# Official Journal C 66/2010

| | ISSN 1725-2423
  doi:10.3000/17252423.C_2010.066.eng |
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| Official Journal
  of the European Union | C 66 |
| | |
| English edition | Information and Notices | Volume 5317 March 2010 |

ISSN 1725-2423

doi:10.3000/17252423.C_2010.066.eng

Official Journal

of the European Union

C 66

English edition

Information and Notices

Volume 5317 March 2010

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| Notice No | Contents | page |
| --- | --- | --- |
| | I   Resolutions, recommendations and opinions |
| | OPINIONS |
| | European Data Protection Supervisor |
| 2010/C 066/01 | Opinion of the European Data Protection Supervisor on the proposal for a Council Regulation on administrative cooperation and combating fraud in the field of value added tax (recast) | 1 |

Notice No

Contents

page

I   Resolutions, recommendations and opinions

OPINIONS

European Data Protection Supervisor

2010/C 066/01

Opinion of the European Data Protection Supervisor on the proposal for a Council Regulation on administrative cooperation and combating fraud in the field of value added tax (recast)

1

| | II   Information |
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| | INFORMATION FROM EUROPEAN UNION INSTITUTIONS, BODIES, OFFICES AND AGENCIES |
| | European Commission |
| 2010/C 066/02 | Non-opposition to a notified concentration (Case COMP/M.5712 — Mitsubishi Chemical Holdings/Mitsubishi Rayon Co) (
  1
  ) | 10 |
| 2010/C 066/03 | Non-opposition to a notified concentration (Case COMP/M.5750 — Wabco/Würth/JV) (
  1
  ) | 10 |

II   Information

INFORMATION FROM EUROPEAN UNION INSTITUTIONS, BODIES, OFFICES AND AGENCIES

European Commission

2010/C 066/02

Non-opposition to a notified concentration (Case COMP/M.5712 — Mitsubishi Chemical Holdings/Mitsubishi Rayon Co) (
  1
  )

1

10

2010/C 066/03

Non-opposition to a notified concentration (Case COMP/M.5750 — Wabco/Würth/JV) (
  1
  )

1

10

| | IV   Notices |
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| | NOTICES FROM EUROPEAN UNION INSTITUTIONS, BODIES, OFFICES AND AGENCIES |
| | European Commission |
| 2010/C 066/04 | Euro exchange rates | 11 |
| 2010/C 066/05 | Commission notice on the quantity of certain products in the milk and milk products sector available for the second half of 2010 under certain quotas opened by the Community | 12 |

IV   Notices

NOTICES FROM EUROPEAN UNION INSTITUTIONS, BODIES, OFFICES AND AGENCIES

European Commission

2010/C 066/04

Euro exchange rates

11

2010/C 066/05

Commission notice on the quantity of certain products in the milk and milk products sector available for the second half of 2010 under certain quotas opened by the Community

12

| | V   Announcements |
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| | ADMINISTRATIVE PROCEDURES |
| | European Commission |
| 2010/C 066/06 | Calls for proposals under the 2010 work programme People of the 7th EC Framework Programme for Research, Technological Development and Demonstration Activities | 13 |
| 2010/C 066/07 | Call for proposals for modal shift, catalyst, motorways of the sea, traffic avoidance and common learning actions under the second Marco Polo Programme (Regulation (EC) No 1692/2006 of the European Parliament and of the Council — OJ L 328, 24.11.2006, p. 1) | 14 |
| | PROCEDURES RELATING TO THE IMPLEMENTATION OF COMPETITION POLICY |
| | European Commission |
| 2010/C 066/08 | State aid — Germany — State aid C 40/09 (ex N 555/09) — Additional aid for WestLB AG related to spin-off of assets — Invitation to submit comments pursuant to Article 108(2) TFEU (
  1
  ) | 15 |

V   Announcements

ADMINISTRATIVE PROCEDURES

European Commission

2010/C 066/06

Calls for proposals under the 2010 work programme People of the 7th EC Framework Programme for Research, Technological Development and Demonstration Activities

13

2010/C 066/07

Call for proposals for modal shift, catalyst, motorways of the sea, traffic avoidance and common learning actions under the second Marco Polo Programme (Regulation (EC) No 1692/2006 of the European Parliament and of the Council — OJ L 328, 24.11.2006, p. 1)

(Regulation (EC) No 1692/2006 of the European Parliament and of the Council — OJ L 328, 24.11.2006, p. 1)

14

PROCEDURES RELATING TO THE IMPLEMENTATION OF COMPETITION POLICY

European Commission

2010/C 066/08

State aid — Germany — State aid C 40/09 (ex N 555/09) — Additional aid for WestLB AG related to spin-off of assets — Invitation to submit comments pursuant to Article 108(2) TFEU (
  1
  )

1

15

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| | (1)   Text with EEA relevance |

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(1)   Text with EEA relevance

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EN

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I Resolutions, recommendations and opinions

OPINIONS

European Data Protection Supervisor

| 17.3.2010 | EN | Official Journal of the European Union | C 66/1 |
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17.3.2010

EN

Official Journal of the European Union

C 66/1

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Opinion of the European Data Protection Supervisor on the proposal for a Council Regulation on administrative cooperation and combating fraud in the field of value added tax (recast)

2010/C 66/01

THE EUROPEAN DATA PROTECTION SUPERVISOR,

Having regard to the Treaty establishing the European Community, and in particular its Article 286,

Having regard to the Charter of Fundamental Rights of the European Union, and in particular its Article 8,

Having regard to Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data (1),

Having regard to Regulation (EC) No 45/2001 of the European Parliament and of the Council of 18 December 2000 on the protection of individuals with regard to the processing of personal data by the Community institutions and bodies and on the free movement of such data (2), and in particular its Article 41,

HAS ADOPTED THE FOLLOWING OPINION:

I.   INTRODUCTION

| 1. | On 18 August 2009, the Commission adopted a proposal for a Council Regulation on administrative cooperation and combating fraud in the field of value added tax (VAT). (3) The proposal in fact constitutes an amendment of Council Regulation (EC) No 1798/2003 (4) on administrative cooperation in the field of value added tax, which has already been amended several times. However, for the sake of clarity and ease of comprehension, the Commission has chosen to use the recasting procedure, which means that Regulation (EC) No 1798/2003 will be repealed if the current proposal is adopted by the Council. |
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1.

On 18 August 2009, the Commission adopted a proposal for a Council Regulation on administrative cooperation and combating fraud in the field of value added tax (VAT). (3) The proposal in fact constitutes an amendment of Council Regulation (EC) No 1798/2003 (4) on administrative cooperation in the field of value added tax, which has already been amended several times. However, for the sake of clarity and ease of comprehension, the Commission has chosen to use the recasting procedure, which means that Regulation (EC) No 1798/2003 will be repealed if the current proposal is adopted by the Council.

| 2. | In the recasting procedure, the legislative discussion is in principle restricted to the substantive amendments proposed by the Commission and does not touch upon the ‘unchanged provisions’. (5) In this Opinion, however, the European Data Protection Supervisor (EDPS) will discuss the current Regulation and the proposed substantive amendments to it in their entirety. Such a full analysis is needed in order to properly assess the impact of the legislation on data protection. The EDPS will recommend adjustments which also relate to such unchanged provisions. The EDPS urges the legislator to take these recommendations into account despite the limited scope of the recasting procedure. In this respect the EDPS points at Article 8 of the Interinstitutional Agreement on the recasting procedure which provides for the possibility of amending unchanged provisions. |
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2.

In the recasting procedure, the legislative discussion is in principle restricted to the substantive amendments proposed by the Commission and does not touch upon the ‘unchanged provisions’. (5) In this Opinion, however, the European Data Protection Supervisor (EDPS) will discuss the current Regulation and the proposed substantive amendments to it in their entirety. Such a full analysis is needed in order to properly assess the impact of the legislation on data protection. The EDPS will recommend adjustments which also relate to such unchanged provisions. The EDPS urges the legislator to take these recommendations into account despite the limited scope of the recasting procedure. In this respect the EDPS points at Article 8 of the Interinstitutional Agreement on the recasting procedure which provides for the possibility of amending unchanged provisions.

| 3. | The legal basis of the proposal is Article 93 EC Treaty, which enables the Council to adopt measures regarding indirect taxation. The Council decides by unanimity on a proposal of the Commission and after the European Parliament and the European Economic and Social Committee have been consulted. The legal basis and the specific procedure will not change after the entry into force of the Lisbon Treaty. |
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3.

The legal basis of the proposal is Article 93 EC Treaty, which enables the Council to adopt measures regarding indirect taxation. The Council decides by unanimity on a proposal of the Commission and after the European Parliament and the European Economic and Social Committee have been consulted. The legal basis and the specific procedure will not change after the entry into force of the Lisbon Treaty.

| 4. | The EDPS has not been consulted as required by Article 28(2) of Regulation (EC) No 45/2001. The current opinion is therefore based on Article 41(2) of the same Regulation. The EDPS recommends that a reference to this opinion is included in the preamble of the proposal. |
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4.

The EDPS has not been consulted as required by Article 28(2) of Regulation (EC) No 45/2001. The current opinion is therefore based on Article 41(2) of the same Regulation. The EDPS recommends that a reference to this opinion is included in the preamble of the proposal.

| 5. | The EDPS is aware of the importance of enhancing the effectiveness of measures against cross-border fraud and of achieving better collection of VAT in cross-border situations. Although the exchange of information, which is part of the administrative cooperation and the combating of VAT fraud, mainly involves information concerning legal persons, it is clear that data relating to natural persons are being processed as well. The EDPS acknowledges that in order to achieve these purposes it is necessary to process personal data. The EDPS underlines however that the processing of such data must be in conformity with the Community rules on data protection. |
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5.

The EDPS is aware of the importance of enhancing the effectiveness of measures against cross-border fraud and of achieving better collection of VAT in cross-border situations. Although the exchange of information, which is part of the administrative cooperation and the combating of VAT fraud, mainly involves information concerning legal persons, it is clear that data relating to natural persons are being processed as well. The EDPS acknowledges that in order to achieve these purposes it is necessary to process personal data. The EDPS underlines however that the processing of such data must be in conformity with the Community rules on data protection.

| 6. | Situations which involve the trans-border exchange of personal data within the EU deserve special attention since they imply an increase in scale of the data processing which necessarily leads to legal uncertainty for the data subjects: actors from all other Member States can be involved, national laws of these other Member States might be applicable and might differ slightly from the laws data subjects are used to, or apply in a legal system which is unfamiliar to the data subject. |
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6.

Situations which involve the trans-border exchange of personal data within the EU deserve special attention since they imply an increase in scale of the data processing which necessarily leads to legal uncertainty for the data subjects: actors from all other Member States can be involved, national laws of these other Member States might be applicable and might differ slightly from the laws data subjects are used to, or apply in a legal system which is unfamiliar to the data subject.

| 7. | After having analysed the legal framework stemming from Regulation (EC) No 1798/2003 and the adjustments currently proposed, the EDPS concludes that, although several positive elements can be found, not all the requirements stemming from the Community rules on data protection are met. |
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7.

After having analysed the legal framework stemming from Regulation (EC) No 1798/2003 and the adjustments currently proposed, the EDPS concludes that, although several positive elements can be found, not all the requirements stemming from the Community rules on data protection are met.

| 8. | Before explaining this point of view in greater detail in Part III (applicable data protection rules) and Part IV (detailed analysis of the proposal), the EDPS will in the next part first describe the context of the current proposal, the existing legal framework and the proposed adjustments. |
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8.

Before explaining this point of view in greater detail in Part III (applicable data protection rules) and Part IV (detailed analysis of the proposal), the EDPS will in the next part first describe the context of the current proposal, the existing legal framework and the proposed adjustments.

II.   EU COOPERATION IN THE FIELD OF VAT

II.1.   Context

| 9. | The current proposal results from a discussion at EU level which officially started in May 2006 by a Communication of the Commission on the fight against fiscal fraud in the internal market (6). Encouraged by the Council and the European Parliament, the Commission, in December 2008, published another Communication on a coordinated strategy to improve the fight against VAT fraud in the EU (7). The Communication announced several changes to the general VAT Directive 2006/112/EC (8) and also announced the current recast of Regulation (EC) No 1798/2003. |
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9.

The current proposal results from a discussion at EU level which officially started in May 2006 by a Communication of the Commission on the fight against fiscal fraud in the internal market (6). Encouraged by the Council and the European Parliament, the Commission, in December 2008, published another Communication on a coordinated strategy to improve the fight against VAT fraud in the EU (7). The Communication announced several changes to the general VAT Directive 2006/112/EC (8) and also announced the current recast of Regulation (EC) No 1798/2003.

| 10. | Regulation (EC) No 1798/2003 has so far been the reference Regulation for administrative cooperation on VAT issues. However, according to a recent study conducted by the Commission which was published on 18 August 2009, the same day as the current proposal, the intensity of the administrative cooperation between Member States to cope with intra-Community VAT evasion and fraud was considered to be unsatisfactory (9). The principal aim of the current proposal therefore is to adjust Regulation (EC) No 1798/2003 in such a way that the effectiveness of measures against cross-border fraud will be enhanced and that better collection of VAT in cross-border situations will be achieved. |
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10.

Regulation (EC) No 1798/2003 has so far been the reference Regulation for administrative cooperation on VAT issues. However, according to a recent study conducted by the Commission which was published on 18 August 2009, the same day as the current proposal, the intensity of the administrative cooperation between Member States to cope with intra-Community VAT evasion and fraud was considered to be unsatisfactory (9). The principal aim of the current proposal therefore is to adjust Regulation (EC) No 1798/2003 in such a way that the effectiveness of measures against cross-border fraud will be enhanced and that better collection of VAT in cross-border situations will be achieved.

II.2.   The current system of cooperation: Regulation (EC) No 1798/2003

| 11. | With Regulation (EC) No 1798/2003 the EU introduced a common system of administrative cooperation and exchange of information between competent authorities of the Member States to enable them to effect a correct assessment of VAT. The Regulation contains a list of competent authorities and obliges Member States to designate a single central liaison office which is responsible for contacts with other Member States in the field of administrative cooperation. |
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11.

With Regulation (EC) No 1798/2003 the EU introduced a common system of administrative cooperation and exchange of information between competent authorities of the Member States to enable them to effect a correct assessment of VAT. The Regulation contains a list of competent authorities and obliges Member States to designate a single central liaison office which is responsible for contacts with other Member States in the field of administrative cooperation.

| 12. | Information exchange between competent authorities takes place in three situations: exchange of information upon request, exchange of information without prior request (spontaneous exchange), and storage of data in an electronic database maintained by each Member State, a part of which can directly be accessed by the competent authorities of other Member States. |
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12.

Information exchange between competent authorities takes place in three situations: exchange of information upon request, exchange of information without prior request (spontaneous exchange), and storage of data in an electronic database maintained by each Member State, a part of which can directly be accessed by the competent authorities of other Member States.

| 13. | Regulation (EC) No 1798/2003 furthermore orders the Member States to ensure that persons involved in the intra-Community supply of goods and of services are allowed to obtain confirmation of the validity of the VAT identification number of any specified person. The system which enables these persons to do so is known as the VAT information exchange system (the VIES). |
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13.

Regulation (EC) No 1798/2003 furthermore orders the Member States to ensure that persons involved in the intra-Community supply of goods and of services are allowed to obtain confirmation of the validity of the VAT identification number of any specified person. The system which enables these persons to do so is known as the VAT information exchange system (the VIES).

| 14. | In general, the Regulation prescribes that communication of information should take place by electronic means. The Commission is thereby responsible for the development of a common communication network or common system interface (the CCN/CSI) as far as this is necessary to permit the exchange of information between Member States. The Member States are responsible for the development of their national systems as far as is necessary to permit information to be exchanged using the CNN/CSI. The Regulation contains further rules on relations with the Commission, simultaneous controls and the exchange of data which originates from third countries. |
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14.

In general, the Regulation prescribes that communication of information should take place by electronic means. The Commission is thereby responsible for the development of a common communication network or common system interface (the CCN/CSI) as far as this is necessary to permit the exchange of information between Member States. The Member States are responsible for the development of their national systems as far as is necessary to permit information to be exchanged using the CNN/CSI. The Regulation contains further rules on relations with the Commission, simultaneous controls and the exchange of data which originates from third countries.

| 15. | The kind of information which can be exchanged between the competent authorities upon request or spontaneously is not defined. Article 1 of Regulation (EC) No 1798/2003 only refers to ‘any information’ that may help them to effect a correct assessment of VAT. The electronic database contains the recapitulative statements of taxable persons identified for VAT purposes which are collected in accordance with the general VAT Directive. These statements contain VAT identification numbers of the different taxable persons involved and the total value of the supplies of goods carried out by the taxable person. The VIES only allows for the confirmation of the validity of a VAT identification number. |
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15.

The kind of information which can be exchanged between the competent authorities upon request or spontaneously is not defined. Article 1 of Regulation (EC) No 1798/2003 only refers to ‘any information’ that may help them to effect a correct assessment of VAT. The electronic database contains the recapitulative statements of taxable persons identified for VAT purposes which are collected in accordance with the general VAT Directive. These statements contain VAT identification numbers of the different taxable persons involved and the total value of the supplies of goods carried out by the taxable person. The VIES only allows for the confirmation of the validity of a VAT identification number.

II.3.   The envisaged improvements in general terms

| 16. | With the current proposal the Commission envisages enhancing the effectiveness of the current cooperation by making competent authorities jointly responsible for the protection of VAT revenues in all Member States, by advancing the exchange of information between the competent authorities and by improving the quality and consistency of this information (10). |
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16.

With the current proposal the Commission envisages enhancing the effectiveness of the current cooperation by making competent authorities jointly responsible for the protection of VAT revenues in all Member States, by advancing the exchange of information between the competent authorities and by improving the quality and consistency of this information (10).

| 17. | Improvement of the exchange of information between member states is achieved by defining the cases in which competent authorities may not refuse to reply to a request for information or for an administrative enquiry and by specifying the cases in which information must be exchanged spontaneously (11). The proposal furthermore introduces stricter deadlines and puts more emphasis on the use of electronic means. |
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17.

Improvement of the exchange of information between member states is achieved by defining the cases in which competent authorities may not refuse to reply to a request for information or for an administrative enquiry and by specifying the cases in which information must be exchanged spontaneously (11). The proposal furthermore introduces stricter deadlines and puts more emphasis on the use of electronic means.

| 18. | The consistency of the information available in the electronic databases is enhanced by defining which kind of information the Member States are obliged to put in their national database. The proposal furthermore increases direct automated access to the electronic databases by competent authorities of other Member States. The information available to other taxable persons through the VIES is supplemented by the name and address of the person who is registered with a VAT identification number. |
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18.

The consistency of the information available in the electronic databases is enhanced by defining which kind of information the Member States are obliged to put in their national database. The proposal furthermore increases direct automated access to the electronic databases by competent authorities of other Member States. The information available to other taxable persons through the VIES is supplemented by the name and address of the person who is registered with a VAT identification number.

| 19. | The proposal furthermore specifies the cases in which Member States may and must conduct multilateral controls. On top of that it creates a legal basis for the setting up of a common operational structure for multilateral cooperation (Eurofisc). This system should allow a fast exchange of targeted information between all Member States as well as the setting up of common risk and strategic analyses. |
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19.

The proposal furthermore specifies the cases in which Member States may and must conduct multilateral controls. On top of that it creates a legal basis for the setting up of a common operational structure for multilateral cooperation (Eurofisc). This system should allow a fast exchange of targeted information between all Member States as well as the setting up of common risk and strategic analyses.

| 20. | The proposal finally introduces a feedback requirement which enables Member States to assess the effectiveness of the information exchange. |
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20.

The proposal finally introduces a feedback requirement which enables Member States to assess the effectiveness of the information exchange.

| 21. | A number of issues will be further elaborated in accordance with a Comitology procedure. These are for instance the standard forms used when competent authorities request information, the way in which the feedback requirement is arranged, the criteria that are used to decide whether changes are to be made to the data stored in the electronic database and to the setting up of Eurofisc. |
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21.

A number of issues will be further elaborated in accordance with a Comitology procedure. These are for instance the standard forms used when competent authorities request information, the way in which the feedback requirement is arranged, the criteria that are used to decide whether changes are to be made to the data stored in the electronic database and to the setting up of Eurofisc.

III.   APPLICABLE DATA PROTECTION RULES

| 22. | In case personal data are being processed, Community legislation on data protection should be complied with. In the data protection legislation ‘personal data’ is broadly defined as ‘any information relating to an identified or identifiable natural person’ (12). As stated before, the exchange of information in the current context is mainly directed towards legal persons. It will, however, contain information relating to natural persons as well. The term ‘any information’ contained in Article 1(1) of the proposed Council Regulation seems to include even further information about natural persons working for or otherwise connected to the legal persons (see also point 31 below). |
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22.

In case personal data are being processed, Community legislation on data protection should be complied with. In the data protection legislation ‘personal data’ is broadly defined as ‘any information relating to an identified or identifiable natural person’ (12). As stated before, the exchange of information in the current context is mainly directed towards legal persons. It will, however, contain information relating to natural persons as well. The term ‘any information’ contained in Article 1(1) of the proposed Council Regulation seems to include even further information about natural persons working for or otherwise connected to the legal persons (see also point 31 below).

| 23. | For data processing by the Member States, the national rules implementing Directive 95/46/EC are applicable. Reference to Directive 95/46/EC is made twice in the current Regulation (EC) No 1798/2003, namely in recital 17 and Article 41. The EDPS notes that these provisions only refer to Directive 95/46/EC in relation to the possibility to restrict certain rights which are guaranteed by the Directive. The recital and the Article reappear in the Commission proposal (as recital 35 and Article 57) but will undergo some changes, which will be discussed in greater detail in point 49 and further below. At this stage it is relevant to point at the fact that the Commission proposes to insert a general sentence into Article 41 (the new Article 57) stating that ‘[a]ll storage or exchange of information referred to in this Regulation is subject to the provisions implementing Directive 95/46/EC’. The EDPS welcomes this insertion and encourages the legislator to insert such a statement in the recital as well. |
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23.

For data processing by the Member States, the national rules implementing Directive 95/46/EC are applicable. Reference to Directive 95/46/EC is made twice in the current Regulation (EC) No 1798/2003, namely in recital 17 and Article 41. The EDPS notes that these provisions only refer to Directive 95/46/EC in relation to the possibility to restrict certain rights which are guaranteed by the Directive. The recital and the Article reappear in the Commission proposal (as recital 35 and Article 57) but will undergo some changes, which will be discussed in greater detail in point 49 and further below. At this stage it is relevant to point at the fact that the Commission proposes to insert a general sentence into Article 41 (the new Article 57) stating that ‘[a]ll storage or exchange of information referred to in this Regulation is subject to the provisions implementing Directive 95/46/EC’. The EDPS welcomes this insertion and encourages the legislator to insert such a statement in the recital as well.

| 24. | Although the Commission is not directly involved in the data exchange between the competent authorities, Article 51(2) shows that the Commission will receive ‘any available information relevant to the application of this Regulation’, ‘statistical data’, and ‘any other information’ that may help to effect a correct assessment of VAT as referred to in Article 1. (13) As mentioned earlier in point 14, the Commission is furthermore responsible for ‘whatever development of the CCN/CSI is necessary’ to permit the exchange of information between Member States (Article 55). As becomes clear from Article 57(2) this responsibility may under certain conditions involve access to the information which is exchanged through the system. |
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24.

Although the Commission is not directly involved in the data exchange between the competent authorities, Article 51(2) shows that the Commission will receive ‘any available information relevant to the application of this Regulation’, ‘statistical data’, and ‘any other information’ that may help to effect a correct assessment of VAT as referred to in Article 1. (13) As mentioned earlier in point 14, the Commission is furthermore responsible for ‘whatever development of the CCN/CSI is necessary’ to permit the exchange of information between Member States (Article 55). As becomes clear from Article 57(2) this responsibility may under certain conditions involve access to the information which is exchanged through the system.

| 25. | It follows from the foregoing that the Commission will be processing personal data as well. It is thereby bound by the data protection rules applicable to EU institutions and bodies which are laid down in Regulation (EC) No 45/2001 and subject to the supervision of the EDPS. For the sake of clarity and in order to prevent any doubt on the applicability of the Regulation, the EDPS urges the legislator to include a reference to the Regulation in the recitals as well as in a substantive provision. |
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25.

It follows from the foregoing that the Commission will be processing personal data as well. It is thereby bound by the data protection rules applicable to EU institutions and bodies which are laid down in Regulation (EC) No 45/2001 and subject to the supervision of the EDPS. For the sake of clarity and in order to prevent any doubt on the applicability of the Regulation, the EDPS urges the legislator to include a reference to the Regulation in the recitals as well as in a substantive provision.

| 26. | If personal data are processed, Article 16 and 17 of Directive 95/46/EC and Article 21 and 22 of Regulation (EC) No 45/2001 require that the confidentiality and security of the data processing is ensured. It is not stated in so many words in the just cited Article 55 whether the Commission is responsible for the maintenance and security of the CCN/CSI (14). In order to avoid doubts about the responsibility for ensuring such confidentiality and security, the EDPS urges the legislator to define more clearly the responsibility of the Commission in this respect, to emphasise the obligations of the Member States and to put this all in the light of requirements stemming from Directive 95/46/EC and Regulation (EC) No 45/2001. |
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26.

If personal data are processed, Article 16 and 17 of Directive 95/46/EC and Article 21 and 22 of Regulation (EC) No 45/2001 require that the confidentiality and security of the data processing is ensured. It is not stated in so many words in the just cited Article 55 whether the Commission is responsible for the maintenance and security of the CCN/CSI (14). In order to avoid doubts about the responsibility for ensuring such confidentiality and security, the EDPS urges the legislator to define more clearly the responsibility of the Commission in this respect, to emphasise the obligations of the Member States and to put this all in the light of requirements stemming from Directive 95/46/EC and Regulation (EC) No 45/2001.

| 27. | Bringing clarity to who will be responsible for compliance with data protection rules (in data protection terminology referred to as the ‘controller’ (15)), is also important with regard to the establishment of Eurofisc. Article 35 explains that Eurofisc will be composed of competent officials designated by the competent authorities of the Member States. The Commission will provide Eurofisc with technical, administrative and operational support. The proposed structure raises questions as to the applicable data protection law (Directive 95/46/EC or Regulation (EC) No 45/2001) and to the responsibility for compliance with these rules. Does the Commission intend to keep Member States responsible either alone or in combination with the Commission, or will Eurofisc as such, and perhaps in combination with the Commission, be the responsible authority? The EDPS calls upon the legislator to clarify these issues and to ensure that responsibilities will be clearly allocated. |
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27.

Bringing clarity to who will be responsible for compliance with data protection rules (in data protection terminology referred to as the ‘controller’ (15)), is also important with regard to the establishment of Eurofisc. Article 35 explains that Eurofisc will be composed of competent officials designated by the competent authorities of the Member States. The Commission will provide Eurofisc with technical, administrative and operational support. The proposed structure raises questions as to the applicable data protection law (Directive 95/46/EC or Regulation (EC) No 45/2001) and to the responsibility for compliance with these rules. Does the Commission intend to keep Member States responsible either alone or in combination with the Commission, or will Eurofisc as such, and perhaps in combination with the Commission, be the responsible authority? The EDPS calls upon the legislator to clarify these issues and to ensure that responsibilities will be clearly allocated.

IV.   DETAILED ANALYSIS OF THE PROPOSAL

IV.1.   Data and purpose specification and ensuring the necessity of data processing

| 28. | The EDPS notes that the proposal does not sufficiently specify the kind of data that are exchanged and the purposes for which the data are exchanged. The proposal furthermore does not sufficiently ensure that personal data are only exchanged when necessary. This is all illustrated by Article 1(1) of the proposed Council Regulation. |
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28.

The EDPS notes that the proposal does not sufficiently specify the kind of data that are exchanged and the purposes for which the data are exchanged. The proposal furthermore does not sufficiently ensure that personal data are only exchanged when necessary. This is all illustrated by Article 1(1) of the proposed Council Regulation.

| 29. | Article 1(1) contains the overall purpose of the Regulation which is to ensure compliance with national VAT laws. This must be achieved through cooperation between Member States and the exchange of any information between the competent authorities of the Member States that may help to effect a correct assessment of VAT, monitor the correct application of VAT particularly on intra-Community transactions and combat fraud. |
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29.

Article 1(1) contains the overall purpose of the Regulation which is to ensure compliance with national VAT laws. This must be achieved through cooperation between Member States and the exchange of any information between the competent authorities of the Member States that may help to effect a correct assessment of VAT, monitor the correct application of VAT particularly on intra-Community transactions and combat fraud.

| 30. | Article 1(1) as such would not meet the requirements stemming from the Community rules on data protection since it is formulated too broadly and leaves too much room for discretion. This creates the risk of substantial non-compliance with applicable data protection rules in practice. |
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30.

Article 1(1) as such would not meet the requirements stemming from the Community rules on data protection since it is formulated too broadly and leaves too much room for discretion. This creates the risk of substantial non-compliance with applicable data protection rules in practice.

| 31. | Firstly, the notion of ‘any information’ is very broad and entails the risk of disproportionate information exchange. As said, it seems to include even further information about natural persons working for or otherwise connected to the legal persons. In this respect, the EDPS wishes to point at the provisions which deal with special categories of data and which contain specific and stricter rules for processing of data relating to offences, criminal convictions, administrative sanctions or judgments in civil cases (16). |
| --- | --- |

31.

Firstly, the notion of ‘any information’ is very broad and entails the risk of disproportionate information exchange. As said, it seems to include even further information about natural persons working for or otherwise connected to the legal persons. In this respect, the EDPS wishes to point at the provisions which deal with special categories of data and which contain specific and stricter rules for processing of data relating to offences, criminal convictions, administrative sanctions or judgments in civil cases (16).

| 32. | Secondly, the purposes for which information can be exchanged are very general, which is contrary to the requirement that the purpose must be specified and made explicit (17). |
| --- | --- |

32.

Secondly, the purposes for which information can be exchanged are very general, which is contrary to the requirement that the purpose must be specified and made explicit (17).

| 33. | Thirdly, according to Article 1(1), information can be exchanged when it ‘may help’ the competent authority in another Member State. If personal data are involved, this would be in conflict with the requirement that data are only processed in so far as it is necessary to achieve the set purpose (18). Without precise knowledge of what kind of personal information is involved and without a further specification of the purposes, it is in any case impossible to assess the necessity of the exchange. |
| --- | --- |

33.

Thirdly, according to Article 1(1), information can be exchanged when it ‘may help’ the competent authority in another Member State. If personal data are involved, this would be in conflict with the requirement that data are only processed in so far as it is necessary to achieve the set purpose (18). Without precise knowledge of what kind of personal information is involved and without a further specification of the purposes, it is in any case impossible to assess the necessity of the exchange.

| 34. | Some further specification of the purpose and of the kind of information which can or will be exchanged — at least in main lines or categories — is therefore needed in order for the exchange to be compliant with the data protection requirements. It should thereby also be assured that the necessity principle is complied with. |
| --- | --- |

34.

Some further specification of the purpose and of the kind of information which can or will be exchanged — at least in main lines or categories — is therefore needed in order for the exchange to be compliant with the data protection requirements. It should thereby also be assured that the necessity principle is complied with.

| 35. | When looking at Regulation (EC) No 1798/2003 in its entirety and the proposed amendments to it, the EDPS notes that further specifications are not or at best only partly provided for. The EDPS will elaborate further on this point of view below. A distinction will thereby be made between the different processing operations that take place: information exchange upon request, spontaneously information exchange, availability of information through the electronic database for competent authorities, information available to other VAT registered persons (the VIES) and processing of data by Eurofisc. |
| --- | --- |

35.

When looking at Regulation (EC) No 1798/2003 in its entirety and the proposed amendments to it, the EDPS notes that further specifications are not or at best only partly provided for. The EDPS will elaborate further on this point of view below. A distinction will thereby be made between the different processing operations that take place: information exchange upon request, spontaneously information exchange, availability of information through the electronic database for competent authorities, information available to other VAT registered persons (the VIES) and processing of data by Eurofisc.

Information upon request

| 36. | As regards information upon request, no further specifications are made as to the kind of information exchanged or to the purposes for which the exchange takes place. Article 7 refers to the ‘information referred to in Article 1’ and states that this includes ‘any information relating to a specific case or cases’. A request for information can lead to the performance of an administrative enquiry. In Article 9 reference is furthermore made to the transfer of ‘any pertinent information’. It is not clarified what kind of information it may entail. The purposes for which the data may be processed are not further specified and the requirement of necessity is not mentioned. |
| --- | --- |

36.

As regards information upon request, no further specifications are made as to the kind of information exchanged or to the purposes for which the exchange takes place. Article 7 refers to the ‘information referred to in Article 1’ and states that this includes ‘any information relating to a specific case or cases’. A request for information can lead to the performance of an administrative enquiry. In Article 9 reference is furthermore made to the transfer of ‘any pertinent information’. It is not clarified what kind of information it may entail. The purposes for which the data may be processed are not further specified and the requirement of necessity is not mentioned.

| 37. | The EDPS urges the legislator to specify the kind of personal information that can be exchanged, to circumscribe the purposes for which personal data can be exchanged and assess the necessity of the transfer, or at least assure that the necessity principle is respected. |
| --- | --- |

37.

The EDPS urges the legislator to specify the kind of personal information that can be exchanged, to circumscribe the purposes for which personal data can be exchanged and assess the necessity of the transfer, or at least assure that the necessity principle is respected.

Spontaneous exchange of information

| 38. | For the spontaneous exchange of information it is defined in which cases the Member State shall forward information to another competent authority. With regard to the kind of information that shall be exchanged reference is again made to Article 1(1). Article 14(1) mentions the following cases:






  1. | where taxation is deemed to take place in the Member State of destination and the information provided by the Member State of origin is necessary for the effectiveness of the control system of the Member State of destination; |
| --- | --- | --- |

38.

For the spontaneous exchange of information it is defined in which cases the Member State shall forward information to another competent authority. With regard to the kind of information that shall be exchanged reference is again made to Article 1(1). Article 14(1) mentions the following cases:

1.

where taxation is deemed to take place in the Member State of destination and the information provided by the Member State of origin is necessary for the effectiveness of the control system of the Member State of destination;

| 2. | where a Member State has grounds to believe that a breach of VAT legislation has been committed or is likely to have been committed in the other Member State; |
| --- | --- |

2.

where a Member State has grounds to believe that a breach of VAT legislation has been committed or is likely to have been committed in the other Member State;

| 3. | where there is a risk of tax loss in the other Member State. |
| --- | --- |

3.

where there is a risk of tax loss in the other Member State.

Although especially the second and third situation are still broad, these three cases could in principle be regarded as further specifications of the purposes for which data are exchanged. The first situation thereby even incorporates the necessity principle. However, spontaneous exchange of information is not restricted to these three situations. Article 15 states that any information referred to in Article 1 of which competent authorities are aware and which ‘may be useful’ to the competent authority of another Member States shall spontaneously be forwarded as well.

| 39. | The proposed changes in fact broaden the provisions which are currently in place. Article 18 of Regulation (EC) No 1798/2003 states that the exact categories of information to be exchanged spontaneously have to be defined in accordance with the Comitology procedure. The Commission now proposes to delete this provision. |
| --- | --- |

39.

The proposed changes in fact broaden the provisions which are currently in place. Article 18 of Regulation (EC) No 1798/2003 states that the exact categories of information to be exchanged spontaneously have to be defined in accordance with the Comitology procedure. The Commission now proposes to delete this provision.

| 40. | The EDPS again urges the legislator to specify the kind of personal information that can be exchanged, to circumscribe the purposes for which personal data can be exchanged and assess the necessity of the transfer, or at least assure that the necessity principle is respected. |
| --- | --- |

40.

The EDPS again urges the legislator to specify the kind of personal information that can be exchanged, to circumscribe the purposes for which personal data can be exchanged and assess the necessity of the transfer, or at least assure that the necessity principle is respected.

Availability of data through the electronic database

| 41. | With regard to the information available to competent authorities through the electronic database, the proposal is more specific as regards the kind of information contained in the database. Article 18 provides a list of information which shall be stored and processed in the electronic database. It concerns information collected pursuant to the general VAT Directive 2006/112/EC which is information gathered through the recapitulative statements and information collected by national authorities for the registration of non-established taxable persons supplying electronic services to other non-taxable persons. Other information in the database are the identity, activity or legal form of persons to whom a VAT identification number has been issued and the history of information exchanges upon request or spontaneously concerning these persons. The list and details of the data which are not collected pursuant to the VAT Directive shall be adopted in accordance with the Comitology procedure. |
| --- | --- |

41.

With regard to the information available to competent authorities through the electronic database, the proposal is more specific as regards the kind of information contained in the database. Article 18 provides a list of information which shall be stored and processed in the electronic database. It concerns information collected pursuant to the general VAT Directive 2006/112/EC which is information gathered through the recapitulative statements and information collected by national authorities for the registration of non-established taxable persons supplying electronic services to other non-taxable persons. Other information in the database are the identity, activity or legal form of persons to whom a VAT identification number has been issued and the history of information exchanges upon request or spontaneously concerning these persons. The list and details of the data which are not collected pursuant to the VAT Directive shall be adopted in accordance with the Comitology procedure.

| 42. | As from 1 January 2015, also information on persons supplying services will be put in the database, amongst which data on the turnover of these persons and information on compliance by these persons with their tax obligations, for example late submission of returns or existence of tax debts (see Article 18(3)). |
| --- | --- |

42.

As from 1 January 2015, also information on persons supplying services will be put in the database, amongst which data on the turnover of these persons and information on compliance by these persons with their tax obligations, for example late submission of returns or existence of tax debts (see Article 18(3)).

| 43. | Article 22 obliges the Member States to grant competent authorities from other Member States automated access to the information contained in the electronic database. The purposes for which the competent authorities will be able to consult the database are not further specified. This is a change to the current text of the Regulation in which it is laid down that competent authorities can have direct access to a limited part of the information and ‘solely in order to prevent a breach of VAT legislation’ and ‘wherever it considers it necessary for the control of intra-Community acquisitions of goods or intra-Community supplies of services’ (see the current Article 24). |
| --- | --- |

43.

Article 22 obliges the Member States to grant competent authorities from other Member States automated access to the information contained in the electronic database. The purposes for which the competent authorities will be able to consult the database are not further specified. This is a change to the current text of the Regulation in which it is laid down that competent authorities can have direct access to a limited part of the information and ‘solely in order to prevent a breach of VAT legislation’ and ‘wherever it considers it necessary for the control of intra-Community acquisitions of goods or intra-Community supplies of services’ (see the current Article 24).

| 44. | By widening the possibility for competent authorities to access the database, the proposal increases the data protection risks. However, if the number of personal data fields stored in the electronic database is as limited as possible, this does not have to pose a problem from a data protection perspective. In that respect, the EDPS welcomes the specification of the data contained in the databases. The proposal, however, only states what information the Member States are obliged to store in the database and is silent on whether any other information can be put in the database as well and whether this information can also be accessed by other competent authorities. The EDPS therefore recommends the legislator to state explicitly that, in as far as personal data are concerned, no other data shall be put in the database, or to at least ensure that automated access is restricted to the categories of data mentioned. The EDPS furthermore urges the legislator to circumscribe the purposes for which the databases can be directly accessed and assure that the necessity principle is respected. |
| --- | --- |

44.

By widening the possibility for competent authorities to access the database, the proposal increases the data protection risks. However, if the number of personal data fields stored in the electronic database is as limited as possible, this does not have to pose a problem from a data protection perspective. In that respect, the EDPS welcomes the specification of the data contained in the databases. The proposal, however, only states what information the Member States are obliged to store in the database and is silent on whether any other information can be put in the database as well and whether this information can also be accessed by other competent authorities. The EDPS therefore recommends the legislator to state explicitly that, in as far as personal data are concerned, no other data shall be put in the database, or to at least ensure that automated access is restricted to the categories of data mentioned. The EDPS furthermore urges the legislator to circumscribe the purposes for which the databases can be directly accessed and assure that the necessity principle is respected.

| 45. | The part on data exchange through the electronic databases also contains rules which relate to the quality of the data. Article 20 states that Member States shall ensure that their databases are kept up to date and are complete and accurate. Article 23 provides for regular checks on the information in order to guarantee the quality and reliability of the information contained in the database. These requirements are fully in line with the data quality requirements of Article 6(1)(d) of Directive 95/46/EC and Article 4(1)(d) of Regulation (EC) No 45/2001. Article 20 furthermore announces that, through the use of the Comitology procedure, criteria shall be defined to determine which changes to the database are not pertinent, essential or useful and therefore need not to be made. The EDPS underlines that these criteria should be in line with data protection requirements (see also points 57-59 below). |
| --- | --- |

45.

The part on data exchange through the electronic databases also contains rules which relate to the quality of the data. Article 20 states that Member States shall ensure that their databases are kept up to date and are complete and accurate. Article 23 provides for regular checks on the information in order to guarantee the quality and reliability of the information contained in the database. These requirements are fully in line with the data quality requirements of Article 6(1)(d) of Directive 95/46/EC and Article 4(1)(d) of Regulation (EC) No 45/2001. Article 20 furthermore announces that, through the use of the Comitology procedure, criteria shall be defined to determine which changes to the database are not pertinent, essential or useful and therefore need not to be made. The EDPS underlines that these criteria should be in line with data protection requirements (see also points 57-59 below).

| 46. | Article 19 states that information in the electronic database shall be stored for at least five years from the end of the first calendar year in which access to the information was granted. There is no justification given for such a storage period. If personal data are involved, providing for a minimum period without any reference to the necessity principle is contrary to the requirement of the data protection legislation that data should not be stored longer than necessary. The EDPS therefore encourages to reassess this provision in light of the obligation stemming from Article 6(1)(e) of Directive 95/46/EC and Article 4(1)(e) of Regulation (EC) No 45/2001 and determine a maximum storage period in case personal data are concerned, with possible exceptions only in exceptional circumstances. |
| --- | --- |

46.

Article 19 states that information in the electronic database shall be stored for at least five years from the end of the first calendar year in which access to the information was granted. There is no justification given for such a storage period. If personal data are involved, providing for a minimum period without any reference to the necessity principle is contrary to the requirement of the data protection legislation that data should not be stored longer than necessary. The EDPS therefore encourages to reassess this provision in light of the obligation stemming from Article 6(1)(e) of Directive 95/46/EC and Article 4(1)(e) of Regulation (EC) No 45/2001 and determine a maximum storage period in case personal data are concerned, with possible exceptions only in exceptional circumstances.

Information available through the VIES

| 47. | Chapter IX of the proposal deals with information available to taxable persons. As explained in point 13 above, the VIES currently enables taxable persons to obtain confirmation of the validity of the VAT identification number under which a person has effected or received an intra-Community supply of goods or services. The Commission proposes to add a phrase stating that such confirmation is sought for the purpose of such transactions and furthermore to also provide the applicant with the name and address associated to the VAT identification number. The EDPS takes the view that these rules are in conformity with the data protection requirements. |
| --- | --- |

47.

Chapter IX of the proposal deals with information available to taxable persons. As explained in point 13 above, the VIES currently enables taxable persons to obtain confirmation of the validity of the VAT identification number under which a person has effected or received an intra-Community supply of goods or services. The Commission proposes to add a phrase stating that such confirmation is sought for the purpose of such transactions and furthermore to also provide the applicant with the name and address associated to the VAT identification number. The EDPS takes the view that these rules are in conformity with the data protection requirements.

Eurofisc

| 48. | The Commission proposal creates a legal basis for the setting up of a common operational structure for multilateral cooperation (Eurofisc). The idea behind the structure is to allow for a fast exchange of targeted information between all Member States. The structure is intended to enable the performance of risk and strategic analyses on the basis of which multilateral exchange of information is promoted. In Article 36(2) it is stated that the arrangements for the exchange of information specific to the structure shall be determined in accordance with the Comitology procedure. In the chapter on which the structure should be established, no reference is made to any data protection requirements. The EDPS wishes to emphasise that — apart from the applicable law as discussed in part III above — the kind of personal information used should be specified, the purposes for which personal data will be investigated and exchanged must be circumscribed, and assurance should be given that the necessity principle is respected. |
| --- | --- |

48.

The Commission proposal creates a legal basis for the setting up of a common operational structure for multilateral cooperation (Eurofisc). The idea behind the structure is to allow for a fast exchange of targeted information between all Member States. The structure is intended to enable the performance of risk and strategic analyses on the basis of which multilateral exchange of information is promoted. In Article 36(2) it is stated that the arrangements for the exchange of information specific to the structure shall be determined in accordance with the Comitology procedure. In the chapter on which the structure should be established, no reference is made to any data protection requirements. The EDPS wishes to emphasise that — apart from the applicable law as discussed in part III above — the kind of personal information used should be specified, the purposes for which personal data will be investigated and exchanged must be circumscribed, and assurance should be given that the necessity principle is respected.

IV.2.   Other elements with data protection relevance

Article 57: the purpose limitation principle

| 49. | Chapter XV of the proposal deals with the conditions governing the exchange of information. The chapter contains provisions addressing the practicalities relating to the exchange of information. One article is of particular interest from a data protection point of view, namely Article 57. It states that persons dealing with information exchanged under the Regulation are bound by the obligation of official secrecy. Although in the fifth paragraph reference is made to Directive 95/46/EC (see below), the obligation of secrecy is not placed in light of data protection rules. The EDPS recommends the legislator to add a reference in the first paragraph to data protection legislation as well. |
| --- | --- |

49.

Chapter XV of the proposal deals with the conditions governing the exchange of information. The chapter contains provisions addressing the practicalities relating to the exchange of information. One article is of particular interest from a data protection point of view, namely Article 57. It states that persons dealing with information exchanged under the Regulation are bound by the obligation of official secrecy. Although in the fifth paragraph reference is made to Directive 95/46/EC (see below), the obligation of secrecy is not placed in light of data protection rules. The EDPS recommends the legislator to add a reference in the first paragraph to data protection legislation as well.

| 50. | Paragraph 1 of Article 57 seems to introduce the use of data for other purposes than those previously referred to in the Regulation. Paragraph 3 explicitly allows for the use of information for ‘other purposes’ if, under the legislation of the Member State of the requested authority, the information can be used for similar purposes. In this respect, the EDPS points at the purpose limitation principle which is laid down in Article 6(1)(b) of Directive 95/46/EC and Article 4(1)(b) of Regulation (EC) No 45/2001. The EDPS underlines that if personal data are involved, these data can in principle not be used for other purposes than the one for which they were collected, unless strict conditions are satisfied under Article 13(1) of the Directive or Article 20(1) of the Regulation (see also points 51-53 below). The EDPS therefore requests the legislator to reassess this provision in the light of the purpose limitation principle as laid down in Article 6(1)(b) of Directive 95/46 and Article 4(1)(b) of Regulation (EC) No 45/2001. |
| --- | --- |

50.

Paragraph 1 of Article 57 seems to introduce the use of data for other purposes than those previously referred to in the Regulation. Paragraph 3 explicitly allows for the use of information for ‘other purposes’ if, under the legislation of the Member State of the requested authority, the information can be used for similar purposes. In this respect, the EDPS points at the purpose limitation principle which is laid down in Article 6(1)(b) of Directive 95/46/EC and Article 4(1)(b) of Regulation (EC) No 45/2001. The EDPS underlines that if personal data are involved, these data can in principle not be used for other purposes than the one for which they were collected, unless strict conditions are satisfied under Article 13(1) of the Directive or Article 20(1) of the Regulation (see also points 51-53 below). The EDPS therefore requests the legislator to reassess this provision in the light of the purpose limitation principle as laid down in Article 6(1)(b) of Directive 95/46 and Article 4(1)(b) of Regulation (EC) No 45/2001.

Article 57(5): restriction of certain specific data protection rights and obligations

| 51. | Recital 35 announces that for the purposes of the Regulation it is appropriate to consider limitations of certain rights and obligations laid down by Directive 95/46/EC. Reference is made to Article 13(1)(e) of the Directive which allows for such limitations. The proposal adds to this recital that these limitations are necessary and proportionate in view of the potential loss of revenue for Member States and the crucial importance of this information to effectively combating fraud. |
| --- | --- |

51.

Recital 35 announces that for the purposes of the Regulation it is appropriate to consider limitations of certain rights and obligations laid down by Directive 95/46/EC. Reference is made to Article 13(1)(e) of the Directive which allows for such limitations. The proposal adds to this recital that these limitations are necessary and proportionate in view of the potential loss of revenue for Member States and the crucial importance of this information to effectively combating fraud.

| 52. | The recital is elaborated in Article 57(5). After stating that all storage or exchange of information referred to in the Regulation is subject to the provisions implementing Directive 95/46/EC (see point 23 above), it continues by stating that ‘Member States shall, for the purpose of the correct application of this Regulation, restrict the scope of the obligations and rights provided for in Article 10, Article 11(1), Articles 12 and 21 of Directive 95/46/EC to the extent required in order to safeguard the interests referred to in Article 13(e) of that Directive’. The Articles referred to contain the obligation for the controller to inform the data subject (Article 10 and 11), the right of access to one's own information (Article 12) and the duty for the national data protection authority to keep a public register on data processing operations (Article 21). |
| --- | --- |

52.

The recital is elaborated in Article 57(5). After stating that all storage or exchange of information referred to in the Regulation is subject to the provisions implementing Directive 95/46/EC (see point 23 above), it continues by stating that ‘Member States shall, for the purpose of the correct application of this Regulation, restrict the scope of the obligations and rights provided for in Article 10, Article 11(1), Articles 12 and 21 of Directive 95/46/EC to the extent required in order to safeguard the interests referred to in Article 13(e) of that Directive’. The Articles referred to contain the obligation for the controller to inform the data subject (Article 10 and 11), the right of access to one's own information (Article 12) and the duty for the national data protection authority to keep a public register on data processing operations (Article 21).

| 53. | The EDPS underlines that Article 13(e) of Directive 95/46/EC enables exemptions to certain provisions of the Directive and must be interpreted strictly. The EDPS acknowledges that in certain circumstances it could be considered as necessary for the purpose of tax fraud prevention and detection to temporarily set aside the duty to inform the data subject in advance and the right to obtain access to the information. However, Article 13 of Directive 95/46/EC requires that (i) such a restriction is laid down in a ‘legislative measure’ and that (ii) the restriction ‘constitutes a necessary measure to safeguard’ one of the interests listed. The current text of the proposed Article 57(5) does not reflect the first requirement since no reference is made to the required basis in law. The EDPS therefore urges the legislator to include this requirement in Article 57(5). The second requirement can be read into the phrase ‘to the extent required’. However, for the sake of consistency the EDPS recommends to replace this phrase by ‘if it constitutes a necessary measure’. The EDPS furthermore urges the legislator to reject the proposed additional sentence in recital 35 which states that the limitations are necessary and proportionate, since this sentence is too general and has no further legal value. |
| --- | --- |

53.

The EDPS underlines that Article 13(e) of Directive 95/46/EC enables exemptions to certain provisions of the Directive and must be interpreted strictly. The EDPS acknowledges that in certain circumstances it could be considered as necessary for the purpose of tax fraud prevention and detection to temporarily set aside the duty to inform the data subject in advance and the right to obtain access to the information. However, Article 13 of Directive 95/46/EC requires that (i) such a restriction is laid down in a ‘legislative measure’ and that (ii) the restriction ‘constitutes a necessary measure to safeguard’ one of the interests listed. The current text of the proposed Article 57(5) does not reflect the first requirement since no reference is made to the required basis in law. The EDPS therefore urges the legislator to include this requirement in Article 57(5). The second requirement can be read into the phrase ‘to the extent required’. However, for the sake of consistency the EDPS recommends to replace this phrase by ‘if it constitutes a necessary measure’. The EDPS furthermore urges the legislator to reject the proposed additional sentence in recital 35 which states that the limitations are necessary and proportionate, since this sentence is too general and has no further legal value.

Transparency

| 54. | Articles 10 and 11 of Directive 95/46/EC contain the obligation for the controller to inform the data subject before the data are collected or, in case the data are not obtained from the data subject, at the time of undertaking the recording of the data. These provisions can be considered as elaborations of the general principle of transparency which is part of the fairness of processing as required in Article 6(1)(a) of Directive 95/46/EC. The EDPS has noted that the proposal contains no further provisions which deal with the transparency principle, for instance on how the system is communicated to the public at large or how data subjects will be informed about the data processing. The EDPS therefore urges the legislator to adopt a provision in which the transparency of the cooperation and the supporting systems is dealt with. |
| --- | --- |

54.

Articles 10 and 11 of Directive 95/46/EC contain the obligation for the controller to inform the data subject before the data are collected or, in case the data are not obtained from the data subject, at the time of undertaking the recording of the data. These provisions can be considered as elaborations of the general principle of transparency which is part of the fairness of processing as required in Article 6(1)(a) of Directive 95/46/EC. The EDPS has noted that the proposal contains no further provisions which deal with the transparency principle, for instance on how the system is communicated to the public at large or how data subjects will be informed about the data processing. The EDPS therefore urges the legislator to adopt a provision in which the transparency of the cooperation and the supporting systems is dealt with.

Article 52: exchange of information with third countries

| 55. | Article 52 foresees the possibility of information exchange with third countries. It states that ‘information obtained under this Regulation may be communicated to [a] third country, with the consent of the competent authorities which supplied the information, in accordance with their domestic provisions applying to the communication of personal data to third countries’. The EDPS is pleased to see that the legislator is aware of the special rules that apply to the exchange of personal data to countries outside the EU. For the sake of clarity an explicit reference to Directive 95/46/EC could be included in the text, stating that such a transfer should be in conformity with the domestic rules implementing the provisions of Chapter IV of Directive 95/46/EC which deals with the transfer of personal data to third countries. |
| --- | --- |

55.

Article 52 foresees the possibility of information exchange with third countries. It states that ‘information obtained under this Regulation may be communicated to [a] third country, with the consent of the competent authorities which supplied the information, in accordance with their domestic provisions applying to the communication of personal data to third countries’. The EDPS is pleased to see that the legislator is aware of the special rules that apply to the exchange of personal data to countries outside the EU. For the sake of clarity an explicit reference to Directive 95/46/EC could be included in the text, stating that such a transfer should be in conformity with the domestic rules implementing the provisions of Chapter IV of Directive 95/46/EC which deals with the transfer of personal data to third countries.

| 56. | The proposal only refers to the competent authorities of the Member States. It is unclear whether any exchange of (personal) information to third countries is also envisaged at European level. This is closely related to the questions raised in Part III above on the law applicable to the conduct of Eurofisc. A transfer of personal data to a third country by Community institutions or bodies must be in conformity with Article 9 of Regulation (EC) No 45/2001. The EDPS requests the legislator to clarify this. |
| --- | --- |

56.

The proposal only refers to the competent authorities of the Member States. It is unclear whether any exchange of (personal) information to third countries is also envisaged at European level. This is closely related to the questions raised in Part III above on the law applicable to the conduct of Eurofisc. A transfer of personal data to a third country by Community institutions or bodies must be in conformity with Article 9 of Regulation (EC) No 45/2001. The EDPS requests the legislator to clarify this.

Comitology

| 57. | As becomes clear from the analysis above, there are several issues with data protection relevance which will be further elaborated in rules adopted following the Comitology procedure as laid down in Article 60 of the proposal (see points 41, 45 and 48 above). Although the EDPS understands the practical need for using such a procedure, he wishes to underline that the main data protection references and guarantees should be laid down in the basic law. |
| --- | --- |

57.

As becomes clear from the analysis above, there are several issues with data protection relevance which will be further elaborated in rules adopted following the Comitology procedure as laid down in Article 60 of the proposal (see points 41, 45 and 48 above). Although the EDPS understands the practical need for using such a procedure, he wishes to underline that the main data protection references and guarantees should be laid down in the basic law.

| 58. | The EDPS wishes to emphasise that if further rules are discussed through Comitology, this should be done with the data protection requirements stemming from Directive 95/46/EC and Regulation (EC) No 45/2001 in mind. The EDPS furthermore urges the Commission to involve the EDPS and request his advice if further rules with data protection relevance are indeed discussed. This would for instance be the case with the setting up of Eurofisc (see point 48 above). |
| --- | --- |

58.

The EDPS wishes to emphasise that if further rules are discussed through Comitology, this should be done with the data protection requirements stemming from Directive 95/46/EC and Regulation (EC) No 45/2001 in mind. The EDPS furthermore urges the Commission to involve the EDPS and request his advice if further rules with data protection relevance are indeed discussed. This would for instance be the case with the setting up of Eurofisc (see point 48 above).

| 59. | In order to ensure the involvement of the EDPS when further rules are adopted on the basis of the Comitology procedure which have data protection relevance, the EDPS recommends the legislator to include in Article 60 a third paragraph stating the following ‘where implementing measures relate to the processing of personal data the European Data Protection Supervisor shall be consulted’. |
| --- | --- |

59.

In order to ensure the involvement of the EDPS when further rules are adopted on the basis of the Comitology procedure which have data protection relevance, the EDPS recommends the legislator to include in Article 60 a third paragraph stating the following ‘where implementing measures relate to the processing of personal data the European Data Protection Supervisor shall be consulted’.

V.   CONCLUSION AND RECOMMENDATIONS

| 60. | The EDPS is aware of the importance of enhancing the effectiveness of measures against cross-border fraud and of achieving better collection of VAT in cross-border situations. The EDPS furthermore acknowledges that in order to achieve these purposes it is inevitable that personal data are processed. The EDPS underlines however that the processing of such data must be in conformity with the Community rules on data protection. |
| --- | --- |

60.

The EDPS is aware of the importance of enhancing the effectiveness of measures against cross-border fraud and of achieving better collection of VAT in cross-border situations. The EDPS furthermore acknowledges that in order to achieve these purposes it is inevitable that personal data are processed. The EDPS underlines however that the processing of such data must be in conformity with the Community rules on data protection.

| 61. | After an analysis of the legal framework stemming from Regulation (EC) No 1798/2003 and the adjustments currently proposed, the EDPS has concluded that, although several positive elements can be found, not all the requirements stemming from the Community rules on data protection are met. |
| --- | --- |

61.

After an analysis of the legal framework stemming from Regulation (EC) No 1798/2003 and the adjustments currently proposed, the EDPS has concluded that, although several positive elements can be found, not all the requirements stemming from the Community rules on data protection are met.

| 62. | In the current Opinion the EDPS has advised the legislator the following:






  — | As regards the issue of the applicable Community legislation on data protection, to clarify the respective responsibilities of the Member States, the Commission and Eurofisc for compliance with these rules. |
| --- | --- | --- |

62.

In the current Opinion the EDPS has advised the legislator the following:

—

As regards the issue of the applicable Community legislation on data protection, to clarify the respective responsibilities of the Member States, the Commission and Eurofisc for compliance with these rules.

| — | As regards the data exchange between competent authorities upon request or spontaneously, to specify the kind of personal information that can be exchanged, to circumscribe the purposes for which personal data can be exchanged and assess the necessity of the transfer, or at least assure that the necessity principle is respected. |
| --- | --- |

—

As regards the data exchange between competent authorities upon request or spontaneously, to specify the kind of personal information that can be exchanged, to circumscribe the purposes for which personal data can be exchanged and assess the necessity of the transfer, or at least assure that the necessity principle is respected.

| — | With regard to the data exchange through the direct accessibility of the electronic databases, to state explicitly that, in as far as personal data are concerned, no other data, then the data already defined, shall be put in the database, or to at least ensure that automated access is restricted to the categories of data mentioned. And furthermore to circumscribe the purposes for which the databases can be directly accessed, to assure that the necessity principle is respected, and to determine a maximum storage period for keeping personal data in the database, with possible exceptions in exceptional circumstances. |
| --- | --- |

—

With regard to the data exchange through the direct accessibility of the electronic databases, to state explicitly that, in as far as personal data are concerned, no other data, then the data already defined, shall be put in the database, or to at least ensure that automated access is restricted to the categories of data mentioned. And furthermore to circumscribe the purposes for which the databases can be directly accessed, to assure that the necessity principle is respected, and to determine a maximum storage period for keeping personal data in the database, with possible exceptions in exceptional circumstances.

| — | With regard to Article 57 (and recital 35),






  — | to add a reference in the first paragraph to the Community legislation on data protection, |
| --- | --- | --- |

—

With regard to Article 57 (and recital 35),

—

to add a reference in the first paragraph to the Community legislation on data protection,

| — | to reassess paragraph 1 and 3 in the light of the purpose limitation principle as laid down in Article 6(1)(b) of Directive 95/46 and Article 4(1)(b) of Regulation (EC) No 45/2001, |
| --- | --- |

—

to reassess paragraph 1 and 3 in the light of the purpose limitation principle as laid down in Article 6(1)(b) of Directive 95/46 and Article 4(1)(b) of Regulation (EC) No 45/2001,

| — | to include in paragraph 5 the requirement contained in Article 13 of Directive 95/46/EC that a restriction of the obligations and rights mentioned should be laid down in a legislative measure, |
| --- | --- |

—

to include in paragraph 5 the requirement contained in Article 13 of Directive 95/46/EC that a restriction of the obligations and rights mentioned should be laid down in a legislative measure,

| — | to replace in paragraph 5 the phrase ‘to the extent required’ by ‘if it constitutes a necessary measure’, |
| --- | --- |

—

to replace in paragraph 5 the phrase ‘to the extent required’ by ‘if it constitutes a necessary measure’,

| — | to reject the proposed additional sentence in recital 35. |
| --- | --- |

—

to reject the proposed additional sentence in recital 35.

| — | With regard to the principle of transparency, to adopt a provision in which the transparency of the cooperation and the supporting systems is dealt with. |
| --- | --- |

—

With regard to the principle of transparency, to adopt a provision in which the transparency of the cooperation and the supporting systems is dealt with.

| — | As regards the exchange of data with third countries, to include an explicit reference to Chapter IV of Directive 95/46/EC in Article 52 and to clarify whether any exchange of personal information to third countries is envisaged by the Commission and/or by Eurofisc. |
| --- | --- |

—

As regards the exchange of data with third countries, to include an explicit reference to Chapter IV of Directive 95/46/EC in Article 52 and to clarify whether any exchange of personal information to third countries is envisaged by the Commission and/or by Eurofisc.

| — | With regard to the rules adopted on the basis of Comitology, to add a third paragraph to Article 60 stating the following: ‘where implementing measures relate to the processing of personal data the European Data Protection Supervisor shall be consulted’. |
| --- | --- |

—

With regard to the rules adopted on the basis of Comitology, to add a third paragraph to Article 60 stating the following: ‘where implementing measures relate to the processing of personal data the European Data Protection Supervisor shall be consulted’.

Done in Brussels, 30 October 2009.

Peter HUSTINX

European Data Protection Supervisor

---

(1)  OJ L 281, 23.11.1995, p. 31.

1

(2)  OJ L 8, 12.1.2001, p. 1.

2

(3)  COM(2009) 427 final of 18 August 2009.

3

(4)  OJ L 264, 15.10.2003, p. 1.

4

(5)  See the Interinstitutional Agreement of 28 November 2001 on a more structured use of the recasting technique for legal acts (OJ C 77, 28.3.2002, p. 1).

5

(6)  Communication COM(2006) 254 of 31 May 2006 concerning the need to develop a coordinated strategy to improve the fight against fiscal fraud.

6

(7)  See Council Conclusions of 4 December 2007 and 7 October 2008, Resolution of 2 September 2008 of the European Parliament (2008/2033(INI)). See Communication COM(2008) 807 of 1 December 2008.

7

(8)  OJ L 347, 11.12.2006, p. 1.

8

(9)  Report COM(2009) 428 of 18 August 2009 on the application of Regulation (EC) No 1798/2003.

9

(10)  The proposal incorporates the changes to Regulation (EC) No 1798/2003 which are envisaged by Council Regulation (EC) No 143/2008 and which will apply as from 1 January 2015 (OJ L 44, 20.2.2008, p. 1). These changes introduce rules relating to the place of supply of services, the special schemes and the refund procedure for VAT.

10

(11)  See the Explanatory Memorandum to the proposal on p. 4.

11

(12)  See Article 2(a) of Directive 95/46/EC and Article 2(a) of Regulation (EC) No 45/2001. See Opinion 4/2007 of 20 June 2007 of the Article 29 Working Party for an explanation of the concept of ‘personal data’ (available at http://ec.europa.eu/justice_home/fsj/privacy/docs/wpdocs/2007/wp136_en.pdf).

12

(13)  See also point 28 and further. In the remainder of this Opinion all references to recitals and Articles refer to those of the proposal, unless stated otherwise.

13

(14)  See for relevant comments also the EDPS Opinion of 16 September 2008 on the proposal for a Council Decision on the establishment of the European Criminal Records Information System (ECRIS) (OJ C 42, 20.2.2009, p. 1), point 23 and further.

14

(15)  See Article 2(d) of Directive 95/46/EC and Article 2(d) of Regulation (EC) No 45/2001. Both provisions envisage the possibility of single and joint control (‘... alone or jointly with others ...’).

15

(16)  See Article 8(5) of Directive 95/46/EC and Article 10(5) of Regulation (EC) No 45/2001.

16

(17)  See Article 6(1)(b) of Directive 95/46/EC and Article 4(1)(b) of Regulation (EC) No 45/2001.

17

(18)  See Article 7 of Directive 95/46/EC and Article 5 of Regulation (EC) No 45/2001.

18

---

II Information

INFORMATION FROM EUROPEAN UNION INSTITUTIONS, BODIES, OFFICES AND AGENCIES

European Commission

| 17.3.2010 | EN | Official Journal of the European Union | C 66/10 |
| --- | --- | --- | --- |

17.3.2010

EN

Official Journal of the European Union

C 66/10

---

Non-opposition to a notified concentration

(Case COMP/M.5712 — Mitsubishi Chemical Holdings/Mitsubishi Rayon Co)

(Text with EEA relevance)

2010/C 66/02

On 25 February 2010, the Commission decided not to oppose the above notified concentration and to declare it compatible with the common market. This decision is based on Article 6(1)(b) of Council Regulation (EC) No 139/2004. The full text of the decision is available only in English and will be made public after it is cleared of any business secrets it may contain. It will be available:

| — | in the merger section of the Competition website of the Commission (http://ec.europa.eu/competition/mergers/cases/). This website provides various facilities to help locate individual merger decisions, including company, case number, date and sectoral indexes, |
| --- | --- |

—

in the merger section of the Competition website of the Commission (http://ec.europa.eu/competition/mergers/cases/). This website provides various facilities to help locate individual merger decisions, including company, case number, date and sectoral indexes,

| — | in electronic form on the EUR-Lex website (http://eur-lex.europa.eu/en/index.htm) under document number 32010M5712. EUR-Lex is the on-line access to the European law. |
| --- | --- |

—

in electronic form on the EUR-Lex website (http://eur-lex.europa.eu/en/index.htm) under document number 32010M5712. EUR-Lex is the on-line access to the European law.

---

| 17.3.2010 | EN | Official Journal of the European Union | C 66/10 |
| --- | --- | --- | --- |

17.3.2010

EN

Official Journal of the European Union

C 66/10

---

Non-opposition to a notified concentration

(Case COMP/M.5750 — Wabco/Würth/JV)

(Text with EEA relevance)

2010/C 66/03

On 11 March 2010, the Commission decided not to oppose the above notified concentration and to declare it compatible with the common market. This decision is based on Article 6(1)(b) of Council Regulation (EC) No 139/2004. The full text of the decision is available only in German and will be made public after it is cleared of any business secrets it may contain. It will be available:

| — | in the merger section of the Competition website of the Commission (http://ec.europa.eu/competition/mergers/cases/). This website provides various facilities to help locate individual merger decisions, including company, case number, date and sectoral indexes, |
| --- | --- |

—

in the merger section of the Competition website of the Commission (http://ec.europa.eu/competition/mergers/cases/). This website provides various facilities to help locate individual merger decisions, including company, case number, date and sectoral indexes,

| — | in electronic form on the EUR-Lex website (http://eur-lex.europa.eu/en/index.htm) under document number 32010M5750. EUR-Lex is the on-line access to the European law. |
| --- | --- |

—

in electronic form on the EUR-Lex website (http://eur-lex.europa.eu/en/index.htm) under document number 32010M5750. EUR-Lex is the on-line access to the European law.

---

IV Notices

NOTICES FROM EUROPEAN UNION INSTITUTIONS, BODIES, OFFICES AND AGENCIES

European Commission

| 17.3.2010 | EN | Official Journal of the European Union | C 66/11 |
| --- | --- | --- | --- |

17.3.2010

EN

Official Journal of the European Union

C 66/11

---

Euro exchange rates (1)

16 March 2010

2010/C 66/04

1 euro =

| | Currency | Exchange rate |
| --- | --- | --- |
| USD | US dollar | 1,3723 |
| JPY | Japanese yen | 124,22 |
| DKK | Danish krone | 7,4407 |
| GBP | Pound sterling | 0,90690 |
| SEK | Swedish krona | 9,7242 |
| CHF | Swiss franc | 1,4516 |
| ISK | Iceland króna | |
| NOK | Norwegian krone | 8,0145 |
| BGN | Bulgarian lev | 1,9558 |
| CZK | Czech koruna | 25,504 |
| EEK | Estonian kroon | 15,6466 |
| HUF | Hungarian forint | 264,19 |
| LTL | Lithuanian litas | 3,4528 |
| LVL | Latvian lats | 0,7077 |
| PLN | Polish zloty | 3,8865 |
| RON | Romanian leu | 4,0893 |
| TRY | Turkish lira | 2,0944 |
| AUD | Australian dollar | 1,5005 |
| CAD | Canadian dollar | 1,3944 |
| HKD | Hong Kong dollar | 10,6493 |
| NZD | New Zealand dollar | 1,9477 |
| SGD | Singapore dollar | 1,9155 |
| KRW | South Korean won | 1 555,03 |
| ZAR | South African rand | 10,1320 |
| CNY | Chinese yuan renminbi | 9,3672 |
| HRK | Croatian kuna | 7,2570 |
| IDR | Indonesian rupiah | 12 581,48 |
| MYR | Malaysian ringgit | 4,5538 |
| PHP | Philippine peso | 62,740 |
| RUB | Russian rouble | 40,2510 |
| THB | Thai baht | 44,497 |
| BRL | Brazilian real | 2,4197 |
| MXN | Mexican peso | 17,1894 |
| INR | Indian rupee | 62,4650 |

Currency

Exchange rate

USD

US dollar

1,3723

JPY

Japanese yen

124,22

DKK

Danish krone

7,4407

GBP

Pound sterling

0,90690

SEK

Swedish krona

9,7242

CHF

Swiss franc

1,4516

ISK

Iceland króna

NOK

Norwegian krone

8,0145

BGN

Bulgarian lev

1,9558

CZK

Czech koruna

25,504

EEK

Estonian kroon

15,6466

HUF

Hungarian forint

264,19

LTL

Lithuanian litas

3,4528

LVL

Latvian lats

0,7077

PLN

Polish zloty

3,8865

RON

Romanian leu

4,0893

TRY

Turkish lira

2,0944

AUD

Australian dollar

1,5005

CAD

Canadian dollar

1,3944

HKD

Hong Kong dollar

10,6493

NZD

New Zealand dollar

1,9477

SGD

Singapore dollar

1,9155

KRW

South Korean won

1 555,03

ZAR

South African rand

10,1320

CNY

Chinese yuan renminbi

9,3672

HRK

Croatian kuna

7,2570

IDR

Indonesian rupiah

12 581,48

MYR

Malaysian ringgit

4,5538

PHP

Philippine peso

62,740

RUB

Russian rouble

40,2510

THB

Thai baht

44,497

BRL

Brazilian real

2,4197

MXN

Mexican peso

17,1894

INR

Indian rupee

62,4650

---

(1)  Source: reference exchange rate published by the ECB.

---

| 17.3.2010 | EN | Official Journal of the European Union | C 66/12 |
| --- | --- | --- | --- |

17.3.2010

EN

Official Journal of the European Union

C 66/12

---

Commission notice on the quantity of certain products in the milk and milk products sector available for the second half of 2010 under certain quotas opened by the Community

2010/C 66/05

When import licences were allocated for the first half of 2010 for certain quotas mentioned in Commission Regulation (EC) No 2535/2001 (1), the licence applications covered quantities less than those available for the products concerned. Therefore, the quantity available for each quota for the period 1 July to 31 December 2010 should be calculated taking account of the unallocated quantities resulting from import licence applications lodged between 20 and 30 November 2009 for butter originating in New Zealand under quotas 09.4195 and 09.4182 and for milk products originating in the Republic of Moldova under quota 09.4210.

The quantities available for the period 1 July to 31 December 2010 for the second half of the year of importation for certain quotas referred to in Regulation (EC) No 2535/2001 are set out below.

---

(1)  OJ L 341, 22.12.2001, p. 29.

---

ANNEX

| Products originating in the Republic of Moldova |
| --- |
| Quota number | Quantity (kilograms) |
| 09.4210 | 1 500 000 |

Products originating in the Republic of Moldova

Quota number

Quantity (kilograms)

09.4210

1 500 000

| Butter originating in New Zealand |
| --- |
| Quota number | Quantity (kilograms) |
| 09.4195 | 26 494 400 |
| 09.4182 | 33 612 000 |

Butter originating in New Zealand

Quota number

Quantity (kilograms)

09.4195

26 494 400

09.4182

33 612 000

---

V Announcements

ADMINISTRATIVE PROCEDURES

European Commission

| 17.3.2010 | EN | Official Journal of the European Union | C 66/13 |
| --- | --- | --- | --- |

17.3.2010

EN

Official Journal of the European Union

C 66/13

---

Calls for proposals under the 2010 work programme ‘People’ of the 7th EC Framework Programme for Research, Technological Development and Demonstration Activities

2010/C 66/06

Notice is hereby given of the launch of calls for proposals under the 2010 work programme ‘People’ of the 7th Framework Programme of the European Community for Research, Technological Development and Demonstration Activities (2007 to 2013).

Proposals are invited for the following calls. Calls deadline and budget are given in the call text, which is published on the CORDIS website.

‘People’ Specific Programme:

| Call Title | Call Identifier |
| --- | --- |
| Intra-European Fellowships | FP7-PEOPLE-2010-IEF |
| International Incoming Fellowships | FP7-PEOPLE-2010-IIF |
| International Outgoing Fellowships | FP7-PEOPLE-2010-IOF |

Call Title

Call Identifier

Intra-European Fellowships

FP7-PEOPLE-2010-IEF

International Incoming Fellowships

FP7-PEOPLE-2010-IIF

International Outgoing Fellowships

FP7-PEOPLE-2010-IOF

These calls for proposals relate to the 2010 work programme adopted by Commission Decision C(2009) 5892 of 29 July 2009.

Information on the modalities of the calls, the work programme, and the guide for applicants on how to submit proposals is available through the CORDIS website: http://cordis.europa.eu/fp7/calls/

---

| 17.3.2010 | EN | Official Journal of the European Union | C 66/14 |
| --- | --- | --- | --- |

17.3.2010

EN

Official Journal of the European Union

C 66/14

---

Call for proposals for modal shift, catalyst, motorways of the sea, traffic avoidance and common learning actions under the second Marco Polo Programme

(Regulation (EC) No 1692/2006 of the European Parliament and of the Council — OJ L 328, 24.11.2006, p. 1)

2010/C 66/07

The European Commission is hereby launching a call for proposals for the selection procedure 2010 under the second Marco Polo Programme. The call is closing on 18 May 2010.

Information on the modalities of the call and guidance to proposers on how to submit projects, is available at the following website:

http://ec.europa.eu/transport/marcopolo/calls/2010_en.htm

The helpdesk of the Marco Polo Programme can be reached via e-mail: eaci-marco-polo-helpdesk@ec.europa.eu and fax: +32 22979506.

---

PROCEDURES RELATING TO THE IMPLEMENTATION OF COMPETITION POLICY

European Commission

| 17.3.2010 | EN | Official Journal of the European Union | C 66/15 |
| --- | --- | --- | --- |

17.3.2010

EN

Official Journal of the European Union

C 66/15

---

STATE AID — GERMANY

State aid C 40/09 (ex N 555/09) — Additional aid for WestLB AG related to spin-off of assets

Invitation to submit comments pursuant to Article 108(2) TFEU

(Text with EEA relevance)

2010/C 66/08

By means of the letter dated 22 December 2009 reproduced in the authentic language on the pages following this summary, the Commission notified Germany of its decision to initiate the procedure laid down in Article 108(2) TFEU concerning the abovementioned aid/measure.

Interested parties may submit their comments on the measure in respect of which the Commission is initiating the procedure within one month of the date of publication of this summary and the following letter, to:

| European Commission |
| --- |
| Directorate-General for Competition |
| State aid Greffe |
| Rue de la Loi/Wetstraat 200 |
| 1049 Bruxelles/Brussel |
| BELGIQUE/BELGIЁ |
| Fax +32 22961242 |

European Commission

Directorate-General for Competition

State aid Greffe

Rue de la Loi/Wetstraat 200

1049 Bruxelles/Brussel

BELGIQUE/BELGIЁ

Fax +32 22961242

These comments will be communicated to Germany. Confidential treatment of the identity of the interested party submitting the comments may be requested in writing, stating the reasons for the request.

SUMMARY

I.   PROCEDURE

| (1) | On 12 May 2009, in case C 43/08 the Commission conditionally approved restructuring aid to WestLB in the form of a risk shield on the Phoenix portfolio of EUR 5 billion. |
| --- | --- |

(1)

On 12 May 2009, in case C 43/08 the Commission conditionally approved restructuring aid to WestLB in the form of a risk shield on the Phoenix portfolio of EUR 5 billion.

| (2) | On 10 December 2009, Germany notified a recapitalisation in favour of WestLB by Germany amounting to EUR 3 billion and a guarantee by the public shareholders of WestLB amounting to EUR 1 billion, which are required to facilitate an asset relief measure in the form of a bad bank. The bad bank shall take over assets with a nominal value of EUR 85,1 billion. The asset relief measure was anticipated in the restructuring Decision of 12 May 2009. However, the additional aid now required was neither notified nor authorised previously. |
| --- | --- |

(2)

On 10 December 2009, Germany notified a recapitalisation in favour of WestLB by Germany amounting to EUR 3 billion and a guarantee by the public shareholders of WestLB amounting to EUR 1 billion, which are required to facilitate an asset relief measure in the form of a bad bank. The bad bank shall take over assets with a nominal value of EUR 85,1 billion. The asset relief measure was anticipated in the restructuring Decision of 12 May 2009. However, the additional aid now required was neither notified nor authorised previously.

II.   FACTS

| (3) | WestLB intends to spin-off its toxic and non-strategic assets into a bad bank. A two-step procedure is envisaged: in a first step, WestLB wants to spin off the toxic assets with a nominal value of approximately EUR 23,8 billion. In a second step, planned for April 2010, it wants to spin off non-strategic assets with a nominal value of approximately EUR 61,3 billion (in total: EUR 85,1 billion). |
| --- | --- |

(3)

WestLB intends to spin-off its toxic and non-strategic assets into a bad bank. A two-step procedure is envisaged: in a first step, WestLB wants to spin off the toxic assets with a nominal value of approximately EUR 23,8 billion. In a second step, planned for April 2010, it wants to spin off non-strategic assets with a nominal value of approximately EUR 61,3 billion (in total: EUR 85,1 billion).

| (4) | WestLB will equip the bad bank with an ‘equity buffer’ of EUR 3 billion to cover expected losses. As WestLB does not have sufficient capital, SoFFin will inject into WestLB the amount of EUR 3 billion in form of a silent participation. Further, losses are to be covered by a guarantee of EUR 1 billion by WestLB's shareholders. |
| --- | --- |

(4)

WestLB will equip the bad bank with an ‘equity buffer’ of EUR 3 billion to cover expected losses. As WestLB does not have sufficient capital, SoFFin will inject into WestLB the amount of EUR 3 billion in form of a silent participation. Further, losses are to be covered by a guarantee of EUR 1 billion by WestLB's shareholders.

| (5) | Germany has clarified that the implementation of the bad bank solution anticipated in the Decision of 12 May has not yet taken place. Furthermore, that solution requires the significant amount of additional aid described above. To this end, Germany has presented an updated restructuring plan which however only envisages minor changes. Germany also provides several commitments which allow for an accelerated sale of WestLB. |
| --- | --- |

(5)

Germany has clarified that the implementation of the bad bank solution anticipated in the Decision of 12 May has not yet taken place. Furthermore, that solution requires the significant amount of additional aid described above. To this end, Germany has presented an updated restructuring plan which however only envisages minor changes. Germany also provides several commitments which allow for an accelerated sale of WestLB.

III.   ASSESSMENT

| (6) | The measures — the recapitalisation, the guarantee and the assets relief measure — constitute State aid in favour of WestLB. |
| --- | --- |

(6)

The measures — the recapitalisation, the guarantee and the assets relief measure — constitute State aid in favour of WestLB.

| (7) | While the recapitalisation meets the requirements of the Recapitalisation Communication of 5 December 2008, the assets relief measure, which must be assessed under the Impaired Asset Communication of 25 February 2009, cannot at this stage be considered compatible. It does not fulfil the conditions of transparency and disclosure, valuation, burden sharing, and remuneration. Moreover, the measures also raise doubts under the Restructuring Communication of 22 July 2009 regarding the bank's chances of restoring viability, burden sharing and mitigation of distortion of competition. In the light of the foregoing considerations, the Commission has decided to initiate the procedure laid down in Article 108(2) TFEU regarding the asset relief in the form of the establishment of a bad bank as well as on the restructuring aid of WestLB. |
| --- | --- |

(7)

While the recapitalisation meets the requirements of the Recapitalisation Communication of 5 December 2008, the assets relief measure, which must be assessed under the Impaired Asset Communication of 25 February 2009, cannot at this stage be considered compatible. It does not fulfil the conditions of transparency and disclosure, valuation, burden sharing, and remuneration. Moreover, the measures also raise doubts under the Restructuring Communication of 22 July 2009 regarding the bank's chances of restoring viability, burden sharing and mitigation of distortion of competition. In the light of the foregoing considerations, the Commission has decided to initiate the procedure laid down in Article 108(2) TFEU regarding the asset relief in the form of the establishment of a bad bank as well as on the restructuring aid of WestLB.

| (8) | However, given the imminent threat to financial stability without the measures, the Commission authorises the recapitalisation measure, the guarantee and the asset relief temporarily for six months as emergency aid under Article 107(3)(b) TFEU. |
| --- | --- |

(8)

However, given the imminent threat to financial stability without the measures, the Commission authorises the recapitalisation measure, the guarantee and the asset relief temporarily for six months as emergency aid under Article 107(3)(b) TFEU.

TEXT OF LETTER

‘The Commission wishes to inform Germany that, having examined the information supplied by your authorities on the measure referred to above, it has decided to initiate the procedure laid down in Article 108(2) of the Treaty on the Functioning of the European Union (TFEU) (1) since the Commission has doubts as to the compatibility of the measures with the internal market.

1.   PROCEDURE

| (1) | On 12 May 2009, in Case C 43/08 (2) the Commission conditionally approved restructuring aid to WestLB AG (“WestLB”) in the form of a risk shield on the Phoenix portfolio of EUR 5 billion. It requires the sale of the bank by the end of 2011. |
| --- | --- |

(1)

On 12 May 2009, in Case C 43/08 (2) the Commission conditionally approved restructuring aid to WestLB AG (“WestLB”) in the form of a risk shield on the Phoenix portfolio of EUR 5 billion. It requires the sale of the bank by the end of 2011.

| (2) | On 7 October 2009, in Case N 531/09 (3) the Commission approved as compatible emergency aid a risk assumption of EUR 6,4 billion (4) of the already protected Phoenix portfolio, which de facto further increased the initial risk shield. Germany committed to notify by 30 November 2009 a revised restructuring plan which would take into account any additional State aid not approved by the Decision of 12 May 2009 and therefore provide for additional restructuring. |
| --- | --- |

(2)

On 7 October 2009, in Case N 531/09 (3) the Commission approved as compatible emergency aid a risk assumption of EUR 6,4 billion (4) of the already protected Phoenix portfolio, which de facto further increased the initial risk shield. Germany committed to notify by 30 November 2009 a revised restructuring plan which would take into account any additional State aid not approved by the Decision of 12 May 2009 and therefore provide for additional restructuring.

| (3) | An updated restructuring plan was submitted on 15 December 2009. |
| --- | --- |

(3)

An updated restructuring plan was submitted on 15 December 2009.

| (4) | On 10 December 2009, Germany notified a recapitalisation of WestLB amounting to EUR 3 billion as well as a guarantee of EUR 1 billion, which are necessary for the establishment of a bad bank by WestLB. The bad bank will relieve WestLB from assets with a nominal value of EUR 85,1 billion. That asset relief measure was envisaged in general terms in the restructuring Decision of 12 May 2009 (5). |
| --- | --- |

(4)

On 10 December 2009, Germany notified a recapitalisation of WestLB amounting to EUR 3 billion as well as a guarantee of EUR 1 billion, which are necessary for the establishment of a bad bank by WestLB. The bad bank will relieve WestLB from assets with a nominal value of EUR 85,1 billion. That asset relief measure was envisaged in general terms in the restructuring Decision of 12 May 2009 (5).

| (5) | Following discussions with the Commission, Germany provided several commitments and additional information by 16 December 2009. |
| --- | --- |

(5)

Following discussions with the Commission, Germany provided several commitments and additional information by 16 December 2009.

| (6) | Given the urgency to get a Commission decision on these measures, Germany has exceptionally agreed that the authentic language for this decision should be English. |
| --- | --- |

(6)

Given the urgency to get a Commission decision on these measures, Germany has exceptionally agreed that the authentic language for this decision should be English.

2.   DESCRIPTION OF THE AID

WestLB AG

| (7) | The beneficiary WestLB is a public limited company, with its registered headquarters in North Rhine-Westphalia. WestLB is a service provider for Germany's largest savings banks network and public-sector clients. WestLB has until recently offered a universal bank's range of products and services, including products for private clients, midmarket companies and corporate enterprises, partly in cooperation with savings banks, partly via subsidiaries specialised in consumer loans, private banking and commercial real estate finance. In line with a restructuring plan dated 30 April 2009, which was approved in the restructuring Decision of 12 May 2009, WestLB is currently unbundling its core activities and abandoning non-core activities. WestLB's published balance-sheet total was EUR 288 billion on 31 December 2008, while its risk-weighted assets stood at EUR 88,5 billion. As of 30 September 2009, the bank's published balance-sheet total was equal to EUR 258,8 billion and its risk-weighted assets stood at EUR 84,2 billion. |
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(7)

The beneficiary WestLB is a public limited company, with its registered headquarters in North Rhine-Westphalia. WestLB is a service provider for Germany's largest savings banks network and public-sector clients. WestLB has until recently offered a universal bank's range of products and services, including products for private clients, midmarket companies and corporate enterprises, partly in cooperation with savings banks, partly via subsidiaries specialised in consumer loans, private banking and commercial real estate finance. In line with a restructuring plan dated 30 April 2009, which was approved in the restructuring Decision of 12 May 2009, WestLB is currently unbundling its core activities and abandoning non-core activities. WestLB's published balance-sheet total was EUR 288 billion on 31 December 2008, while its risk-weighted assets stood at EUR 88,5 billion. As of 30 September 2009, the bank's published balance-sheet total was equal to EUR 258,8 billion and its risk-weighted assets stood at EUR 84,2 billion.

| (8) | WestLB is currently owned by the Westfälisch-Lippische Sparkassen- und Giroverband (WLSGV), which accounts for 25,03 % of its shares, the Rheinische Sparkassen- und Giroverband (RSGV), which owns 25,03 % and — both directly and indirectly, via the NRW.BANK (formerly known as Landesbank Nordhein-Westfalen) — the Land of North Rhine-Westphalia (37,74 %), the Landschaftsverband Westfalen Lippe (LWL; 6,09 %), and the Landschaftsverband Rheinland (LVR; 6,09 %). |
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(8)

WestLB is currently owned by the Westfälisch-Lippische Sparkassen- und Giroverband (WLSGV), which accounts for 25,03 % of its shares, the Rheinische Sparkassen- und Giroverband (RSGV), which owns 25,03 % and — both directly and indirectly, via the NRW.BANK (formerly known as Landesbank Nordhein-Westfalen) — the Land of North Rhine-Westphalia (37,74 %), the Landschaftsverband Westfalen Lippe (LWL; 6,09 %), and the Landschaftsverband Rheinland (LVR; 6,09 %).

2.1.   The restructuring Decision of 12 May 2009

| (9) | At the end of March 2008, WestLB's shareholders granted the bank an “impaired assets relief” measure through a risk shield of up to EUR 5 billion for a portfolio of structured securities with a nominal volume of approximately EUR 23 billion (“Phoenix”) in order to prevent bank resolution procedures. |
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(9)

At the end of March 2008, WestLB's shareholders granted the bank an “impaired assets relief” measure through a risk shield of up to EUR 5 billion for a portfolio of structured securities with a nominal volume of approximately EUR 23 billion (“Phoenix”) in order to prevent bank resolution procedures.

| (10) | WestLB is currently in the process of implementing the restructuring plan dated 30 April 2009 which was approved in the restructuring Decision of 12 May 2009. The implementation of the plan gives rise to significant divestures and a reshuffle of the bank's business model. In particular, WestLB will stop proprietary trading activities and, overall, reduce its assets by 50 %. The bank will focus on three core business areas: “transaction banking”; “medium-sized companies, savings banks partnership, and corporate banking”, and “capital market activities and structured finance” which all have to be structurally separated. |
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(10)

WestLB is currently in the process of implementing the restructuring plan dated 30 April 2009 which was approved in the restructuring Decision of 12 May 2009. The implementation of the plan gives rise to significant divestures and a reshuffle of the bank's business model. In particular, WestLB will stop proprietary trading activities and, overall, reduce its assets by 50 %. The bank will focus on three core business areas: “transaction banking”; “medium-sized companies, savings banks partnership, and corporate banking”, and “capital market activities and structured finance” which all have to be structurally separated.

| (11) | In order to achieve the targeted balance sheet reduction, the restructuring plan set out explicitly in Annex 2 point 3.3.l that the “reduction of the total balance sheet and the risk-weighted assets ... is based on the assumption that WestLB will fully dispose a number of assets grouped in an exit portfolio.” However, no additional aid was foreseen or authorised for this purpose. Regarding the exit portfolio it was planned from the very beginning to spin off both structured securities and non-strategic assets of approximately EUR 85 billion (the so-called “PEG” portfolio, of which the Phoenix portfolio is part) to a so-called bad bank, set up pursuant to the Gesetz zur Fortentwicklung der Finanzmarktstabilisierung, the German bad bank law (FMStFG). This transaction was initially scheduled to be completed well in advance of 31 December 2009, in order to meet the caps on the balance sheet total. Moreover, Germany committed to initiate the change of the bank's ownership structure through a public tender procedure before the end of 2011. |
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(11)

In order to achieve the targeted balance sheet reduction, the restructuring plan set out explicitly in Annex 2 point 3.3.l that the “reduction of the total balance sheet and the risk-weighted assets ... is based on the assumption that WestLB will fully dispose a number of assets grouped in an exit portfolio.” However, no additional aid was foreseen or authorised for this purpose. Regarding the exit portfolio it was planned from the very beginning to spin off both structured securities and non-strategic assets of approximately EUR 85 billion (the so-called “PEG” portfolio, of which the Phoenix portfolio is part) to a so-called bad bank, set up pursuant to the Gesetz zur Fortentwicklung der Finanzmarktstabilisierung, the German bad bank law (FMStFG). This transaction was initially scheduled to be completed well in advance of 31 December 2009, in order to meet the caps on the balance sheet total. Moreover, Germany committed to initiate the change of the bank's ownership structure through a public tender procedure before the end of 2011.

| (12) | The spin-off could not be carried out as initially planned since WestLB's shareholders did not agree upon the set-up of the bad bank. Furthermore, the capital required to enable the spin-off of risky and non-strategic assets had been substantially underestimated. |
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(12)

The spin-off could not be carried out as initially planned since WestLB's shareholders did not agree upon the set-up of the bad bank. Furthermore, the capital required to enable the spin-off of risky and non-strategic assets had been substantially underestimated.

2.2.   The Decision of 7 October 2009

| (13) | In October 2009, additional aid in the form of a further risk assumption for the Phoenix portfolio in the amount of EUR 6,4 billion was required to address an additional capital shortage that had not been made known previously and was therefore not addressed in the Commission Decision of 12 May 2009. Due to increasing losses and mounting risk weights, the risk shield for the Phoenix portfolio was no longer sufficient to achieve a risk transfer. Therefore, the portfolio became subject to regulatory capital requirements again. As a result, WestLB's overall capital ratio fell to [< 7 %] (6) and, therefore, significantly short of the regulatory minimum capital requirements. Without the provision of additional capital or State aid, the German regulator BaFin would have been obliged to initiate bank resolution procedures. |
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(13)

In October 2009, additional aid in the form of a further risk assumption for the Phoenix portfolio in the amount of EUR 6,4 billion was required to address an additional capital shortage that had not been made known previously and was therefore not addressed in the Commission Decision of 12 May 2009. Due to increasing losses and mounting risk weights, the risk shield for the Phoenix portfolio was no longer sufficient to achieve a risk transfer. Therefore, the portfolio became subject to regulatory capital requirements again. As a result, WestLB's overall capital ratio fell to [< 7 %] (6) and, therefore, significantly short of the regulatory minimum capital requirements. Without the provision of additional capital or State aid, the German regulator BaFin would have been obliged to initiate bank resolution procedures.

| (14) | This additional aid during the restructuring phase was temporarily approved for reasons of financial stability by the Commission in its Decision of 7 October 2009. However, that decision required a reassessment of the existing restructuring plan and the planned restructuring measures. Additionally, Germany provided a commitment that all shareholders would ensure the sale of the “core” bank, including establishing a core capital ratio of 7 %. |
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(14)

This additional aid during the restructuring phase was temporarily approved for reasons of financial stability by the Commission in its Decision of 7 October 2009. However, that decision required a reassessment of the existing restructuring plan and the planned restructuring measures. Additionally, Germany provided a commitment that all shareholders would ensure the sale of the “core” bank, including establishing a core capital ratio of 7 %.

2.3.   The new measures — Bad bank and additional recapitalisation

| (15) | At the end of November 2009, the risk assumption granted under the Decision of 7 October expired before the intended asset relief measure had been implemented. In addition, despite an explicit commitment by Germany that all shareholders had undertaken to inject the capital required to increase WestLB's Tier 1 capital so that it had a Tier 1 ratio of 7 %, the savings banks failed to do so. As a result, the overall capital ratio fell to [< 6,7 %] and, thus, again short of regulatory minimum capital requirements. |
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(15)

At the end of November 2009, the risk assumption granted under the Decision of 7 October expired before the intended asset relief measure had been implemented. In addition, despite an explicit commitment by Germany that all shareholders had undertaken to inject the capital required to increase WestLB's Tier 1 capital so that it had a Tier 1 ratio of 7 %, the savings banks failed to do so. As a result, the overall capital ratio fell to [< 6,7 %] and, thus, again short of regulatory minimum capital requirements.

(a)   The recapitalisation of WestLB

| (16) | On 24 November 2009, Germany and WestLB's shareholders agreed upon the details of the creation of the bad bank under the FMStFG. WestLB is at present not sufficiently capitalized to finance this transaction without external support. Therefore, SoFFin will inject overall EUR 3 billion in at least three partial payments, taking place between 18 December 2009 and 30 April 2010, in form of a silent participation that can be converted into ordinary shares after 1 July 2010 (7). |
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(16)

On 24 November 2009, Germany and WestLB's shareholders agreed upon the details of the creation of the bad bank under the FMStFG. WestLB is at present not sufficiently capitalized to finance this transaction without external support. Therefore, SoFFin will inject overall EUR 3 billion in at least three partial payments, taking place between 18 December 2009 and 30 April 2010, in form of a silent participation that can be converted into ordinary shares after 1 July 2010 (7).

(b)   The bad bank for WestLB

| (17) | WestLB intends to spin off its toxic and non-strategic assets into a bad bank under Section 8a of the FMStFG (8). Those assets have been assigned to two portfolios, the first called Phoenix portfolio, the second PEG portfolio. |
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(17)

WestLB intends to spin off its toxic and non-strategic assets into a bad bank under Section 8a of the FMStFG (8). Those assets have been assigned to two portfolios, the first called Phoenix portfolio, the second PEG portfolio.

| (18) | The Phoenix portfolio contains toxic assets, mainly structured securities, with a nominal value of approximately EUR 23,8 billion (as of 30 June 2009). The Phoenix portfolio will be transferred to the bad bank with the original risk shield of 5 billion. |
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(18)

The Phoenix portfolio contains toxic assets, mainly structured securities, with a nominal value of approximately EUR 23,8 billion (as of 30 June 2009). The Phoenix portfolio will be transferred to the bad bank with the original risk shield of 5 billion.

| (19) | The remaining portfolio comprises mainly non-strategic assets, in particular corporate, State, municipal and student loans, as well as collateralized debt obligations, and other structured securities. It has a nominal value of approximately EUR 61,3 billion (as of 30 June 2009). |
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(19)

The remaining portfolio comprises mainly non-strategic assets, in particular corporate, State, municipal and student loans, as well as collateralized debt obligations, and other structured securities. It has a nominal value of approximately EUR 61,3 billion (as of 30 June 2009).

| (20) | The combined nominal value of the two portfolios is EUR 85,1 billion. According to information provided by Germany, the book value of the assets is equal to EUR [65-75] billion and the estimated real economic value equal to EUR [60-70] billion. No market value of the portfolios was submitted although the Commission has repeatedly asked for it. |
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(20)

The combined nominal value of the two portfolios is EUR 85,1 billion. According to information provided by Germany, the book value of the assets is equal to EUR [65-75] billion and the estimated real economic value equal to EUR [60-70] billion. No market value of the portfolios was submitted although the Commission has repeatedly asked for it.

| (21) | Regarding the set-up of the bad bank WestLB proposes a two-step procedure: in a first step, to be implemented before 31 December 2009, the Phoenix portfolio will be split off, with the retroactive cut-off date set at 1 January 2009. In a second step, planned for April 2010, WestLB intends to spin off the remaining portfolio, to be implemented retroactively with effect as of 1 January 2010. Germany requests the temporary authorisation of this measure for 6 months. |
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(21)

Regarding the set-up of the bad bank WestLB proposes a two-step procedure: in a first step, to be implemented before 31 December 2009, the Phoenix portfolio will be split off, with the retroactive cut-off date set at 1 January 2009. In a second step, planned for April 2010, WestLB intends to spin off the remaining portfolio, to be implemented retroactively with effect as of 1 January 2010. Germany requests the temporary authorisation of this measure for 6 months.

| (22) | After the spin-off, those assets and liabilities will be held by the bad bank. In order to ensure that expected losses of the assets are sufficiently covered, WestLB will equip the bad bank with equity of EUR 3 billion. It will provide the capital step-by-step, in line with the staggered spin-off of assets and the corresponding need for capital. Germany requests the temporary authorisation of this measure for 6 months. |
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(22)

After the spin-off, those assets and liabilities will be held by the bad bank. In order to ensure that expected losses of the assets are sufficiently covered, WestLB will equip the bad bank with equity of EUR 3 billion. It will provide the capital step-by-step, in line with the staggered spin-off of assets and the corresponding need for capital. Germany requests the temporary authorisation of this measure for 6 months.

| (23) | Potential further losses will be covered by a guarantee by WestLB's shareholders in the amount of EUR 1 billion in total, provided by the Land North Rhine-Westphalia (EUR 0,482 billion), by the savings banks associations RSGV and WLSGV (EUR 0,501 billion), and by the regional authorities LVR and LWL (EUR 0,017 billion). Germany also requests the temporary authorisation of this measure for 6 months. |
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(23)

Potential further losses will be covered by a guarantee by WestLB's shareholders in the amount of EUR 1 billion in total, provided by the Land North Rhine-Westphalia (EUR 0,482 billion), by the savings banks associations RSGV and WLSGV (EUR 0,501 billion), and by the regional authorities LVR and LWL (EUR 0,017 billion). Germany also requests the temporary authorisation of this measure for 6 months.

| (24) | Should the envisaged capital not suffice to cover the losses incurred in the future by the bad bank, such losses — pursuant to the FMStFG — must be covered by the shareholders of the beneficiary bank. However, that obligation to compensate further losses is capped in this case as regards RSGV and WLSGV at an amount of EUR 4 billion in total (EUR 4,5 billion considering EUR 0,5 billion related to the guarantee given as former owners, the so-called “Alteigentümergarantie”). In order to provide these EUR 4 billion, RSGV and WLSGV are permitted to build up adequate reserves for this obligation over a period of 25 years. Any further losses exceeding the equity of the bad bank and the existing guarantees will be borne by FMSA and the Land North Rhine-Westphalia, releasing RSGV and WLSGV from their corresponding obligations. |
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(24)

Should the envisaged capital not suffice to cover the losses incurred in the future by the bad bank, such losses — pursuant to the FMStFG — must be covered by the shareholders of the beneficiary bank. However, that obligation to compensate further losses is capped in this case as regards RSGV and WLSGV at an amount of EUR 4 billion in total (EUR 4,5 billion considering EUR 0,5 billion related to the guarantee given as former owners, the so-called “Alteigentümergarantie”). In order to provide these EUR 4 billion, RSGV and WLSGV are permitted to build up adequate reserves for this obligation over a period of 25 years. Any further losses exceeding the equity of the bad bank and the existing guarantees will be borne by FMSA and the Land North Rhine-Westphalia, releasing RSGV and WLSGV from their corresponding obligations.

(c)   Envisaged further recapitalisation of WestLB

| (25) | Finally, SoFFin and the Land North Rhine-Westphalia have agreed to provide further equity for WestLB if such additional support is required to enable the sale of WestLB even after the establishment of the bad bank. 51 % of the capital needs will be provided by the Land North Rhine-Westphalia in the form of a first-loss guarantee, and 49 % will be provided by SoFFin. SoFFin has restricted its commitment to EUR 1 billion; hence, an overall support of EUR 2 billion must not be exceeded. This potential additional measure is not the subject of Germany's request for temporary authorisation for 6 months. |
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(25)

Finally, SoFFin and the Land North Rhine-Westphalia have agreed to provide further equity for WestLB if such additional support is required to enable the sale of WestLB even after the establishment of the bad bank. 51 % of the capital needs will be provided by the Land North Rhine-Westphalia in the form of a first-loss guarantee, and 49 % will be provided by SoFFin. SoFFin has restricted its commitment to EUR 1 billion; hence, an overall support of EUR 2 billion must not be exceeded. This potential additional measure is not the subject of Germany's request for temporary authorisation for 6 months.

(d)   Key assumptions of the restructuring plan

| (26) | The revised restructuring plan — of which a summary was provided on 15 December 2009 — foresees that, as initially planned, WestLB will withdraw from the markets for real estate finance (except for services provided to the saving banks), retail banking, asset management, and private equity. A core feature of WestLB’s strategic orientation towards a client-focussed business model remains the withdrawal from proprietary trading. However, WestLB had to revise the targets for profit set in the initial plan, as general market conditions over the last months proved to be worse than expected by WestLB. |
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(26)

The revised restructuring plan — of which a summary was provided on 15 December 2009 — foresees that, as initially planned, WestLB will withdraw from the markets for real estate finance (except for services provided to the saving banks), retail banking, asset management, and private equity. A core feature of WestLB’s strategic orientation towards a client-focussed business model remains the withdrawal from proprietary trading. However, WestLB had to revise the targets for profit set in the initial plan, as general market conditions over the last months proved to be worse than expected by WestLB.

| (27) | The bank now plans to achieve a target of EUR 500 million in profit before taxes only in 2014 at the earliest, and not by 2012, as initially planned. That revision of targets is not only due to general market conditions, but also due to the fact that its rating was recently downgraded to BBB+. WestLB estimates that a Single-A-Rating will not be reached again before 31 December 2010. Consequently, WestLB now has reduced access to funding whilst simultaneously it is exposed to stricter capital requirements and a significant increase in impairment charges for credit losses. Nevertheless, WestLB’s strategic thrust remains unchanged as compared to the initial plan. Deconsolidation will be extended and produce additional saving effects. Sectors without strategic importance and low expertise are to be phased out. WestLB will liquidate or sell at least five more affiliate companies than originally planned. Its offices in Buenos Aires and Santiago de Chile will be closed. WestLB plans to withdraw from the funds business, own issues of closed-end investment funds, the private equity business, and the leveraged finance business. With regard to the substance of the business model, the revised restructuring plan shows overall only minor changes. |
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(27)

The bank now plans to achieve a target of EUR 500 million in profit before taxes only in 2014 at the earliest, and not by 2012, as initially planned. That revision of targets is not only due to general market conditions, but also due to the fact that its rating was recently downgraded to BBB+. WestLB estimates that a Single-A-Rating will not be reached again before 31 December 2010. Consequently, WestLB now has reduced access to funding whilst simultaneously it is exposed to stricter capital requirements and a significant increase in impairment charges for credit losses. Nevertheless, WestLB’s strategic thrust remains unchanged as compared to the initial plan. Deconsolidation will be extended and produce additional saving effects. Sectors without strategic importance and low expertise are to be phased out. WestLB will liquidate or sell at least five more affiliate companies than originally planned. Its offices in Buenos Aires and Santiago de Chile will be closed. WestLB plans to withdraw from the funds business, own issues of closed-end investment funds, the private equity business, and the leveraged finance business. With regard to the substance of the business model, the revised restructuring plan shows overall only minor changes.

| (28) | Germany agreed to the Commission's proposal to establish concrete parameters that will allow monitoring of WestLB's commitment, given in the context of the restructuring Decision of 12 May 2009, to cease proprietary trading activities. |
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(28)

Germany agreed to the Commission's proposal to establish concrete parameters that will allow monitoring of WestLB's commitment, given in the context of the restructuring Decision of 12 May 2009, to cease proprietary trading activities.

| (29) | On 16 December 2009, WestLB issued an ad hoc publication announcing that it might not be able to achieve a positive result in 2009 but probably record a loss. Therefore, it would not be able to pay dividends or coupons and such instruments would participate in the loss. |
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(29)

On 16 December 2009, WestLB issued an ad hoc publication announcing that it might not be able to achieve a positive result in 2009 but probably record a loss. Therefore, it would not be able to pay dividends or coupons and such instruments would participate in the loss.

3.   COMMENTS BY GERMANY

| (30) | Due to the fact that WestLB, a systemically relevant bank, would become subject to bank resolution procedures without State aid being granted, and the serious consequences that this event would entail for Germany's financial system and to the German economy, Germany requests an urgent temporary authorisation of the measures for six months. |
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(30)

Due to the fact that WestLB, a systemically relevant bank, would become subject to bank resolution procedures without State aid being granted, and the serious consequences that this event would entail for Germany's financial system and to the German economy, Germany requests an urgent temporary authorisation of the measures for six months.

| (31) | Germany agrees that the capital injection of EUR 3 billion by SoFFin constitutes State aid. Germany also does not dispute that the taking over of losses of the owners for the assets in the bad bank could constitute aid. However, in this particular case, Germany disputes the existence of elements of State aid. It claims that the spin-off of the assets would be accompanied by sufficient equity (the EUR 3 billion) to cover expected and unexpected losses. The additional explicit guarantee provided by the shareholders and their obligation to bear potential losses resulting from the resolution of the bad bank should be considered as a mere safeguard for eventualities. Potential benefits stemming from State resources would be of theoretical nature only. Whereas Germany acknowledges that, in theory, this could be the case under very unrealistic assumptions as far as the guarantee is concerned, that possibility is entirely excluded as regards the shareholders obligation to bear losses potentially resulting from the resolution of the bad bank. |
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(31)

Germany agrees that the capital injection of EUR 3 billion by SoFFin constitutes State aid. Germany also does not dispute that the taking over of losses of the owners for the assets in the bad bank could constitute aid. However, in this particular case, Germany disputes the existence of elements of State aid. It claims that the spin-off of the assets would be accompanied by sufficient equity (the EUR 3 billion) to cover expected and unexpected losses. The additional explicit guarantee provided by the shareholders and their obligation to bear potential losses resulting from the resolution of the bad bank should be considered as a mere safeguard for eventualities. Potential benefits stemming from State resources would be of theoretical nature only. Whereas Germany acknowledges that, in theory, this could be the case under very unrealistic assumptions as far as the guarantee is concerned, that possibility is entirely excluded as regards the shareholders obligation to bear losses potentially resulting from the resolution of the bad bank.

| (32) | Germany commits that WestLB shall pay a remuneration of 10 % p.a. which is to be paid retroactively for the EUR 3 billion recapitalisation. |
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(32)

Germany commits that WestLB shall pay a remuneration of 10 % p.a. which is to be paid retroactively for the EUR 3 billion recapitalisation.

| (33) | Germany furthermore commits to adjust the remuneration to bring it in line with the requirements of the Impaired Assets Communication should the valuation to be performed by the Commission reveal additional benefits to WestLB. |
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(33)

Germany furthermore commits to adjust the remuneration to bring it in line with the requirements of the Impaired Assets Communication should the valuation to be performed by the Commission reveal additional benefits to WestLB.

| (34) | Germany commits that the aid shall be limited to the minimum necessary by providing the recapitalisation pro rata and by implementing a redemption mechanism should future developments result in an overcapitalisation. |
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(34)

Germany commits that the aid shall be limited to the minimum necessary by providing the recapitalisation pro rata and by implementing a redemption mechanism should future developments result in an overcapitalisation.

| (35) | Additionally, Germany commits that SoFFin will receive proceeds resulting from the sale of WestLB or parts thereof prior to the other shareholders until the capital granted by it is paid back fully. |
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(35)

Additionally, Germany commits that SoFFin will receive proceeds resulting from the sale of WestLB or parts thereof prior to the other shareholders until the capital granted by it is paid back fully.

| (36) | Germany further commits that until the measures are terminated, WestLB will make payments on capital instruments only to the extent it is under an obligation to do so without releasing reserves or the special reserves pursuant to Section 340(g) of the German Commercial Code. Furthermore, these instruments shall participate in losses if losses could only be avoided through the release of such reserves. |
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(36)

Germany further commits that until the measures are terminated, WestLB will make payments on capital instruments only to the extent it is under an obligation to do so without releasing reserves or the special reserves pursuant to Section 340(g) of the German Commercial Code. Furthermore, these instruments shall participate in losses if losses could only be avoided through the release of such reserves.

| (37) | Germany commits to start the sales process of WestLB earlier than initially planned, i.e. [within the first half of] 2010. Furthermore, if the sale has not been concluded at the beginning of 2011, Germany commits to appoint, subject to a corresponding decision by the Commission, a divestiture trustee who has the power to sell WestLB or parts thereof. Germany, however, refuses to commit to additional restructuring or measures limiting distortion of competition. |
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(37)

Germany commits to start the sales process of WestLB earlier than initially planned, i.e. [within the first half of] 2010. Furthermore, if the sale has not been concluded at the beginning of 2011, Germany commits to appoint, subject to a corresponding decision by the Commission, a divestiture trustee who has the power to sell WestLB or parts thereof. Germany, however, refuses to commit to additional restructuring or measures limiting distortion of competition.

4.   ASSESSMENT

4.1.   Existence of State aid

| (38) | Article 107(1) TFEU provides that, save as otherwise provided in the Treaty, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market. |
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(38)

Article 107(1) TFEU provides that, save as otherwise provided in the Treaty, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.

| (39) | In concurrence with the German authorities, the Commission considers first that the EUR 3 billion capital injection of SoFFin and the guarantee of EUR 1 billion by WestLB's shareholders constitute State aid within the meaning of Article 107(1) TFEU (9). No market investor would grant WestLB the same support under the current circumstances. |
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(39)

In concurrence with the German authorities, the Commission considers first that the EUR 3 billion capital injection of SoFFin and the guarantee of EUR 1 billion by WestLB's shareholders constitute State aid within the meaning of Article 107(1) TFEU (9). No market investor would grant WestLB the same support under the current circumstances.

| (40) | Additionally, the Commission considers that the establishment of a bad bank under the FMStFG can comprise additional aid to the beneficiary bank which must be assessed under the Commission’s Impaired Asset Communication (10) (“IAC”). The IAC provides guidance on the treatment under Article 107(3)(b) EC of asset relief measures by Member States, including in particular bad bank solutions as indicated in Annex II to the IAC. |
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(40)

Additionally, the Commission considers that the establishment of a bad bank under the FMStFG can comprise additional aid to the beneficiary bank which must be assessed under the Commission’s Impaired Asset Communication (10) (“IAC”). The IAC provides guidance on the treatment under Article 107(3)(b) EC of asset relief measures by Member States, including in particular bad bank solutions as indicated in Annex II to the IAC.

| (41) | The Commission recalls that according to the IAC impaired assets correspond to categories of assets on which banks are likely to incur losses. It defines asset relief as any measure whereby a bank is dispensed from the need for severe downward value adjustments of certain asset classes. In the present case the main purpose of the bad bank is to provide relief from risky and non-strategic assets of WestLB. The bad bank solution is intended to protect WestLB against the risk of future devaluation of assets included in the portfolio. The bad bank, in its design as well in its effects, allows WestLB to avoid considerable write-downs and at the same time reduces the bank's regulatory capital requirements. Therefore, the bad bank constitutes an asset relief measure and falls within the scope of the IAC (11). |
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(41)

The Commission recalls that according to the IAC impaired assets correspond to categories of assets on which banks are likely to incur losses. It defines asset relief as any measure whereby a bank is dispensed from the need for severe downward value adjustments of certain asset classes. In the present case the main purpose of the bad bank is to provide relief from risky and non-strategic assets of WestLB. The bad bank solution is intended to protect WestLB against the risk of future devaluation of assets included in the portfolio. The bad bank, in its design as well in its effects, allows WestLB to avoid considerable write-downs and at the same time reduces the bank's regulatory capital requirements. Therefore, the bad bank constitutes an asset relief measure and falls within the scope of the IAC (11).

| (42) | According to point 39 of the IAC an impaired asset measure constitutes State aid in so far as the transfer value exceeds the market value of the total portfolio. |
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(42)

According to point 39 of the IAC an impaired asset measure constitutes State aid in so far as the transfer value exceeds the market value of the total portfolio.

| (43) | In this case, the assets will be spun off at the book value of EUR [65-75] billion. However, WestLB provides the bad bank with equity in the amount of EUR 3 billion. Providing equity to the bad bank is, from an economic perspective, equivalent to a write-down before a transfer. Therefore, this equity can be subtracted from the book value in order to obtain the transfer value. The transfer value is thus EUR [62-72] billion. |
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(43)

In this case, the assets will be spun off at the book value of EUR [65-75] billion. However, WestLB provides the bad bank with equity in the amount of EUR 3 billion. Providing equity to the bad bank is, from an economic perspective, equivalent to a write-down before a transfer. Therefore, this equity can be subtracted from the book value in order to obtain the transfer value. The transfer value is thus EUR [62-72] billion.

| (44) | As no market value has been submitted, the market value can deemed to be zero. Hence, the Commission at this stage deems that the aid amount is EUR [62-72] billion. |
| --- | --- |

(44)

As no market value has been submitted, the market value can deemed to be zero. Hence, the Commission at this stage deems that the aid amount is EUR [62-72] billion.

| (45) | Finally, it shall be noted that apart from the risk shield of EUR 5 billion none of the aid to be received by WestLB has been subject to the final Decision of 12 May 2009. |
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(45)

Finally, it shall be noted that apart from the risk shield of EUR 5 billion none of the aid to be received by WestLB has been subject to the final Decision of 12 May 2009.

4.2.   Application of Article 107(3)(b) TFEU

| (46) | Article 107(3)(b) TFEU empowers the Commission to decide that aid is compatible with the internal market if it is intended “to remedy a serious disturbance in the economy of a Member State”. The Commission acknowledges that, overall, the threat of a serious disturbance in the German economy persists and that measures supporting banks are suitable to address that threat. |
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(46)

Article 107(3)(b) TFEU empowers the Commission to decide that aid is compatible with the internal market if it is intended “to remedy a serious disturbance in the economy of a Member State”. The Commission acknowledges that, overall, the threat of a serious disturbance in the German economy persists and that measures supporting banks are suitable to address that threat.

| (47) | Given the significance of its integration and cooperation with other public sector banks, the Commission accepts that WestLB is a systemically relevant bank. The Commission further notes that the measures which are linked to each other contractually and, therefore, interdependent, are suitable to address WestLB's breach of regulatory minimum capital requirements. Without these measures, the shortfall of regulatory minimum capital requirements would trigger bank resolution procedures by the competent regulatory authority. The Commission concludes that such a failure would entail serious consequences for the German financial sector and the real economy. The measures must therefore be assessed under Article 107(3)(b) TFEU. |
| --- | --- |

(47)

Given the significance of its integration and cooperation with other public sector banks, the Commission accepts that WestLB is a systemically relevant bank. The Commission further notes that the measures which are linked to each other contractually and, therefore, interdependent, are suitable to address WestLB's breach of regulatory minimum capital requirements. Without these measures, the shortfall of regulatory minimum capital requirements would trigger bank resolution procedures by the competent regulatory authority. The Commission concludes that such a failure would entail serious consequences for the German financial sector and the real economy. The measures must therefore be assessed under Article 107(3)(b) TFEU.

4.3.   Compatibility with Article 107(3)(b) TFEU

| (48) | The Commission has already made a first assessment regarding compatibility of some restructuring aid received by WestLB in its Decision of 12 May 2009. However, that decision did not authorise the additional aid which is the subject of the present decision. The compatibility of that additional aid needs therefore to be assessed separately. The Restructuring Communication of 22 July 2009 (12) states in point 27 that such additional aid during the restructuring can only be provided if it is justified for reasons of financial stability and is limited to the minimum necessary to restore viability. Pursuant to point 16 of the Restructuring Communication such measures cannot be approved under a scheme but must be authorised ex ante individually. |
| --- | --- |

(48)

The Commission has already made a first assessment regarding compatibility of some restructuring aid received by WestLB in its Decision of 12 May 2009. However, that decision did not authorise the additional aid which is the subject of the present decision. The compatibility of that additional aid needs therefore to be assessed separately. The Restructuring Communication of 22 July 2009 (12) states in point 27 that such additional aid during the restructuring can only be provided if it is justified for reasons of financial stability and is limited to the minimum necessary to restore viability. Pursuant to point 16 of the Restructuring Communication such measures cannot be approved under a scheme but must be authorised ex ante individually.

4.3.1.   Recapitalisation

| (49) | As with any recapitalisation measure, the recapitalisation of WestLB in form of a silent participation by SoFFin amounting to EUR 3 billion needs to be examined in the context of the Communication of 5 December 2008 on the limitation of aid to the minimum necessary and safeguards against undue distortions of competition (Recapitalisation Communication) (13) independently of the fact that it is required and intended to establish a bad bank. |
| --- | --- |

(49)

As with any recapitalisation measure, the recapitalisation of WestLB in form of a silent participation by SoFFin amounting to EUR 3 billion needs to be examined in the context of the Communication of 5 December 2008 on the limitation of aid to the minimum necessary and safeguards against undue distortions of competition (Recapitalisation Communication) (13) independently of the fact that it is required and intended to establish a bad bank.

| (50) | The Recapitalisation Communication sets out that such measures are in principle appropriate if they prevent the insolvency of a bank and thereby serve financial stability as well as supporting the provision with credit of the real economy. However, such measures must limit distortions of competition to the minimum. To this end, section 2 of the Recapitalisation Communication requires an appropriate remuneration. As noted in point 11 of the Recapitalisation Communication, market-oriented pricing of capital injections would be the best safeguard against unjustified disparities in the level of capitalisation and improper use of such capital. Furthermore, section 2.3 of the Recapitalisation Communication explicitly states that such remuneration must be higher in the case of distressed banks, but pursuant to point 44 in any event as close as possible to that required for a similar bank under normal market conditions. The German rescue scheme requires at least 10 % on average for banks that are not fundamentally sound, according to the institution's risk profile. This was confirmed as a benchmark for distressed banks in Commission Decision of 12 December 2008 in Case N 615/08 (14). WestLB is considered to be a distressed bank since it would have been subject to bank resolution procedures without aid being granted. Thus, the capital provided must be remunerated with at least 10 % p.a. to be compatible with the Recapitalisation Communication. According to the commitments provided by Germany, WestLB will pay 10 % p.a. This rate is in line with the above requirements. |
| --- | --- |

(50)

The Recapitalisation Communication sets out that such measures are in principle appropriate if they prevent the insolvency of a bank and thereby serve financial stability as well as supporting the provision with credit of the real economy. However, such measures must limit distortions of competition to the minimum. To this end, section 2 of the Recapitalisation Communication requires an appropriate remuneration. As noted in point 11 of the Recapitalisation Communication, market-oriented pricing of capital injections would be the best safeguard against unjustified disparities in the level of capitalisation and improper use of such capital. Furthermore, section 2.3 of the Recapitalisation Communication explicitly states that such remuneration must be higher in the case of distressed banks, but pursuant to point 44 in any event as close as possible to that required for a similar bank under normal market conditions. The German rescue scheme requires at least 10 % on average for banks that are not fundamentally sound, according to the institution's risk profile. This was confirmed as a benchmark for distressed banks in Commission Decision of 12 December 2008 in Case N 615/08 (14). WestLB is considered to be a distressed bank since it would have been subject to bank resolution procedures without aid being granted. Thus, the capital provided must be remunerated with at least 10 % p.a. to be compatible with the Recapitalisation Communication. According to the commitments provided by Germany, WestLB will pay 10 % p.a. This rate is in line with the above requirements.

| (51) | The recapitalisation must be seen in the context of the updated restructuring of WestLB which already provides for sufficient behavioural safeguards in line with point 45 of the Recapitalisation Communication. Moreover, Germany has provided several commitments to ensure a restricted dividend policy and that the recapitalisation will be used only to implement the objectives of the original decision. |
| --- | --- |

(51)

The recapitalisation must be seen in the context of the updated restructuring of WestLB which already provides for sufficient behavioural safeguards in line with point 45 of the Recapitalisation Communication. Moreover, Germany has provided several commitments to ensure a restricted dividend policy and that the recapitalisation will be used only to implement the objectives of the original decision.

| (52) | Therefore, the recapitalisation is compatible with the Recapitalisation Communication. However, pursuant to point 45 of the Recapitalisation Communication, it can only be authorised temporarily for six months until the presentation of a revised restructuring plan. |
| --- | --- |

(52)

Therefore, the recapitalisation is compatible with the Recapitalisation Communication. However, pursuant to point 45 of the Recapitalisation Communication, it can only be authorised temporarily for six months until the presentation of a revised restructuring plan.

4.3.2.   Asset relief measures

| (53) | Asset relief measures by Member States, irrespective of their form, need to be assessed under the IAC. |
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(53)

Asset relief measures by Member States, irrespective of their form, need to be assessed under the IAC.

—   Eligibility of assets

| (54) | As regards the eligibility of the assets, the IAC indicates in section 5.4 that asset relief requires a clear identification of impaired assets and that certain limits apply in relation to eligibility to ensure compatibility. It notes that assets which have triggered the financial crisis and are subject to severe downward value adjustments appear to account for the bulk of uncertainty and scepticism concerning the viability of banks. In this respect, US mortgage backed securities and associated hedges and derivatives are mentioned. The IAC also notes, however, that an overly narrow relief measure would not be advisable and refers to a proportionate approach permitting the extension of eligibility to well-defined categories of other assets as well. |
| --- | --- |

(54)

As regards the eligibility of the assets, the IAC indicates in section 5.4 that asset relief requires a clear identification of impaired assets and that certain limits apply in relation to eligibility to ensure compatibility. It notes that assets which have triggered the financial crisis and are subject to severe downward value adjustments appear to account for the bulk of uncertainty and scepticism concerning the viability of banks. In this respect, US mortgage backed securities and associated hedges and derivatives are mentioned. The IAC also notes, however, that an overly narrow relief measure would not be advisable and refers to a proportionate approach permitting the extension of eligibility to well-defined categories of other assets as well.

| (55) | The bad bank does not only consist of structured securities but comprises also corporate, State, municipal, and student loans. |
| --- | --- |

(55)

The bad bank does not only consist of structured securities but comprises also corporate, State, municipal, and student loans.

| (56) | While in principle it would be questionable whether a spin-off of such assets at a transfer price above the market value is compatible with State aid rules, the IAC recognises in point 34 the necessity of a pragmatic and flexible approach to the selection of asset types for impaired assets measures (15). The Commission notes that the range of asset classes affected by the financial crisis became broader due to spillover effects. In particular, student loans and securities related to shipping, aircraft and real estate in general, face illiquid markets and/or are subject to severe downward adjustments. Asset relief for such assets can help to achieve the objectives of the IAC, i.e. to increase transparency and to contribute to financial stability, even if such assets are not included in the assets classes that initially triggered the financial crisis. Therefore, the Commission has in previous cases accepted asset relief measures for those assets (16). As set out in point 36 of the IAC, however, the comparatively broad range of assets affected requires an increased depth of restructuring. |
| --- | --- |

(56)

While in principle it would be questionable whether a spin-off of such assets at a transfer price above the market value is compatible with State aid rules, the IAC recognises in point 34 the necessity of a pragmatic and flexible approach to the selection of asset types for impaired assets measures (15). The Commission notes that the range of asset classes affected by the financial crisis became broader due to spillover effects. In particular, student loans and securities related to shipping, aircraft and real estate in general, face illiquid markets and/or are subject to severe downward adjustments. Asset relief for such assets can help to achieve the objectives of the IAC, i.e. to increase transparency and to contribute to financial stability, even if such assets are not included in the assets classes that initially triggered the financial crisis. Therefore, the Commission has in previous cases accepted asset relief measures for those assets (16). As set out in point 36 of the IAC, however, the comparatively broad range of assets affected requires an increased depth of restructuring.

—   Transparency and disclosure

| (57) | As regards transparency and disclosure, section 5.1 of the IAC requires full ex ante transparency and disclosure of impairments on the assets which are covered by relief measures, based on adequate valuation, certified by recognised independent experts and validated by the competent supervisory authority. This valuation must be provided to the Commission according to point 37 of the IAC. |
| --- | --- |

(57)

As regards transparency and disclosure, section 5.1 of the IAC requires full ex ante transparency and disclosure of impairments on the assets which are covered by relief measures, based on adequate valuation, certified by recognised independent experts and validated by the competent supervisory authority. This valuation must be provided to the Commission according to point 37 of the IAC.

| (58) | In that respect, the Commission notes that information provided by Germany so far only covers some of the assets to be taken over by the bad bank. Moreover, no detailed evaluation performed by independent experts has yet been submitted to the Commission. |
| --- | --- |

(58)

In that respect, the Commission notes that information provided by Germany so far only covers some of the assets to be taken over by the bad bank. Moreover, no detailed evaluation performed by independent experts has yet been submitted to the Commission.

| (59) | Consequently, the Commission notes that the IAC's criteria regarding transparency and disclosure are not met and, therefore, questions the compatibility of the measures with the State aid rules. |
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(59)

Consequently, the Commission notes that the IAC's criteria regarding transparency and disclosure are not met and, therefore, questions the compatibility of the measures with the State aid rules.

—   Management of assets

| (60) | As regards management of assets, section 5.6 of the IAC requires a clear functional and organisational separation between the beneficiary bank and its shielded assets, notably as to their management, staff and clientele. In this respect, the Commission notes that a bad bank ensures a clear functional and organisational separation, and is thus sufficient to achieve compliance. |
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(60)

As regards management of assets, section 5.6 of the IAC requires a clear functional and organisational separation between the beneficiary bank and its shielded assets, notably as to their management, staff and clientele. In this respect, the Commission notes that a bad bank ensures a clear functional and organisational separation, and is thus sufficient to achieve compliance.

—   Valuation

| (61) | Section 5.5 of the IAC explains that a correct and consistent approach to valuation is of key importance to prevent undue distortions of competition and to ensure the consistency of valuation methodologies. |
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(61)

Section 5.5 of the IAC explains that a correct and consistent approach to valuation is of key importance to prevent undue distortions of competition and to ensure the consistency of valuation methodologies.

| (62) | Germany, so far, has only submitted estimated and/or preliminary figures and not disclosed all relevant details of the portfolios concerned and the methodology used for the assessment. Therefore, the Commission has doubts about the valuation of the real economic value of the portfolio being EUR [60-70] billion. |
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(62)

Germany, so far, has only submitted estimated and/or preliminary figures and not disclosed all relevant details of the portfolios concerned and the methodology used for the assessment. Therefore, the Commission has doubts about the valuation of the real economic value of the portfolio being EUR [60-70] billion.

—   Burden-sharing

| (63) | As regards ex ante burden-sharing, section 5.2 of the IAC points out that banks ought to bear the losses associated with the impaired assets to the maximum extent. Burden sharing is usually achieved by a transfer at the real economic value and requires a corresponding write down of the book value. Accordingly, the beneficiary bank must disclose incurred and expected losses of the portfolio, and should limit the transfer price to the real economic value. However, if the beneficiary bank capitalises the bad bank with sufficient equity and thereby enables the bad bank to absorb future losses, the same economic effect is obtained. |
| --- | --- |

(63)

As regards ex ante burden-sharing, section 5.2 of the IAC points out that banks ought to bear the losses associated with the impaired assets to the maximum extent. Burden sharing is usually achieved by a transfer at the real economic value and requires a corresponding write down of the book value. Accordingly, the beneficiary bank must disclose incurred and expected losses of the portfolio, and should limit the transfer price to the real economic value. However, if the beneficiary bank capitalises the bad bank with sufficient equity and thereby enables the bad bank to absorb future losses, the same economic effect is obtained.

| (64) | As indicated above, the “transfer value” is EUR [62-72] billion. Germany claims that the equity to be provided to the bad bank (i.e. EUR 3 billion) is sufficient to cover so-called expected losses. In the absence of a proper valuation it remains unclear whether this equity is sufficient to cover the write down or first loss required under the IAC as no details regarding the methodology used have been revealed. However, aggregate figures provided by Germany reveal a difference between the book value and the real economic value of EUR [2,5-5,5] billion. Thus, the equity provided appears to be insufficient to cover the difference between the book value and the real economic value, which is at odds with the requirements of the IAC. |
| --- | --- |

(64)

As indicated above, the “transfer value” is EUR [62-72] billion. Germany claims that the equity to be provided to the bad bank (i.e. EUR 3 billion) is sufficient to cover so-called expected losses. In the absence of a proper valuation it remains unclear whether this equity is sufficient to cover the write down or first loss required under the IAC as no details regarding the methodology used have been revealed. However, aggregate figures provided by Germany reveal a difference between the book value and the real economic value of EUR [2,5-5,5] billion. Thus, the equity provided appears to be insufficient to cover the difference between the book value and the real economic value, which is at odds with the requirements of the IAC.

| (65) | Moreover, the Commission notes that the shareholders have granted a guarantee amounting to EUR 1 billion which is already required to compensate for the shortfall of equity mentioned in point 62. Furthermore, the shareholders have an obligation to bear losses resulting from the resolution of the bad bank. Germany claims that both obligations will theoretically not be needed and do not have an economic value. This claim is however contradicted by the need felt by the parties concerned not only to notify the additional guarantee of EUR 1 billion but to cap the saving banks obligation to bear losses incurred by the bad bank. This is, in the view of the Commission, further evidence that the equity provided to the bad bank is not sufficient to cover all potential losses and, therefore, to cover the difference between the book value and the real economic value. |
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(65)

Moreover, the Commission notes that the shareholders have granted a guarantee amounting to EUR 1 billion which is already required to compensate for the shortfall of equity mentioned in point 62. Furthermore, the shareholders have an obligation to bear losses resulting from the resolution of the bad bank. Germany claims that both obligations will theoretically not be needed and do not have an economic value. This claim is however contradicted by the need felt by the parties concerned not only to notify the additional guarantee of EUR 1 billion but to cap the saving banks obligation to bear losses incurred by the bad bank. This is, in the view of the Commission, further evidence that the equity provided to the bad bank is not sufficient to cover all potential losses and, therefore, to cover the difference between the book value and the real economic value.

| (66) | The Commission consequently has doubts that the measures amount to proper burden sharing in line with the IAC and reserves a final judgement on compatibility until the real economic value has been properly established. Nevertheless, the Commission acknowledges that the additional explicit guarantee of EUR 1 billion is part of the asset relief measures and must therefore take part in its approval. |
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(66)

The Commission consequently has doubts that the measures amount to proper burden sharing in line with the IAC and reserves a final judgement on compatibility until the real economic value has been properly established. Nevertheless, the Commission acknowledges that the additional explicit guarantee of EUR 1 billion is part of the asset relief measures and must therefore take part in its approval.

—   Remuneration

| (67) | Point 21 of the IAC notes that correct remuneration is another element of the burden-sharing requirement. The Commission shall ensure, as noted in Annex IV to that Communication, that any pricing of the asset relief must include remuneration for the State that adequately takes account of the risks of future losses exceeding those projected in the determination of the real economic value. In line with the Commission's recent practice (17) this is based upon the capital relief effect resulting thereof. |
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(67)

Point 21 of the IAC notes that correct remuneration is another element of the burden-sharing requirement. The Commission shall ensure, as noted in Annex IV to that Communication, that any pricing of the asset relief must include remuneration for the State that adequately takes account of the risks of future losses exceeding those projected in the determination of the real economic value. In line with the Commission's recent practice (17) this is based upon the capital relief effect resulting thereof.

| (68) | The notification does not indicate how WestLB will remunerate the asset relief measure. Instead, Germany claims there is no need to provide remuneration, because the equity provided to the bad bank was sufficient to cover both losses and the capital relief effect. Apart from the fact that the Commission has doubts as to the establishment of the real economic value, it has not received any figures for the calculation of the capital relief effect. Since it is not in a position to verify whether the claim of Germany is correct, the Commission must reserve doubts in this respect. |
| --- | --- |

(68)

The notification does not indicate how WestLB will remunerate the asset relief measure. Instead, Germany claims there is no need to provide remuneration, because the equity provided to the bad bank was sufficient to cover both losses and the capital relief effect. Apart from the fact that the Commission has doubts as to the establishment of the real economic value, it has not received any figures for the calculation of the capital relief effect. Since it is not in a position to verify whether the claim of Germany is correct, the Commission must reserve doubts in this respect.

| (69) | Furthermore, the Commission highlights again the potential benefit stemming from the shareholders obligation to bear the losses of the bad bank and that apparently it was necessary to cap this obligation as regards the saving banks. This is further evidence that the equity may not be sufficient to cover both losses and the capital relief effect. Nevertheless, no remuneration is envisaged. Therefore the Commission raises doubts regarding remuneration. |
| --- | --- |

(69)

Furthermore, the Commission highlights again the potential benefit stemming from the shareholders obligation to bear the losses of the bad bank and that apparently it was necessary to cap this obligation as regards the saving banks. This is further evidence that the equity may not be sufficient to cover both losses and the capital relief effect. Nevertheless, no remuneration is envisaged. Therefore the Commission raises doubts regarding remuneration.

4.4.   Revised restructuring plan

| (70) | The recapitalisation and the asset relief measures are provided with the aim of enabling the restructuring of WestLB. WestLB was already previously under the obligation to present a restructuring plan (18), which was recently submitted. Germany claims that its most recent update aims also at incorporating the current measures including the potential EUR 2 billion mentioned in recital 24. They will thus be subject to this preliminary assessment under the Commission's Restructuring Communication (19). |
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(70)

The recapitalisation and the asset relief measures are provided with the aim of enabling the restructuring of WestLB. WestLB was already previously under the obligation to present a restructuring plan (18), which was recently submitted. Germany claims that its most recent update aims also at incorporating the current measures including the potential EUR 2 billion mentioned in recital 24. They will thus be subject to this preliminary assessment under the Commission's Restructuring Communication (19).

| (71) | The updated restructuring plan reveals that the original timetable for the asset relief measure has been delayed. Moreover, the currently assessed measures show that a significant amount of additional aid is required compared to the aid under assessment in the Decision of 12 May 2009. Therefore, in the context of the assessment of the revised restructuring plan, all aid measures, including those which were already examined in the Decision of 12 May 2009, will be considered when evaluating the restoration of viability of WestLB through the spin-off of assets into a bad bank and the sale of the remainder by the end of 2011. |
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(71)

The updated restructuring plan reveals that the original timetable for the asset relief measure has been delayed. Moreover, the currently assessed measures show that a significant amount of additional aid is required compared to the aid under assessment in the Decision of 12 May 2009. Therefore, in the context of the assessment of the revised restructuring plan, all aid measures, including those which were already examined in the Decision of 12 May 2009, will be considered when evaluating the restoration of viability of WestLB through the spin-off of assets into a bad bank and the sale of the remainder by the end of 2011.

—   Return to viability

| (72) | The Commission first doubts whether WestLB can generate sufficient revenues that would enable the bank to pay an appropriate remuneration for the recapitalisation and the asset relief measures. Hence, the Commission doubts that the restructuring plan is suitable to restore the viability of WestLB. |
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(72)

The Commission first doubts whether WestLB can generate sufficient revenues that would enable the bank to pay an appropriate remuneration for the recapitalisation and the asset relief measures. Hence, the Commission doubts that the restructuring plan is suitable to restore the viability of WestLB.

| (73) | Furthermore, the restructuring plan raises doubts that it is suitable to ensure that WestLB can be sold in a public tender in whole or in parts. As regards marketability, Germany anticipates that further capital will be required to enable the sale of the bank. The Commission takes this as an indication that Germany does not assume that the restructuring plan is apt to achieve the sale of the bank. According to the business plan, even in a medium-term perspective two of the three core business areas currently break even only because a considerable amount of costs has been accounted for in the Corporate Centre unit and has not been fully allocated to the three core business areas. The Commission therefore has doubts that these core business areas are marketable. |
| --- | --- |

(73)

Furthermore, the restructuring plan raises doubts that it is suitable to ensure that WestLB can be sold in a public tender in whole or in parts. As regards marketability, Germany anticipates that further capital will be required to enable the sale of the bank. The Commission takes this as an indication that Germany does not assume that the restructuring plan is apt to achieve the sale of the bank. According to the business plan, even in a medium-term perspective two of the three core business areas currently break even only because a considerable amount of costs has been accounted for in the Corporate Centre unit and has not been fully allocated to the three core business areas. The Commission therefore has doubts that these core business areas are marketable.

| (74) | One of WestLB's core assumptions for the business plan — and a key factor for prospects of its profitability in the future — is that the bank will receive a Single-A rating again in the future. However, in May 2009 WestLB was downgraded to BBB+. Moreover, an analysis of a recent reporting by Standard & Poor's (dated 15 October 2009) shows that this rating agency is sceptical about the business model of WestLB, highlighting the weakness of focussing on cyclical wholesale business areas and the vulnerability to financial stress from recessions and difficult capital market conditions. Hence, the scepticism that is expressed in that report does not justify assuming that the bank's rating will improve in the short-term. Thus, the projected profit and loss figures are unlikely to be achieved as the current plan seems to significantly underestimate WestLB's cost of funding. |
| --- | --- |

(74)

One of WestLB's core assumptions for the business plan — and a key factor for prospects of its profitability in the future — is that the bank will receive a Single-A rating again in the future. However, in May 2009 WestLB was downgraded to BBB+. Moreover, an analysis of a recent reporting by Standard & Poor's (dated 15 October 2009) shows that this rating agency is sceptical about the business model of WestLB, highlighting the weakness of focussing on cyclical wholesale business areas and the vulnerability to financial stress from recessions and difficult capital market conditions. Hence, the scepticism that is expressed in that report does not justify assuming that the bank's rating will improve in the short-term. Thus, the projected profit and loss figures are unlikely to be achieved as the current plan seems to significantly underestimate WestLB's cost of funding.

—   Own contribution

| (75) | Germany has provided a commitment to limit payments on capital instruments in case of losses and to achieve loss contribution. According to an ad hoc publication dated 16 December 2009, WestLB will probably post a loss for 2009 and not release reserves to enable payment and coupons or prevent loss participation. Shareholders and other creditors of capital instruments will hence contribute to the restructuring. However, the notified measures limit the potential for losses and thus enable WestLB to serve these instruments in the future. Thus, burden-sharing by shareholders and holders of capital instruments will remain limited. |
| --- | --- |

(75)

Germany has provided a commitment to limit payments on capital instruments in case of losses and to achieve loss contribution. According to an ad hoc publication dated 16 December 2009, WestLB will probably post a loss for 2009 and not release reserves to enable payment and coupons or prevent loss participation. Shareholders and other creditors of capital instruments will hence contribute to the restructuring. However, the notified measures limit the potential for losses and thus enable WestLB to serve these instruments in the future. Thus, burden-sharing by shareholders and holders of capital instruments will remain limited.

| (76) | In particular, the savings banks, instead of participating adequately in the burden-sharing, benefit significantly from the asset relief measure. As a result of the recapitalisation, they only contribute to the restructuring process of WestLB to a very limited extent. Furthermore, according to the FMStFG, the shareholders of the beneficiary bank should also compensate for losses that may occur at the resolution of the bad bank, corresponding to their stake. However, this obligation of the savings banks and consequently their participation in future losses of the bad bank has been capped at EUR 4,5 billion. |
| --- | --- |

(76)

In particular, the savings banks, instead of participating adequately in the burden-sharing, benefit significantly from the asset relief measure. As a result of the recapitalisation, they only contribute to the restructuring process of WestLB to a very limited extent. Furthermore, according to the FMStFG, the shareholders of the beneficiary bank should also compensate for losses that may occur at the resolution of the bad bank, corresponding to their stake. However, this obligation of the savings banks and consequently their participation in future losses of the bad bank has been capped at EUR 4,5 billion.

| (77) | On this basis the Commission has doubts that burden-sharing is sufficient. Moreover, should Germany not propose genuine measures for burden-sharing of the savings banks, the Commission would have to ask for recovery of any unlawful and incompatible aid from the savings banks. |
| --- | --- |

(77)

On this basis the Commission has doubts that burden-sharing is sufficient. Moreover, should Germany not propose genuine measures for burden-sharing of the savings banks, the Commission would have to ask for recovery of any unlawful and incompatible aid from the savings banks.

—   Measures limiting the distortion of competition

| (78) | According to point 30 of the Restructuring Communication, the nature and form of measures limiting the distortion of competition depends on the amount of the aid and the conditions and circumstances under which it was granted, as well as on the characteristics of the market or markets on which the beneficiary bank will operate. The Commission doubts that the measures proposed to mitigate the distortive effect of the entire aid (original aid and present aid) are sufficient as no relevant additional measures have been proposed notwithstanding the substantial additional aid to be received by WestLB. |
| --- | --- |

(78)

According to point 30 of the Restructuring Communication, the nature and form of measures limiting the distortion of competition depends on the amount of the aid and the conditions and circumstances under which it was granted, as well as on the characteristics of the market or markets on which the beneficiary bank will operate. The Commission doubts that the measures proposed to mitigate the distortive effect of the entire aid (original aid and present aid) are sufficient as no relevant additional measures have been proposed notwithstanding the substantial additional aid to be received by WestLB.

| (79) | Given the potential magnitude of the aid stemming from the original measures plus asset relief measures and the capital injection, the Commission, at this stage, cannot exclude that [...] WestLB might be the only alternative to make all the aid compliant with Article 107(3)(b) TFEU. |
| --- | --- |

(79)

Given the potential magnitude of the aid stemming from the original measures plus asset relief measures and the capital injection, the Commission, at this stage, cannot exclude that [...] WestLB might be the only alternative to make all the aid compliant with Article 107(3)(b) TFEU.

5.   CONCLUSION AND TEMPORARY AUTHORISATION OF THE MEASURES

| (80) | All measures in favour of WestLB constitute State aid, which can however not be authorised at this stage because the asset relief measure does not fulfil the conditions of transparency and disclosure, valuation, burden sharing, and remuneration and because of doubts regarding the chances of restoration of viability, burden sharing and the mitigation of distortion of competition. |
| --- | --- |

(80)

All measures in favour of WestLB constitute State aid, which can however not be authorised at this stage because the asset relief measure does not fulfil the conditions of transparency and disclosure, valuation, burden sharing, and remuneration and because of doubts regarding the chances of restoration of viability, burden sharing and the mitigation of distortion of competition.

| (81) | However, the Commission has established that it will authorise emergency measures temporarily if needed for reasons of financial stability (20), while it is not ready to take a definite decision given doubts on compatibility of the measures as restructuring aid. In the present case the supervisory authorities have confirmed that the aid is necessary in order to prevent of the initiation of bank resolution procedures of a systemically relevant bank. |
| --- | --- |

(81)

However, the Commission has established that it will authorise emergency measures temporarily if needed for reasons of financial stability (20), while it is not ready to take a definite decision given doubts on compatibility of the measures as restructuring aid. In the present case the supervisory authorities have confirmed that the aid is necessary in order to prevent of the initiation of bank resolution procedures of a systemically relevant bank.

| (82) | It has first been established that the recapitalisation measures fulfil the requirements of the Recapitalisation Communication. |
| --- | --- |

(82)

It has first been established that the recapitalisation measures fulfil the requirements of the Recapitalisation Communication.

| (83) | Second, as regards the asset relief measures, the Commission has doubts regarding their compatibility with the IAC. These doubts relate in particular to the real economic value, which could not be assessed at this stage. However, these doubts do not hinder a temporary approval for reasons of financial stability, because Germany committed that the measure would be brought in line with the IAC if the real economic value turned out to be lower than submitted. Moreover, the Commission has verified that the other criteria of the IAC are met (in particular eligibility and the management of assets) and that the recapitalisation and the guarantee of EUR 1 billion ensure some limited burden sharing at this stage. |
| --- | --- |

(83)

Second, as regards the asset relief measures, the Commission has doubts regarding their compatibility with the IAC. These doubts relate in particular to the real economic value, which could not be assessed at this stage. However, these doubts do not hinder a temporary approval for reasons of financial stability, because Germany committed that the measure would be brought in line with the IAC if the real economic value turned out to be lower than submitted. Moreover, the Commission has verified that the other criteria of the IAC are met (in particular eligibility and the management of assets) and that the recapitalisation and the guarantee of EUR 1 billion ensure some limited burden sharing at this stage.

| (84) | Given the imminent threat of the initiation of bank resolution procedures in the absence of the measures, the Commission considers the recapitalisation measure and the asset relief to be temporarily compatible for six months with the internal market as emergency support under Article 107(3)(b) TFEU. Therefore, the Commission has at this stage temporarily no objection to the transfer of the assets to the bad bank. |
| --- | --- |

(84)

Given the imminent threat of the initiation of bank resolution procedures in the absence of the measures, the Commission considers the recapitalisation measure and the asset relief to be temporarily compatible for six months with the internal market as emergency support under Article 107(3)(b) TFEU. Therefore, the Commission has at this stage temporarily no objection to the transfer of the assets to the bad bank.

| (85) | In light of the doubts regarding compatibility of the asset relief measure with the IAC and the failure of the current revised restructuring plan to demonstrate that it will ensure the sale of the beneficiary, proper burden sharing and mitigate the distortions of competition, the Commission needs to further investigate the measures and thus to open a formal investigation procedure pursuant to Article 108(2) TFEU. |
| --- | --- |

(85)

In light of the doubts regarding compatibility of the asset relief measure with the IAC and the failure of the current revised restructuring plan to demonstrate that it will ensure the sale of the beneficiary, proper burden sharing and mitigate the distortions of competition, the Commission needs to further investigate the measures and thus to open a formal investigation procedure pursuant to Article 108(2) TFEU.

6.   DECISION

The Commission concludes that the measures notified by Germany on 10 December 2009 concerning the recapitalisation of WestLB, the guarantee and the associated asset relief measure constitute State aid within the meaning of Article 107(1) TFEU.

In the light of the foregoing considerations, the Commission has decided to initiate the procedure laid down in Article 108(2) TFEU regarding the asset relief in the form of the establishment of a bad bank concerning transparency and disclosure, valuation and burden sharing (including remuneration) as well as on the restructuring aid (asset relief, recapitalisation and guarantee) to WestLB.

On the basis of the commitments provided by Germany, and in order to secure financial stability the Commission authorises the asset relief in the form of the establishment of a bad bank, the recapitalisation by SoFFin in the amount of EUR 3 billion as well as the guarantee of the shareholders of EUR 1 billion temporarily for a period of six months.

Germany is required to provide in addition to all documents already received, information and data needed for the assessment of the compatibility of the aid, and in particular:

—   transparency and disclosure including evaluation: the final composition of the portfolios and the evaluation of the assets to be spun off,

—   burden sharing and remuneration: detailed information regarding burden sharing and remuneration for the asset relief measure, based upon evaluation,

—   suitability of the restructuring plan to enable sale: a revised restructuring plan that takes into account the full amount of State aid granted, comprising adequate remuneration, additional in-depth restructuring, and measures limiting distortion of competition.

Should the Commission come to the conclusion that unlawful State aid was granted to savings bank which are members of Westfälisch-Lippische Sparkassen- und Giroverband and Rheinische Sparkassen- und Giroverband by releasing them from their obligation to contribute to the recapitalisation and by introducing a cap to their liabilities and thus their participation in losses of bad bank, such unlawful aid if incompatible will be recovered from the savings banks.

Germany is requested to forward a copy of this letter to the potential recipients of the aid immediately.

The Commission wishes to remind Germany that Article 108(3) TFEU has suspensory effect, and would draw your attention to Article 14 of Council Regulation (EC) No 659/1999, which provides that all unlawful aid may be recovered from the recipient.

The Commission warns Germany that it will inform interested parties by publishing this letter and a meaningful summary of it in the Official Journal of the European Union. It will also inform interested parties in the EFTA countries which are signatories to the EEA Agreement, by publishing a notice in the EEA Supplement to the Official Journal of the European Union, and will inform the EFTA Surveillance Authority by sending a copy of this letter. All such interested parties will be invited to submit their comments within one month of the date of such publication.

The Commission notes, that for the reason of urgency Germany exceptionally accepts the adoption of the decision in the English language.’

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(1)  With effect from 1 December 2009, Articles 87 and 88 of the EC Treaty have become Articles 107 and 108, respectively, of the TFEU. The two sets of provisions are, in substance, identical. For the purposes of this Decision, references to Articles 107 and 108 of the TFEU should be understood as references to Articles 87 and 88, respectively, of the EC Treaty where appropriate.

1

(2)  Cf. Commission Decision of 12 May 2009 in Case C 43/08, Restructuring of WestLB AG, http://ec.europa.eu/competition/state_aid/register/ii/doc/C-43-2008-WLWL-en-12.5.2009.pdf

2

Restructuring of WestLB AG

(3)  Cf. Commission Decision of 7 October 2009 in Case N 531/09, Assumption of Risk for WestLB, not yet published.

3

Assumption of Risk for WestLB

(4)  According to information sent by Germany on 18 November 2009, the risk shield that was in the end contractually agreed upon was only EUR 5,9 billion, therefore lower than the amount initially notified.

4

(5)  Cf. point 1.1 and 3.3 of the Annex to Commission Decision of 12 May 2009 in Case C 43/08, Restructuring of WestLB AG, http://ec.europa.eu/competition/state_aid/register/ii/doc/C-43-2008-WLWL-en-12.5.2009.pdf

5

Restructuring of WestLB AG

(6)  Confidential information.

6

(7)  It is contractually excluded that SoFFin can become majority shareholder.

7

(8)  The FMStFG in section 8a provides the possibility for the SoFFin to create a bad bank, a so-called “Bundesrechtliche Abwicklungsanstalt”. Its main objective is to take over — and subsequently to wind-up — risky and non-strategic assets. Usage of a bad bank requires that the requesting bank has a viable business model and is sufficiently capitalized. Upon request, the SoFFin will allow or reject the application after an assessment of the business concept for the bad bank and an evaluation of the assets to be taken over.

8

The bad bank's take-over of assets shall be accomplished in the form of an asset spin-off by the beneficiary bank which is released from any contingent liabilities (“Nachhaftung”) of the bad bank. Instead, the shareholders of the beneficiary bank remain liable for debts of the bad bank and are obliged to loss compensation (“Verlustübernahme”), if required, corresponding to their percentage of equity. The bad bank is an organisationally and economically autonomous entity within the Bundesanstalt für Finanzmarktstabilisierung (FMSA) with the legal capacity to act and take legal action on its own behalf. If a bad bank is created, the SoFFin is responsible for its monitoring, coordination and liquidation, while the bad bank is autonomously responsible to cover its operating costs. Losses or surpluses after the wind-up of the bad bank's asset are allocated to the shareholders of the beneficiary bank. Therefore, the FMStFG requires that potential losses are borne by the shareholders of the beneficiary bank.

Additionally, according to section 8 point 4.5 FMStFG, a beneficiary bank has to disclose all risks associated with the respective assets prior to the asset relief measure. However, there is no obligation to evaluate the assets.

(9)  This also applies to the additional EUR 2 billion for the benefit of WestLB mentioned in point 25.

9

(10)  Communication from the Commission on the treatment of impaired assets in the Community banking sector, OJ C 72, 26.3.2009, p. 1.

10

(11)  As regards the application ratione temporis the Commission recalls that it has to apply law and guidelines in force at the time of the adoption of the decision, irrespective of the time at which the aid measures were designed or notified (cf. Case C 334/07 P Commission v Freistaat Sachsen, judgment of 11 December 2008, not yet reported) The IAC applies to the present bad bank, since it agreed to and notified after the publication of the IAC, notwithstanding its retroactive entering into force.

11

Commission

Freistaat Sachsen

(12)  Commission Communication on the return viability and the assessment of restructuring measures in the financial crisis under State aid rules, OJ C 195, 14.8.2009, p. 9.

12

(13)  Communication from the Commission — Recapitalisation of financial institutions in the current financial crisis: limitation of aid to the minimum necessary and safeguards against undue distortions of competition, OJ C 10, 15.1.2009, p. 2.

13

(14)  See point 16 in Commission Decision of 12 December 2008 in Case N 625/08, OJ C 143, 24.6.2009, p. 1.

14

(15)  Commission Decision of 22 October 2009 in Case C 29/09, HSH Nordbank, point 40, OJ C 281, 21.11.2009, p. 42.

15

(16)  Commission Decision of 22 October 2009 in Case C 29/09, HSH Nordbank, OJ C 281, 21.11.2009, p. 42, point 40. To some extent also Commission Decision of 15 December 2009 in Case C 17/09 — LBBW, not yet published.

16

(17)  Cf. Commission Decision of 15 December 2008 in Case C 17/08 LBBW, Commission Decision of 18 November 2009 in Case C 10/09 ING.

17

(18)  The Commission already noted in its Decision of 7 October 2009 that the need for additional aid in the restructuring phase required reassessment of the implementation of the existing restructuring plan.

18

(19)  Although the Decision of 12 May 2009 made reference to the 2004 Guidelines on State aid for rescuing and restructuring firms in difficulty, the Commission has clarified in point 49 of the Restructuring Communication that all aid notified to the Commission before 31 December 2010 will be assessed as restructuring aid to banks pursuant to that Communication instead of the 2004 Guidelines.

19

(20)  Commission Decision of 13 November in Case C 15/08, Hypo RealEstate, not yet published, and Commission Decision of 31 March 2009 in Case C 10/09 ING, OJ C 158, 11.7.2009, p. 13.

20

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