Spain intends to take the Italian auto multinational Fiat to international arbitration for failing to honor agreements to contribute funds to its Spanish associate Seat, which is the country's largest car manufacturer.

The move signals the complete breakdown of relations between the Spanish state holding company INI, which is Seat's second shareholder, and the auto group, which is based in Turin.

INI is considering other European and Japanese auto multinationals that might become involved in Seat and assure its long-term future.

INI President Jose Miguel de la Rica told a news conference last week that Fiat had refused to contribute its $40 million share of an $85 million capital increase. The deadline for making the capital increase was May 31, and de la Rica said that the Spanish government had released special funds to INI to enable the state holding company to cover the FIAT equity.

De la Rica said that INI lawyers had been instructed to assess the Damage claims against Fiat which would be taken to arbitration before the Paris-based International Chamber of Commerce. He refused to specify what the damages could amount to and said that the suit wouldn't be presented before fall at the earliest. A clause ensuring arbitration in Paris was built into an agreement between INI and Fiat a year ago when the Italian group undertook to acquire more than 80 percent of the Seat equity by 1981.

Indications that Fiat was considering a new stand first were substantiated last March at a Seat board meeting when the Italians abstained in a vote on capital increases. De la Rica said that since then there has been no contact between INI and Fiat and that relations are now "completely broken." Following the May 31 expiration date, the approximately 40 senior management executives from Turin who had been running Seat since the agreement last year were clearing their desks and preparing to return to Italy in what de la Rica said was "an orderly manner."

The planned Fiat pullout was first discussed publicly at the Turin Motor Show last April when Fiat senior executives claimed the INI and the Spanish government hadn't honored their side of the agreement specifically over the questions of price liberalization and of Labor Ministry rulings on restructuring the labor force. Although these claims haven't been lodged officially, de la Rica, anticipating their being put before the arbitration chamber, rejected them outright, saying he was convinced that the Spanish side had "substantially honored its side of the bargain."

With the Fiat refusal to participate in the capital increase and the decision by the Spanish government to step in with emergency funding, the Seat equity stands at INI, 48.3 percent; Fiat, 32.3 percent; Spanish private banks, 13.9 percent; and Spanish private shareholders, 5.5 percent. This is roughly a return to the pre-1979 status quo which over the previous 30 years had allowed Seat to be a Spanish-controlled company with a separate licensing and technology agreement with Fiat and with substantial Italian shareholding.

One reason for last year's agreement was the Spaniards' conviction that Seat -- which is the largest single company in Spain and which employs a work force of 32,000 -- was only viable in the long term through a majority shareholding by a multinational. De la Rica said that this remained a governing principle in Seat and that the renewed Spanish participation was only a mid-term solution to face the crisis. "We will look for other multinationals, but they do not appear overnight," he said.

Informal contacts with the Japanese Toyota and Nissan groups as well as with West Germany's Volkswagen already have been initiated. Prospective multinational entrants into Seat will find a competitive market in which Ford and the French Citroen and Talbot groups already are established. General Motors Corp. agreed to come into Spain last June in the very same week that Fiat announced its plans to expand into Seat.

Seat sustained losses of $212 million last year.