The Supreme Court has rejected the precautionary measure that Santa Bárbara requested in the legal battle it undertook against Indra and Escribano Mechanical & Engineering (EM&E). The high court opposes suspending the public aid of 3,002 million euros that the Government granted to this temporary union of companies (UTE) to pre-finance the two artillery programs contemplated in the military modernization strategy, whose contracts amount to 7,240 million euros in total.
Santa Bárbara, owned by the American General Dynamics, requested the annulment of the loans approved by royal decree on October 14 and of all those provisions of said norm related to said concession, as well as the suspension of all subsequent administrative procedures and acts issued in execution of the previous ones, understanding that the procedure was not carried out correctly.
According to its appeal, the company complains that it was not even invited to the negotiated procedure without publicity or competition that the Ministry of Defense processed for the award of the aforementioned specialized modernization programs (PEM). Something that, in its opinion, is relevant because these are the “highest value ones processed by the Ministry to date and will condition the operators of the Spanish Defense industry (both selected and excluded) in the next decade.” One of the largest Defense contracts, before the current boom due to increased military spending in Europe, was the award in 2020 of the production of 348 8×8 armored vehicles for the Army. This project is valued at 2,500 million euros, which is not even half the value of the two challenged artillery contracts.
In this context, Santa Bárbara requested the precautionary suspension of the loans while the merits of the case are resolved. It argues that the damage caused by the awards to Indra and Escribano will be “irreparable” because “they lack equivalent experience, resources, or products.” In fact, the subsidiary of the American General Dynamics argued in its appeal that it is “the only Spanish manufacturer of artillery systems.”
However, the Administrative Litigation Chamber considers that these alleged damages “are nothing more than a mere allegation lacking supporting evidence.” In this regard, in a ruling made public this Monday, the court indicates that the requirements to accept the requested precautionary measure are not met because it has not proven that the execution of the challenged royal decree “could cause imminent harm, much less that these are difficult or impossible to repair.”
Harm to the national defense strategy
On the contrary, it states that halting the execution of this public aid would cause “significant harm” to the public interest in launching these programs, which are part of a national security and defense strategy. According to the Supreme Court, the precautionary suspension “would not produce a mere neutral postponement of the investment, but a substantial alteration of military, industrial, and budgetary planning, with cumulative effects that are difficult to reverse.”
The magistrates add that the adoption of the precautionary measure “would directly and immediately compromise the modernization of critical military capabilities, the fulfillment of international commitments assumed by Spain, and the stability of a strategic industrial sector.” These programs are part of the international commitments assumed with the European Union to reduce dependence on external supply for provision and to strengthen autonomous defense capacity and the national industry.
With all this, the Chamber ―which has not delved into the merits of the case― emphasizes that the execution of public aid, despite being appealed, does not cause irreparable economic damage to Santa Bárbara. The fact that it belongs to a multinational, “one of the world leaders in manufacturing and design in the defense sector,” suggests that neither the continuity of the business, nor its current market position, nor current jobs can be affected by the granting of these loans to its competitors, highlights the high court. All this without forgetting, it continues, that Santa Bárbara is the recipient of other public loans, such as the update of the Pizarro armored vehicles, for the amount of 176 million euros, also granted on October 14.
Santa Bárbara wants to propose the Nemesis
The Supreme Court’s ruling represents a new setback for Santa Bárbara in its battle against Indra for dominance in the national land military industry. Last week, the Ministry of Defense rejected the administrative appeal filed by the General Dynamics subsidiary against the assignment of these two contracts within the framework of the PEMs, which the Executive launched to boost military spending to the equivalent of 2% of GDP. This appeal was an administrative tool that, once exhausted, Santa Bárbara will continue through the National Court, as the company stated last week.
The contracts for these self-propelled howitzers on wheels and tracks were the most lucrative programs within the PEMs in the land military sphere, for which Santa Bárbara wanted to present its Nemesis model, which it showed to the world together with its partner KNDS at the International Defense and Security Fair (Feindef) held in Madrid last year. However, the Government decided to award these contracts to Indra and EM&E for reasons of “national security” and a supposed “lack of competition” in this area, as the Executive pointed out in a response to the Vox parliamentary group in the Congress of Deputies.
Within the framework of the PEMs, Santa Bárbara only managed to secure the modernization of the Pizarro armored vehicles last year, a much smaller contract than those for artillery. Indra, in turn, not only kept the howitzers but will also, in partnership with EM&E, build bridge-laying vehicles and amphibious armored vehicles for the Marine Infantry.
The precautionary measures requested by Santa Bárbara affected the entire Royal Decree in which the Government had approved 0% interest loans. A Royal Decree that included more military programs, so the company’s legal challenge affected other companies such as Oesía and Telefónica, which also benefited from the PEMs. Santa Bárbara even asked the Supreme Court to restrict Indra, EM&E, Oesía, and Telefónica from full access to its lawsuit, something that the high court also rejected, calling the request “extravagant.”
