ), the Bulgarian authorities did not take
This increase in the liability of the State (i.e. the non-
any steps to enforce that part of the debt either.
enforcement) produces effects after the date of accession
and therefore the measure is to be regarded as applicable
after accession and thus to involve new State aid.
(49) In
fact,
the
Bulgarian
authorities
did
not
provide
any
justifications as to why the repayment schedule was
not enforced and did not justify their claim that
(41) It
must
be
also
noted
that
this
non-notified
measure
was
waiting for voluntary repayment (in the light of the
not covered by Appendix to Annex V of Bulgaria’s Act of
debt default history of the company) would have
accession ( 12 ). In particular, it was a) neither put into
maximised their chance for the recovery of the debt.
effect before 31 December 1994, b) nor listed in the
Appendix to Annex V, and c) nor covered by the
interim mechanism that applied in connection with the
(50) In
similar
circumstances,
a
private
creditor
would
have
accession.
pursued the enforcement of the agreement. Therefore, the
non-compliance with the 2001 rescheduling and
Bulgaria’s failure to enforce its debt confers an
(42) Against this background, the Commission will assess in
advantage to Ruse Industry.
the following whether the non-enforcement of the debt
as from 1 January 2007 constitutes new aid in the
meaning of Article 107(1) TFEU.
Conclusion on the existence of State aid
(51) On the basis of the above, the Commission considers the
(43) According
to
Article
107(1)
TFEU,
any
aid
granted
by
a
Member State or through state resources in any form
non-enforcement of public debt in favour of Ruse
whatsoever which distorts or threatens to distort
industry constitutes new aid as from 1 January 2007
competition by favouring certain undertakings or the
in the meaning of Article 107(1) TFEU.
production of certain goods, and affects trade between
Member States is incompatible with the Internal Market.
Compatibility
(44) The measure is financed by State resources – as it results
(52) Concerning
possible compatibility
of the measure,
it
in forgone revenues to the State – and the decisions of
should be noted that Bulgaria did not bring forward
the MoF are directly imputable to the State.
any arguments in this respect.
(45) The
non-enforcement
of
the
debt
also
concerns
Ruse
(53) Even
if
Ruse
Industry
were
to
formally
qualify
as
a
Industry individually and as such is selective.
company in difficulty in the sense of the Communication
from the Commission Community Guidelines on State aid for
rescuing and restructuring firms in difficulty, the criteria for
(46) In
addition,
Ruse
Industry
is
an
undertaking
producing
compatible rescue or restructuring aid are not met. In
goods which are freely traded within the Union. The
particular as regards rescue aid, it has not been demon
Commission thus considers that the condition of the
strated that the measure would be restricted to the
affectation of competition and trade within the Union
minimum necessary, would be warranted on the
is fulfilled.
grounds of serious social difficulties and has no unduly
adverse spill-over effects on other Member States.
(47) The Commission should further assess whether the
Moreover, it goes beyond 6 months. From the restruc
measure in the form of non-enforcement of debt
turing aid point of view in the absence of restructuring
confers an advantage to the company which it would
plan, the restoration of long-term viability is not proven.
not have been able to obtain otherwise in the market.
In addition it has not been demonstrated that the aid is
kept to a minimum, and that undue distortions of
competition are avoided.
(48) As
explained
above,
the
debt
dates
back
to
1996-97
and
has been rescheduled already twice (in 1999 and 2001).
( 13 ) Ca. EUR 565 thousand
( 14 ) In 2001 the pledged assets had a value of BGN 1,18 million (ca
( 12 ) OJ L 157, 21.6.2005, p. 93.
EUR 590 thousand).

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EN
17.11.2012 Official
Journal
of
the
European
Union L
320/31
(54) The
company
is
located
in
an
assisted
area
pursuant
to
VI CONCLUSION
Article 107(3)(a) TFEU and as such eligible for regional
aid under the Guidelines on national regional aid for 2007-
(60) First,
the
Commission
notes
that
Bulgaria
withdrew
the
2013 ( 15 ) (hereinafter: ‘RAG’). The measure, however,
notification concerning the notified debt rescheduling of
does not comply with the RAG. In particular, as
EUR 9,85 million, the formal investigation procedure
regards possible operating aid, this aid does not facilitate
with regard to this measure has thus become without
the development of any activities or economic areas and
object.
it is not limited in time, degressive or proportionate to
what is necessary to remedy specific economic handicaps.
(61) Second, the Commission concludes that non-
enforcement of public debt as from 1 January 2007
constitutes new State aid in favour of Ruse industry in
(55) No other
grounds for compatibility seem to apply.
the meaning of Article 107(1) TFEU.
Therefore, the aid is unlawful and incompatible with
the TFEU.
(62) As
this
State
aid
is
illegal
and
incompatible,
it
has
to
be
recovered from the beneficiary.
Recovery
HAS ADOPTED THIS DECISION:
(56) According to the TFEU and the Court of Justice’s estab
Article 1
lished case law, the Commission is competent to decide
that the State concerned must abolish or alter aid ( 16 )
The Commission has decided to close the formal investigation
when it has found that it is incompatible with the
procedure under Article 108(2) of the Treaty on the Func
internal market. The Court has also consistently held
tioning of the European Union in respect of the notified debt
that the obligation on a State to abolish aid regarded
rescheduling of EUR 9,85 recording that Bulgaria has
by the Commission as being incompatible with the
withdrawn its notification.
internal market is designed to re-establish the previously
existing situation (
Article 2

17 ). In this context, the Court has estab
lished that that objective is attained once the recipient
The State aid unlawfully granted by Bulgaria in breach of
has repaid the amounts granted by way of unlawful aid,
Article 108(3) of the Treaty on the Functioning of the
thus forfeiting the advantage which it had enjoyed over
European Union, in favour of Ruse Industry, by way of non-
its competitors on the market, and the situation prior to
effective enforcement of public debt as from 1 January 2007, is
the payment of the aid is restored ( 18 ).
incompatible with the internal market.
(57) Following
that
case-law,
Article
14
of
Regulation
(EC)
No
Article 3
659/1999 laid down that ‘where negative decisions are
taken in respect of unlawful aid, the Commission shall
1. Bulgaria
shall
recover
the
aid
referred
to
in
Article
2
from
decide that the Member State concerned shall take all
the beneficiary.
necessary measures to recover the aid from the bene
2. The sums to be recovered shall bear interest from
ficiary.’
1 January 2007 until their actual recovery.
(58) Thus, given that the measure at hand is to be considered
3. The
interest
shall
be
calculated
on
a
compound
basis
in
as unlawful and incompatible aid, the amounts of aid
accordance with Chapter V of Commission Regulation (EC) No
must be recovered in order to re-establish the situation
794/2004 ( 19 ).
that existed on the market prior to the granting of the
Article 4
aid. Recovery shall be hence affected from the time when
the advantage occurred to the beneficiary, i.e. when the
1. Recovery
of
the
aid
referred
to
in
Article
2
shall
be
aid was put at the disposal of the beneficiary and shall
immediate and effective.
bear recovery interest until effective recovery.
2. Bulgaria
shall
ensure
that
this
decision
is
implemented
within four months following the date of notification of this
(59) The
incompatible aid element of the measures is calculated
Decision.
as the amount due and unpaid according to 2001 resche
duling starting from 1 January 2007 until 11 November
Article 5
2010, when Bulgaria registered its claim in the liqui
dation procedure. At that time, the overdue amount
1. Within two months following notification of this
was estimated to be EUR 3,7 million. The exact
Decision, Bulgaria shall submit the following information to
recovery amount and the recovery interest to be
the Commission:
applied on these amounts have to be calculated by
Bulgaria. Payments made other than the amounts paid
(a) the total amount (principal and recovery interests) to be
under the agreement may be deducted from the sum to
recovered from the beneficiary;
be recovered as unlawful and incompatible aid.
(b) a detailed description of the measures already taken and
planned to comply with this Decision;
( 15 ) OJ C 54, 4.3.2006, p. 13.
( 16 ) Case C-70/72 Commission v Germany [1973] ECR 813, point 13.
(c) documents demonstrating that the beneficiary has been
( 17 ) Joined Cases C-278/92, C-279/92 and C-280/92 Spain v Commission
ordered to repay the aid.
[1994] ECR I-4103, point 75.
( 18 ) Case C-75/97 Belgium v Commission [1999] ECR I-3671, points
64-65.
( 19 ) OJ L 140, 30.4.2004, p. 1.

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L 320/32
EN
Official Journal of the European Union
17.11.2012
2. Bulgaria shall keep the Commission informed of the progress of the national measures taken to
implement this Decision until recovery of the aid referred to in Article 2 has been completed. It shall
immediately submit, on simple request by the Commission, information on the measures already taken and
planned to comply with this Decision. It shall also provide detailed information concerning the amounts of
aid and recovery interest already recovered from the beneficiary
Article 6
This Decision is addressed to Bulgaria.
Done at Brussels, 13 July 2011.
For the Commission
Joaquín ALMUNIA
Vice-President

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Document Outline

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