# EUR-Lex - 52012PC0272 - EN

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# 52012PC0272

**Proposal for a DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the mobilisation of the European Globalisation Adjustment Fund in accordance with point 28 of the Interinstitutional Agreement of 17 May 2006 between the European Parliament, the Council and the Commission on budgetary discipline and sound financial management (application EGF/2011/008 DK/Odense Steel Shipyard from Denmark) /* COM/2012/0272 final */**

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EXPLANATORY MEMORANDUM

Point 28 of the Interinstitutional
Agreement of 17 May 2006 between the European Parliament, the Council and the
Commission on budgetary discipline and sound financial management[1] allows for the mobilisation of
the European Globalisation Adjustment Fund (EGF) through a flexibility
mechanism, within the annual ceiling of EUR 500 million over and
above the relevant headings of the financial framework.

The rules applicable to the contributions
from the EGF are laid down in Regulation (EC) No 1927/2006 of the European
Parliament and of the Council of 20 December 2006 on establishing the European
Globalisation Adjustment Fund[2].

On 28 October 2011, Denmark submitted application EGF/2011/008 DK/Odense
Steel Shipyard 2 for a financial contribution from the
EGF, following redundancies in Odense Steel Shipyard in Denmark.

After a thorough
examination of this application, the Commission has concluded in accordance
with Article 10 of Regulation (EC) No 1927/2006 that the conditions for a
financial contribution under this Regulation are met.

SUMMARY OF THE APPLICATION AND ANALYSIS

Key data: ||

EGF Reference no. || EGF/2011/008

Member State || Denmark

Article 2 || (a)

Primary enterprise || Odense Steel Shipyard

Suppliers and downstream producers || 4

Reference period || 01.05.2011 - 31.08.2011

Starting date for the personalised services || 31.10.2011

Application date || 28.10.2011

Redundancies during the reference period || 585

Redundancies before and after the reference period || 396

Total eligible redundancies || 981

Redundant workers targeted for support || 550

Expenditure for personalised services (EUR) || 9 487 675

Expenditure for implementing EGF[3] (EUR) || 443 255

Expenditure for implementing EGF (%) || 4,5

Total budget (EUR) || 9 930 930

EGF contribution (65 %) (EUR) || 6 455 104

1.           The application was
presented to the Commission on 28 October 2011 and supplemented by additional
information up to 8 March 2012.

2.           The
application meets the conditions for deploying the EGF as set out in Article 2(a)
of Regulation (EC) No 1927/2006, and was submitted within the deadline of 10
weeks referred to in Article 5 of that Regulation.

Link between the redundancies and major structural changes in world trade patterns due to globalisation or the global financial and economic crisis

3.           In order to establish the
link between the redundancies and the global financial and economic crisis,
Denmark argues that shipyards in Europe over the last decades have been losing
substantial market shares to Asia. The global financial and economic crisis
then further affected the global shipbuilding market, such that, according to
the Community of European Shipyards' Associations (CESA), the European
orderbook dropped from 13,692 million CGT[4] to 9,470 million CGT
between 2008 and 2009, and further to 6,394 million CGT in 2010. New orders,
having fallen from 2,114 million CGT to 561 million CGT between
2008 and 2009, recovered to 2,459 million CGT in 2010, still less than half of
the pre-crisis level of 5,425 million CGT in 2007.

4.           In its annual report for
2010-2011[5],
published in Brusels in August 2011, CESA writes : "The coming two years
will remain very difficult for the industry. Only a few yards have been able to
secure healthy orderbooks for 2012 and beyond. Consequently, the employment
impact resulting from the demand collapse from 2008 and 2009 will hit the
European shipbuilding industry mainly in 2011 and 2012".

The CESA annual report shows that the shipbuilding
workforce in Europe declined by 23 % over the past three years, from
148 792 in 2007 to 114 491 in 2010. The workforce on new buildings
dropped even more sharply, by 33 %, from 93 832 in 2007 to
62 854 in 2010.

5.           The decision to close Odense
Steel Shipyard was taken on 10 August 2009, and a programme was agreed with all
employees regarding the ships that would still be finished at the yard and
thus, the timing of the redundancies required. A first application for EGF
funding in support of the first wave of 1 356 redundant workers was made
by the Danish authorities on 6 October 2010 and, following approval of the
Commission's proposal[6]
by the Council and the European Parliament, the funds were paid out on 2 August
2011. It was understood at the time of the first application that a second
would follow, to take care of the later and final wave of redundancies, also including
the workers made redundant by some of the suppliers to the shipyard.

6.           This is the fourth EGF
case in the shipbuilding sector. The arguments presented in the three previous
cases (EGF/2010/001 DK/Nordjylland[7],
EGF/2010/006 PL/H. Cegielski-Poznan[8]
and EGF/2010/025 DK/Odense Steel Shipyard[9])
remain valid.

Demonstration of the number of
redundancies and compliance with the criteria of Article 2(a)

7.           Denmark submitted this
application under the intervention criteria of Article 2(a) of Regulation (EC)
No 1927/2006, which requires at least 500 redundancies over a four-month period
in an enterprise in a Member State, including workers made redundant in its
suppliers and downstream producers.

8.           The application cites 509
redundancies in Odense Steel Shipyard during the reference
period from 1 May 2011 to 31 August 2011 as well as a
further eight from G4S (the security company operating the main gate at OSS), 67
from YIT (providing maintenance services for the equipment and machines at the
yard and installing the electrical systems on the ships built there), and one
from BM Steel Construction (specialists helping with the building of navy
vessels), making a total of 585 redundancies from Odense Steel Shipyard and its
suppliers. In addition, 396 workers from these four companies as well as
Persolit (another provider of maintenance and electrical systems) were made
redundant before and after the reference period. All of these redundancies were
calculated in accordance with the first indent of the second paragraph of
Article 2 of Regulation (EC) No 1927/2006.

Explanation of the unforeseen nature
of those redundancies

9.           The Danish authorities
argue that the closure of the shipyard and the resulting redundancies could not
have been foreseen. The shipyard owners invested heavily into the yard until
2009; this would not have happened if the closure had been expected. It must be
noted that this is one of the biggest and most modern shipyards in Europe,
holding records such as that of having built (in 2006-2008) the biggest
container ships in the world, Emma Maersk and her seven E-class sisters. The
yard has been known for consistently designing and building innovative vessels
that apply the newest technology in design and equipment.

Demonstration of the redundancies and
identification of the dismissing enterprises

10.         The application relates to 981
redundancies in total in Odense Steel Shipyard and four of its suppiers. Following
observations made during the current Odense Steel Shipyard implementation, the
applicant Member State concluded that around 55 to 60 % of the workers
affected (estimated at 550) would wish to benefit from the EGF measures, while
the other workers would either find new employment themselves or decide to
retire from the labour force.

11.         The break-down of the
targeted workers is as follows:

Category || Number || Percent

Men || 531 || 96,5

Women || 19 || 3,5

EU citizens || 550 || 100,0

Non EU citizens || 0 || 0,0

15-24 years old || 25 || 4,5

25-54 years old || 431 || 78,4

55-64 years old || 94 || 17,1

> 64 years old || 0 || 0,0

12.         There are no workers with
longstanding health problems or disabilities among either the affected or the
targeted workers.

13.         In terms of occupational
categories, the break-down is as follows:

Category || Number || Percent

Legislators, senior officials and managers || 4 || 0,7

Professionals || 18 || 3,3

Technicians and associated professionals || 376 || 68,4

Clerks || 12 || 2,2

Service workers and shop and market sales workers || 66 || 12,0

Craft and related trade workers || 4 || 0,7

Elementary occupations || 70 || 12,7

14.         In accordance with Article
7 of Regulation (EC) No 1927/2006, Denmark has confirmed that a policy of
equality between women and men as well as non-discrimination has been applied,
and will continue to apply, during the various stages of the implementation of
and, in particular, in access to the EGF.

Description of the territory
concerned and its authorities and stakeholders

15.         Odense is Denmark's third
largest city with almost 200 000 inhabitants. The city is in the
centre of the island of Funen, where the total population is close to
500 000. Funen is the eastern part of the region of Southern Denmark,
which has a total of 1 200 000 inhabitants. The infrastructure
of both Funen and the region is well developed and the working population
increasingly commutes to work outside their home towns. In the case of the
Odense Steel Shipyard workers, however, commuting cannot be seen as the
solution to their employment problem, as there are few employment opportunities
for workers elsewhere on the island and no labour shortage in Denmark as a
whole in the metallurgical sector. Major efforts will therefore have to be made
to prepare the redundant workers for new jobs.

16.         Odense has access to the
sea via a canal and the Odense Fjord, on which Odense Steel Shipyard is located
in the small town of Munkebo (5 500 inhabitants). Munkebo is part of
Kerteminde Municipality, forming the northeast part of Funen.

17.         In 2008, the total
workforce in Odense and Kerteminde was 109 000 people. The direct
losses at Odense Steel Shipyard covered by the two applications therefore
amount to around 2 % of the workforce. It is estimated that the indirect
job losses will be as heavy as the direct ones, so that the shipyard closure is
regarded as a major crisis in the regional economy.

The educational standard of the employed
workforce in Kerteminde is below both the national average and the average in
Funen. In 2008, about 27,3 % of the workforce in Kerteminde had received
some further education, while the corresponding figure for Funen was 33 %
and the national average was 34,8 %.

18.         Both the municipalities of
Odense and Kerteminde are closely involved in this application, which they have
supported from the outset.

Expected impact of the redundancies
as regards local, regional or national employment

19.         The general employment
situation deteriorated sharply in Denmark during 2009 and 2010. Unemployment rose
from a record low of 3,4 % for the year 2008 to a new high of 7,6 %
in 2010 (source: Eurostat[10]).

20.         The industrial structure of
Kerteminde is characterised by a high share of employment in manufacturing,
particularly in metallurgy. Many jobs in this industry have already been lost
to other countries with lower wages. The shipyard workers being dismissed have
a high technical expertise which is difficult to apply in other industries in
Funen or even the whole of Denmark. Many of them have worked in the shipyard
all their lives and their parents may have worked there too.

In addition, the shipyard is being wound down
in stages, with groups of workers being dismissed as the final ship orders are
completed. The previous wave of redundancies, preceding this cohort, is
currently aspiring to the potentially suitable new jobs being created. Without
significant retraining, it will be even harder for this second wave of redundant
workers to find new employment.

21.         Since the announcement of
the closure in August 2009, a consortium of local, regional and national
stakeholders has discussed and formulated a strategy for new growth
opportunities in the region. It is this strategy that is taking shape now and
is guiding the choice of measures in the application.

Co-ordinated package of personalised
services to be funded and a breakdown of its estimated costs, including its
complementarity with actions funded by the Structural Funds

22.         The Region of South Denmark
is, on the one hand, defining and designing measures which can be taken under
the Lisbon goals with the objective of strong European competitiveness. The
regional Growth Forum uses both ESF and ERDF funding, as well as national
labour market assistance to achieve these long-term goals of promoting new
growth industries in the area.

23.         In order to help these
immediate redundancies, however, more specific activities need to be
undertaken. These include education, training, employment incentives and
support for entrepreneurship. The target group of workers are already highly
skilled, but in a field where the outlook for future employment looks bleak.
Hence, the measures proposed for them will be somewhat more costly than would
be the case for other workers in mass layoffs, which often concern people with
relatively low skills.

–
Basic course and clarification: It is estimated that this will be taken up by some 55 % of all
the redundant workers, who constitute the group of targeted workers. The course
will run over an average period of four weeks and will contain both group-based
teaching and additional one-to-one counselling. The objective is to help the
workers to understand their own situation and to acquire the motivation to
accept a complete reorientation, to understand the opportunities open in the
region, to identify their own competencies, to identify opportunities of
interest to them, and to decide on further measures they wish to take. This
measure will involve much more intensive and personalised counselling than the
Job Centres are normally able to provide.

–
Vocational training and general education: It is estimated that this too will be taken up by all the targeted
workers, opting for various fields of education and retraining. Some of the
workers may need to reinforce their general education before they can benefit
from the training options.

–
The first of these options will be in Energy
Technology, involving power generation, energy storage, energy
infrastructure and energy efficiency -- the emphasis being on green energy in
these areas. This is a new training area which was not provided by the Job
Centres before the first application for Odense Steel Shipyard.

–
The second will be in Construction and
Landscaping, for which there are already large public commitments to be
implemented in coming years. The course will include specific learning in
energy efficient building. These are innovative training measures which depart
from what is available in the area.

–
The third will be in Robotics, an area of
strong growth, where Denmark is successful at international level. The main
focus areas will be industrial production, play and learning, and biological
production. This is not currently provided by Job Centres, but could be taken
on by them in future, if this scheme works well.

–
The fourth will be in Welfare Technology,
the development of which is already centred around Odense. The demand for
public welfare in hospitals and healthcare services is expected to increase in
future. The main focus will be a general introduction to technology and a
practical upgrading of skills. This course too is not currently provided by Job
Centres, but may offer good employment opportunities in the future.

–
The fifth is General Education, which may
be a prerequisite for many of the redundant workers so as to enable them to
take up the training offered. It is estimated that a quarter of the total
target group will take up this measure, which is scheduled to last for an
average of 22 weeks per person. While this is being offered by Job Centres,
they are currently flooded with demand from unemployed workers and not always
able to cope.

–
Attract and retain the youth / higher
education: This will guide the young workers to
return to education, provide support and fund training costs for up to one
year. The support provided here goes beyond that which is normally available
from Job Centres.

–
Employment Incentives -- Teaching in Enterprises: This will help the redundant
worker in transition to new employment, by facilitating learning and adjustment
for both the employer and the new employee. It will most often take place in
addition to one of the other measures preparing the worker for a new job. In
practical terms, it will be a course given to new employees at one to three
days per week and over a period of six to ten weeks. It will greatly facilitate
the decision for new employers to take on the redundant workers, as they will
be helped to adapt to their new workplace more quickly.

–
Incentives to start a new business: Entrepreneurship in Denmark is at a low level, but increasing, and
is particularly low in the two municipalities most affected. The workshops
planned will help these workers to develop ideas and creativity, the screening
of ideas will help them to focus on the best cases for further development,
an entrepreneurship course of six weeks' duration will enable those who
decide to go down this route to focus on how a business is run; a small number
will then be helped with advice on how to develop a product and with the
necessary market analysis. These new entrepreneurs will receive guidance
and coaching in the early start-up phase, and mentoring by means
of a number of sessions during the first year. Those who successfully start
businesses will be helped with marketing and public relations, including
branding. Entrepreneurs who fulfil stringent conditions can apply for a loan.
It is estimated that some ten applicants will participate in these measures,
and that one of them will qualify for the final stage of support by means of a
loan.

–
In addition to these measures, Denmark proposes
a subsistence allowance of EUR 103 per worker per day of active
involvement in training or other relevant measures.

24.         The expenditure for
implementing the EGF, which is included in the application in accordance with
Article 3 of Regulation (EC) No 1927/2006, covers preparatory,
management, information and publicity as well as control activities. All
partners involved in the measures are committed to communicating the EGF support
being provided. An EGF Secretariat has been set up under the Odense
Municipality, and is co-financed by the Municipality of Kerteminde and the
Region of Southern Denmark. This secretariat will be in regular contact with
the workers and will maintain and update the relevant web site[11]. A conference is planned for
the two Odense Steel Shipyard cases together, which will serve as a closing
conference for the first case[12]
and a mid-term conference for the second application.

25.         The personalised services
presented by the Danish authorities are active labour market measures within
the eligible actions defined by Article 3 of Regulation (EC) No 1927/2006. The Danish
authorities estimate the total costs of these services at EUR 9 487 675
and the expenditure for implementing the EGF at EUR 443 255 (4,5 %
of the total amount). The total contribution requested from the EGF is EUR 6 455 104
(65 % of the total costs).

Actions || Estimated number of workers targeted || Estimated cost per worker targeted (EUR) || Total costs (EGF and national cofinancing) (EUR)

Personalised services (first paragraph of Article 3 of Regulation (EC) No 1927/2006)

Basic course and clarification || 550 || 1 611 || 885 906

Vocational training in energy technology || 110 || 13 423 || 1 476 510

Vocational training in construction and landscaping || 85 || 5 369 || 456 376

Vocational training in robotics || 44 || 10 067 || 442 953

Vocational training in welfare technology || 38 || 12 081 || 459 060

General education || 138 || 7 973 || 1 100 295

Attract and retain in higher education || 110 || 6 711 || 738 255

Teaching in enterprises || 110 || 3 221 || 354 362

Stimulating entrepreneurship || 28 || 268 || 7 517

Screening of ideas || 14 || 134 || 1 879

Entrepreneurship course || 8 || 5 638 || 45 101

Course in product development || 4 || 3 758 || 15 034

Market analysis and feasibility study || 2 || 4 027 || 8 054

Business start-up cases || 2 || 5 638 || 11 275

Mentoring || 2 || 1 342 || 2 685

Advertisement and branding || 2 || 4 027 || 8 054

Start-up loan || 1 || 26 846 || 26 846

Subsistence allowance (per diem) || (days) 33 530 || 103 || 3 447 514

Sub total personalised services || || 9 487 675

Expenditure for implementing EGF (third paragraph of Article 3 of Regulation (EC) No 1927/2006)

Preparatory activities || || 0

Management || || 308 456

Information and publicity || || 67 953

Control activities || || 66 846

Sub total expenditure for implementing EGF || || 443 255

Total estimated costs || || 9 930 930

EGF contribution (65 % of total costs) || || 6 455 104

- The totals do not entirely tally due to
conversion from DKK and rounding.

26.         Denmark confirms that the
measures described above are complementary with actions funded by the
Structural Funds and that all double financing will be prevented.

27.         The former employers,
Odense Steel Shipyard, organised a jobs fair in the autumn of 2010, at which
information was provided on job opportunities and on EGF-financed activities. A
number of jobs in Trondheim and other Norwegian locations were offered to the
skilled workers.

Date on which the personalised
services to the affected workers were started or are planned to start

28.         Denmark started the
personalised services to the affected workers included in the co-ordinated
package proposed for co-financing to the EGF on 31 October 2011. This date
therefore represents the beginning of the period of eligibility for any
assistance that might be awarded from the EGF.

Procedures for consulting the social
partners

29.         The Region of Southern
Denmark, and the Municipalities of Odense and Kerteminde prepared the
application together. This work has involved a number of social partners,
professional organisations, unions and educational institutions. Joint meetings
have been held, at which detailed strategies for growth and extraordinary
actions in the transition plan were discussed and designed by the parties.

30.         The Danish authorities
confirmed that the requirements laid down in national and EU legislation
concerning collective redundancies have been complied with.

Information on actions that are
mandatory by virtue of national law or pursuant to collective agreements

31.         As regards the criteria
contained in Article 6 of Regulation (EC) No 1927/2006, the Danish authorities
in their application:

· confirmed that the financial contribution from the EGF does not
replace measures which are the responsibility of companies by virtue of
national law or collective agreements;

· demonstrated that the actions provide support for individual workers
and are not to be used for restructuring companies or sectors;

· confirmed that the eligible actions referred to above do not receive
assistance from other EU financial instruments.

Management and control systems

32.         Denmark has notified the
Commission that the financial contribution will be managed and controlled by
the same bodies as the European Social Fund, which also has the Danish
Enterprise and Construction Authority as Managing Authority. The Certifying
Authority will be vested in a different department of the same body. The
Auditing Authority will be the EU Controllerfunction in the Danish Enterprise
and Construction Authority.

Financing

33.         On the basis of the
application from Denmark, the proposed contribution from the EGF to the
coordinated package of personalised services is EUR 6 455 104,
representing 65 % of the total cost. The Commission's proposed allocation
under the Fund is based on the information made available by Denmark.

34.         Considering the maximum
possible amount of a financial contribution from the EGF under Article 10(1) of
Regulation (EC) No 1927/2006, as well as the scope for reallocating
appropriations, the Commission proposes to mobilise the EGF for the total
amount referred to above, to be allocated under heading 1a of the financial
framework.

35.         The proposed amount of financial
contribution will leave more than 25 % of the maximum annual amount
earmarked for the EGF available for allocations during the last four months of
the year, as required by Article 12(6) of Regulation (EC) No 1927/2006.

36.         By presenting this proposal
to mobilise the EGF, the Commission initiates the simplified trialogue
procedure, as required by Point 28 of the Interinstitutional Agreement of 17 May
2006, with a view to securing the agreement of the two arms of the budgetary
authority on the need to use the EGF and the amount required. The Commission
invites the first of the two arms of the budgetary authority that reaches
agreement on the draft mobilisation proposal, at appropriate political level,
to inform the other arm and the Commission of its intentions. In case of
disagreement by either of the two arms of the budgetary authority, a formal
trialogue meeting will be convened.

37.         The Commission presents separately
a transfer request in order to enter in the 2012 budget specific commitment
appropriations, as required in Point 28 of the Interinstitutional Agreement of
17 May 2006.

Source of payment appropriations

38.         As the 2012 budget includes
payment appropriations of EUR 50 000 000 on budget line 04.0501
"European Globalisation Adjustment Fund (EGF)", this budget line will
be used to cover the amount of EUR 6 455 104 needed for this
application.

Proposal for a

DECISION OF THE EUROPEAN PARLIAMENT
AND OF THE COUNCIL

on the mobilisation of the European
Globalisation Adjustment Fund in accordance with point 28 of the
Interinstitutional Agreement of 17 May 2006 between the European Parliament,
the Council and the Commission on budgetary discipline and sound financial
management (application EGF/2011/008 DK/Odense Steel Shipyard from Denmark)

THE EUROPEAN PARLIAMENT AND THE
COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the
Functioning of the European Union,

Having regard to the Interinstitutional
Agreement of 17 May 2006 between the European Parliament, the Council and the
Commission on budgetary discipline and sound financial management[13], and in particular point 28
thereof,

Having regard to Regulation (EC) No
1927/2006 of the European Parliament and of the Council of 20 December 2006
establishing the European Globalisation Adjustment Fund[14], and in particular Article
12(3) thereof,

Having regard to the proposal from the
Commission[15],

Whereas:

(1)       The European Globalisation
Adjustment Fund (EGF) was established to provide additional support for workers
made redundant as a result of major structural changes in world trade patterns due
to globalisation and to assist them with their reintegration into the labour
market.

(2)       The scope of the EGF was
broadened for applications submitted from 1 May 2009 to 30 December 2011 to
include support for workers made redundant as a direct result of the global
financial and economic crisis.

(3)       The Interinstitutional
Agreement of 17 May 2006 allows the mobilisation of the EGF within the annual
ceiling of EUR 500 million.

(4)       Denmark submitted an
application to mobilise the EGF, in respect of redundancies in the enterprise Odense Steel Shipyard, on 28 October 2011 and supplemented it by additional information up to 8 March 2012. This application complies with the requirements for determining
the financial contributions as laid down in Article 10 of
Regulation (EC) No 1927/2006. The Commission, therefore,
proposes to mobilise an amount of EUR 6 455 104.

(5)       The EGF should, therefore,
be mobilised in order to provide a financial contribution for the application
submitted by Denmark.

HAVE ADOPTED THIS DECISION:

Article 1

For the general budget of the European
Union for the financial year 2012, the European Globalisation Adjustment Fund
(EGF) shall be mobilised to provide the sum of EUR 6 455 104 in
commitment and payment appropriations.

Article 2

This Decision shall be published in the Official
Journal of the European Union.

Done at Brussels,

For the European Parliament                       For
the Council

The President                                                 The
President

[1]               OJ C 139, 14.6.2006, p. 1.

[2]               OJ L 406, 30.12.2006, p. 1.

[3]               In accordance with the third paragraph of Article 3
of Regulation (EC) No 1927/2006.

[4]               Compensated Gross Tonnage (CGT) is an indicator of
the amount of work that is necessary to build a given ship and is calculated by
multiplying the tonnage of a
ship by a coefficient, which is determined according to type and size of a
particular ship (http://en.wikipedia.org/wiki/Compensated_gross_tonnage)

[5]               http://www.cesa.eu/presentation/publication/CESA_AR_2010_2011/pdf/CESA%20AR%202010-2011.pdf

[6]               COM(2011)251 final

[7]               COM(2010)451 final

[8]               COM(2010)631 final

[9]               COM(2011)251 final

[10]             http://appsso.eurostat.ec.europa.eu/nui/submitViewTableAction.do?dvsc=9

[11]             www.odense.dk/lindoglobaliseringsfonden

[12]             EGF/2010/025 DK/Odense Steel Shipyard

[13]             OJ C 139, 14.6.2006, p. 1.

[14]             OJ L 406, 30.12.2006, p. 1.

[15]             OJ C [...], [...], p. [...].