Introduction
When a party to a financial transaction is a company that is owned and controlled by the state, it is difficult to determine whether the transaction is free of State aid. This is because it is not easy to prove that the state had no influence over the decision of the company to carry out that transaction.
The Commission was confronted with such a problem when it received a complaint alleging that State aid had been granted by the Italian state-owned Asset Management Company [AMCO] in favour of Ferrarini, which was in pre-insolvency proceedings. Those proceedings were eventually closed by a national court decision with the agreement of the creditors.
AMCO has decision-making autonomy it is under the supervision of the Italian Ministry of Economic Affairs and Finance [MEF]. Ferrarini is an Italian food producing company. As of 2018, Ferrarini began facing liquidity problems due to a high level of debt. In April 2023, AMCO and Pini Italia took over joint control of Ferrarini following an arrangement with creditors authorised by a national court. Pini Italia is an industrial partner of Ferrarini and supported Ferrarini by providing finance.
Following the drafting of complex plans for the restructuring and re-capitalisation of Ferrarini, agreement was achieved on the so-called “second arrangement” whereby AMCO acquired 20% of the share capital of RIA, the company which would control 100% of Ferrarini’s capital. In addition, AMCO granted a EUR 12 million loan to Ferrarini. The complaint concerned these two financial interventions.
In its decision [SA.58607] which was published on 10 July 2024, the Commission focused on two issues: Whether AMCO’s decisions could be imputed to the state and whether the two interventions conferred an advantage that was not available to Ferrarini under normal market conditions. Its findings were negative on both issues and, therefore, it concluded that no State aid had been granted.
Because of the length and complexity of the case, this article is in two parts. Part I reviews the application of the concept of imputability. Part II, that will be published next week, reviews why the Commission was satisfied that no abnormal advantage had been granted to Ferrarini.
Part I: State resources
Control by the state
‘(52) The notion of State resources within the meaning of Article 107(1) TFEU encompasses, alongside the resources of a Member State and of its public authorities, inter alia, also the resources of public undertakings over which the public authorities may exercise, directly or indirectly, a dominant influence.’
‘(53) As emphasised by the Court of Justice, ‘[r]esources of public undertakings, when they fall under the control of the State and are therefore at its disposal, fall within the concept of ‘State resources’ within the meaning of Article 107(1) TFEU. By exercising its dominant influence over those undertakings, the State is perfectly capable of directing the use of their resources to finance, where appropriate, specific advantages in favour of other undertakings’.”
‘(54) AMCO’s share capital is wholly owned by the Italian State […] The Italian State, in its capacity of the sole shareholder, has the right to appoint the members of AMCO’s Board of Directors. It follows that the Italian State has sole control over AMCO, as it is in a position to exercise a dominant influence over AMCO and to direct the use of AMCO’s resources.”
‘(55) The Commission consequently concludes that the measures involve the use of State resources, regardless of the fact that the activities falling within AMCO’s tasks are of a commercial nature.’
Imputability of the measures to a decision of the state
‘(56) As the Court of Justice has held, ‘[e]ven where the State is in a position to control a public undertaking and to exercise a dominant influence over its operations, the actual exercise of such control in a particular case cannot automatically be presumed. A public undertaking may act with greater or lesser independence, depending on the degree of autonomy granted to it by the State […] Therefore, the mere fact that a public undertaking is under State control is not sufficient to impute to the State measures taken by that undertaking, such as the financial support measures in question. It remains to be examined whether the public authorities must be regarded as having played any role in the adoption of such measures’.”
“(57) The criterion of imputability to the State must therefore be examined […] on a case-by-case basis. Imputability cannot be inferred solely from factors of an institutional nature linking the public undertaking to the State.”
‘(58) The Court of Justice has clarified that ‘[t]he imputability to the State of an aid measure taken by a public undertaking may be inferred from a set of indicators arising from the circumstances of the case and the context in which the measure in question was adopted’. In its case-law, the Court of Justice referred to indicators such as: the fact that the public undertaking, which granted the aid, could not adopt the contested decision without taking into account the requirements of the public authorities; the fact that the undertaking was not only bound to the State by elements of an institutional nature, but also had to take account of the guidelines issued by an inter-ministerial committee; the undertaking’s integration into the structures of the public administration; the nature of the undertaking’s activities and the exercise of those activities on the market in normal conditions of competition with private operators; the legal status of the undertaking (subject to public law or ordinary company law); the intensity of the supervision exercised by the public authorities over the management of the undertaking, or any other indicator showing, in the particular case, an involvement by the public authorities in the adoption of a measure or the unlikelihood of their not being involved, having regard also to the scope of the measure, its content or the conditions which it entails.”
Therefore, the Commission assessed whether the circumstances of the case at hand revealed the involvement by public authorities in the adoption of the measures in question.
i) Legal status of AMCO
“(62) AMCO operates according to the rules applicable to ordinary commercial undertakings with the aim of generating a corporate profit. AMCO carries out activities of a commercial nature, in a competitive market where remunerations are paid. AMCO is by no means integrated into the structures of the public administration.”
“(63) In relation to its legal status as an undertaking, therefore, public ownership of the share capital, the State origin of the financial resources at its disposal and the submission to a public audit of accounts are not such as to deny the commercial nature and the profit-motivated logic of AMCO’s decision to participate in Ferrarini’s insolvency arrangement with creditors.”
Nonetheless, the Commissioned considered it still necessary “(64) to verify the actual degree of public supervision and, in particular, whether the public authorities were likely to be involved in the specific decision to participate in Ferrarini’s insolvency arrangement”.
ii) Intensity of the state’s supervision of AMCO
“(65) In terms of AMCO’s governance and the organic and/or institutional links to the State, certain senior positions with management and audit functions are assigned to employees of the MEF. In particular, the Board of Directors is currently composed of three members, appointed by the undertaking’s general meeting (i.e. by the State in its capacity of the sole shareholder). In accordance with the legislation in force, two members of the Board of Directors are MEF’s employees, one of whom acts as Chairperson of the Board of Directors. […] The members of the Board of Auditors (chairperson, serving and substitute statutory auditors) are also employed by the MEF.”
“(66) The organic links, relating to the possibility of the State to appoint the majority of the Board of Directors and the totality of the Board of Auditors, are not a decisive factor and cannot be assessed in isolation from other factors […] Given the sole control of the State over AMCO, these appointment rights are part of the normal powers of a sole shareholder and are not indicative of exceptional interference by the State in the governance of the company. Moreover, as regards the MEF employee board members, their position does not automatically mean that they cannot act independently in their capacity as board members.”
“(67) Importantly, it does not appear from the case file that AMCO’s decision to participate in Ferrarini’s insolvency arrangement with creditors […] was taken with the involvement of the MEF (or any other public authority), nor that a specific process was undertaken in order to approve it, contrary to the situation when a statutory intervention by AMCO was requested and imposed by law, such as in the context of the compulsory administrative liquidation of Banca Popolare di Vicenza S.p.a. and Veneto Banca S.p.a. […] In fact, in the present case the available evidence […] suggests that no act of the public authorities nor MEF’s decision imposed the adoption of the measures and, instead, AMCO considered its own benefit in adhering to the second arrangement proposal in its position of a creditor. In this respect, AMCO’s backing of the second arrangement proposal appears to have been decided by the undertaking’s Board of Directors in the exercise of its full discretion and decision-making autonomy.”
Of course, written evidence cannot demonstrate that the MEF officials sitting in the Board of AMCO did not follow oral instructions issued by the MEF. But, when applying Article 107(1) TFEU the Commission cannot rely on suspicions concerning the hypothetical behaviour of public authorities. It must actually adduce credible evidence to prove the involvement of public authorities.
The Commission further noted that “(68) the only relevant consideration in the adoption of that decision appears to be the maximisation of recovery, on account of the claims that AMCO held against Ferrarini […], as evidenced by the minutes of the Board meeting of 25 May 2020, where AMCO’s Directors and managers considered that the second arrangement with creditors proposed by Pini Italia, and endorsed by Ferrarini, would make it possible to obtain a reimbursement equal to 30% of AMCO’s claims, as compared to 2% (in the best scenario) or even 0% (in the worst scenario) in case of bankruptcy”.
“(69) AMCO’s decision to adhere to the second arrangement proposal, including to provide new financing to Ferrarini, appears to be motivated by the objective of maximising the recovery of AMCO’s claims vis-à-vis Ferrarini, and the Commission has not identified any indications that public authorities would have interfered with AMCO’s decision on grounds of public policy objectives.”
“(73) Therefore, there are no material indications that AMCO’s adherence to the second arrangement proposal would have been a decision taken in the pursuit of public interests or otherwise with the involvement of public authorities.”
Conclusions on the use of state resources
“(75) The fact that AMCO is subject to rules of administrative transparency and the State origin of the financial resources at its disposal, including staff that is paid by MEF, do not automatically mean that measures adopted by AMCO are imputable to the State, but merely confirm that AMCO is a State-controlled publicly owned undertaking. However, those organic links between the State and AMCO are insufficient, in accordance with settled case law, to demonstrate the imputability of AMCO’s specific business decisions to the State.
“(76) Contrary to what the complainants claim, the information provided by them […], as well the evidence gathered in the course of the investigation […], do not contain any indication that the Italian State was decisively involved, exercised decisive influence or imposed on AMCO the transaction complained of, or that its absence of involvement in the measures would have been unlikely. […] Hence, the contested measures are not imputable to the Italian State within the meaning in Article 107(1) TFEU.”
On the basis of this finding, the Commission could have stopped at this point. However, for the sake of completeness, the Commission also considered whether the measures in question conferred an economic advantage on Ferrarini.