European Commission rules against Ciudad de la Luz

Decision raises doubt about mega-studio future

BRUSSELS The Spanish film studio that hosted Bruce Willis-starrer “The Cold Light of Day,” among other pics, will be forced to pay back €265 million ($345 million) in public subsidy after a European Commission probe found the coin broke competition rules.

The Commission ruled Tuesday that payments to the Ciudad de la Luz studio complex near Alicante were not provided on normal market terms and massively distorted competition between Euro studios.

“Spain’s cinema sector is dynamic and competitive. Not only is there no need to spend public money to finance a new operator but, above all, this penalizes the existing players and potential new entrants who have to operate without state funding,” said competition regulator Joaquin Almunia.

Francis Ford Coppola’s “Tetro,” Gallic tentpole “Asterix at the Olympic Games,” Juan Antonio Bayonas’ “The Impossible,” starring Naomi Watts and Ewan McGregor, and Nia Vardalos vehicle “My Life in Ruins,” all shot at the state-of-the art studio, which opened in 2005.

The Commission began investigating Ciudad in 2008 following complaints from rival operators across the continent that its owner, the Valencia regional government, was illegally subsidizing the project with public coin.

The Spanish authorities initially argued that the money was not a subsidy since the private sector would have invested on the same terms. However, the Commission probe found that no market investor would have fully funded the studio, far from major production centers in Madrid and Barcelona, on the basis of its business plan.

With no hope of a private sector buyer in sight, it is questionable just how Ciudad can pay back the $345 million to the Valencia government.

Ciudad is already in litigation with Aguamarga, the company that ran the studios until filing for bankruptcy protection in January, alleging Ciudad had not paid it since August 2009.

There is also a question mark over the future of rebates offered by the Valencia authorities to shoot at Ciudad. A Commission proposal this March suggested lower rebate caps for non-EU shoots in Europe.

Valencia is itself teetering toward bankruptcy. Late last year, Spain’s central Madrid government was forced to pay $160 million owed by the Valencia region to Deutsche Bank.

John Hopewell in Madrid contributed to this report.