COMMISSION DECISION No 3855/91/ECSC of 27 November 1991 establishing Community rules for aid to the steel industry

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Coal and Steel Comunity, and in particular the first and second paragraphs of Article 95 thereof,

Having regard to the Consensus concluded with the United States of America concerning trade in certain steel products (1),

Having consulted the Consultative Committee and with the unanimous assent of the Council,

WHEREAS:

I

Any aid in any form whatsoever and whether specific or non-specific which Member States might grant to their steel industries is prohibited pursuant to Article 4 (c) of the Treaty.

As from 1 January 1986, Commission Decision No 3484/85/ECSC (2), replaced from 1 January 1989 by Decision No 322/89/ECSC (3), estabished rules authorizing the grant of aid to the steel industry in certain cases expressly provided for.

The rules cover aid, whether specific or non-specific, financed by Member States in any form whatsoever.

Their aim is firstly not to deprive the steel industry of aid for research and development or for bringing plants into line with new environmental standards. The rules also authorize social aid to encourage the partial closure of plants or finance the permanent cessation of all ECSC activities by the least-competitive enterprises. Finally, they prohibit the grant of any other operating or investment aid to steel firms in the Community, albeit with an exemption regarding regional investment aid in certain Member States.

The strict regime thus established, which now applies to the entire territory of the 12 Member States, has ensured fair competition in this industry in recent years. It is consistent with the objective pursued through the completion of the single market. It also conforms to the rules on State aid laid down in the Consensus on the steel industry concluded between the Community and the United States in November 1989, which is valid until 31 March 1992. It should therefore continue to be applied, albeit with a number of technical modifications.

Decision No 322/89/ECSC will expire on 31 December 1991.

The Community thus finds itself faced with a situation not specifically provided for in the ECSC Treaty and yet requiring action. In these circumstances, recourse must be had to the first paragraph of Article 95 of the EEC Treaty, so as to enable the Community to pursue the objectives set out in Articles 2 to 4 thereof.

II

In order to cover a significant part of the period remaining before the expiry of the ECSC Treaty in 2002, this Decision will apply until 31 December 1996.

In order to ensure that the steel industry and other industries have equal access to aid for research and development, in so far as this is permitted by the Treaties, the compatibility of these aid schemes with the common market will be assessed in the light of the Community framework on State aid for research and development. As the provisions on aid for environmental protection are identical to those contained in the framework on State aid in environmental matters, they have not been changed. If the rules laid down by these two general frameworks were changed substantially during the term of validity of this Decision, a proposal for an amendment would be presented.

Where a firm ceases all ECSC activity, aid for closure may be paid without restriction as to the nature of that firm's steel production.

As regional investment aids are exceptional in nature, there would be no justification in maintaining them beyond the appropriate period for the modernization of the steel plants concerned, which is set at three years. This possibility is hereby extended, under the same conditions as for Greece, to existing small and medium-sized enterprises in Portugal in order to take account of the fact that Protocol 20 to the Act of Accession prevented them from receiving aid for restructuring for a period of five years following accession. In the case of Germany, they must be accompanied by an overall reduction in capacity in the five new Laender. In order to permit effective monitoring of the application of these provisions, each specific case must be notified. Where the investments for which aid is to be granted reach a certain threshold, Member States will be consulted beforehand.

To avoid discrimination due to the variety of forms which State aid may take, transfers of State resources to public or private steel firms, in the form of acquisitions of shareholdings or provisions of capital or similar financing, must be subject to the same procedures as aid so that the Commission can determine whether such operations involve an aid element. This will be the case where the financial transfer is not a genuine provision of risk capital according to usual investment practice in a market economy. The compatibility of any such aid elements with the Treaty must be assessed by the Commission in the light of the criteria laid down in this Decision. For this purpose, all such financial transfers must be notified to the Commission and may not be implemented if before the end of the standstill period laid down in Article 6 (5) the Commission determines that they contain aid elements and initiaties the procedure provided for in Article 6 (4).

This Decision will be applied in accordance with current or future international commitments of the Community concerning State aid to the steel industry.

In order to improve transparency with regard to aid, the Commission will draw up an annual report on the implementation of this Decision,

HAS ADOPTED THIS DECISION:

Article 1

1. Aid to the steel industry, whether specific or non-specific, financed by Member States or their regional or local authorities or through State resources in any form whatsoever may be deemed Community aid and therefore compatible with the orderly functioning of the common market only if it satisfies the provisions of Articles 2 to 5.

2. The term 'aid' also covers the aid elements contained in transfers of State resources by Member States, regional or local autorities or other bodies to steel undertakings in the form of acquisitions of shareholdings or provisions of capital or similar financing (such as bonds convertible into shares, or loans, the interest on which is at least partly dependent on the undertaking's financial performance) which cannot be regarded as a genuine provision of risk capital according to usual investment practice in a market economy.

3. Aid coming within the terms of this Decision may be granted only after the procedures laid down in Article 6 have been followed and shall not be payable after 31 December 1996.

The deadline for payments of aid falling under Article 5 is 31 December 1994 with the exception of the special fiscal concessions (Investitionszulage) in the five new Laender as provided for in the German 'Tax amendment law 1991', which may be payable up to 31 December 1995.

Article 2

Aid for research and development Aid granted to defray expenditures by steel undertakings on research and development projects may be deemed compatible with the common market if it is in compliance with the rules laid down in the Community framework for State aid for research and development (4).

Article 3

Aid for environmental protection 1. Aid granted to steel undertakings for bringing into line with new statutory environmental standards plants which entered into service at least two years before the introduction of the standards may be deemed compatible with the common market.

2. The total amount of aid granted for this purpose may not exceed 15 % net grant equivalent of the investment costs directly related to the environmental measures concerned. Where the investment is associated with an increase in the capacity of the plant, the eligible costs shall be proportionate to the initial capacity of the plant.

Article 4

Aid for closures 1. Aid towards the costs of payments to workers made redundant or accepting early retirement may be deemed compatible with the common market provided that:

- the payments do not exceed those customary under the rules in force in the Member States on 1 January 1991 and actually arise from the partial or total closure of steel plants that have been in regular production up to the time of notification of the aid and whose closure has not already been taken into account for the purposes of applying Commission Decisions No 257/80/ECSC (5), No 2320/81/ECSC (6) and No 218/89/ECSC (7) on aid to the steel industry or the Act of Accession of Spain and Portugal,

- the aid does not exceed 50 % of that portion of such payments which is not defrayed directly pursuant to Article 56 (1) (c) or (2) (b) of the ECSC Treaty by the Member State or by the Community according to the modalities laid down by the Commission in the bilateral conventions but is payable by the undertaking concerned.

2. Aid to steel undertakings which permanently cease production of ECSC iron and steel products may be deemed compatible with the orderly functioning of the common market, provided that the undertakings:

- became a legal entity before 1 January 1991,

- have been regularly producing ECSC iron and steel products up to the date of notification of the aid,

- have not reorganized their production or plant structure since 1 January 1991, and

- are not directly or indirectly controlled, within the meaning of Decision No 24/54 of the High Authority (8), by, and do not themselves directly or indirectly control, an undertaking that is itself a steel undertaking or controls other steel undertakings,

and that the closure of their plants has not already been taken into account for the purposes of applying the Decisions referred to in paragraph 1 or the Act of Accession of Spain and Portugal or granting a favourable opinion pursuant to Article 54 of the ECSC Treaty.

The amount of aid may not exceed the higher of the following two values, as determined by an independent consultant's report:

- the discounted value of the contribution to fixed costs obtainable from the plants over a three-year period, less any advantages the aided firm derives from their closure, or

- the residual book value of the plants (ignoring that portion of any revaluations since 1 January 1990 which exceeded the national inflation rate).

Article 5

Aid granted to steel undertakings for investment under general regional aid schemes may until 31 December 1994 be deemed compatible with the common market, provided that the aided undertaking:

- is located in the territory of Greece and the aided investment does not lead to an increase in production capacity,

- is a small or medium-sized undertaking according to the prevailing Community criteria for aid to such undertakings, located in the territory of Portugal, which became a legal entity before 1 July 1991 and the aided investment does not lead to an increase in production capacity,

- is located in the territory of the former German Democratic Republic and the aid is accompanied by a reduction in the overall production capacity of that territory.

Article 6

1. The Commission shall be informed, in sufficient time to enable it to submit its comments, of any plans to grant or alter aid of the types referred to in Articles 2 to 5. It shall likewise be informed of plans to grant aid to the steel industry under schemes on which it has already taken a decision under the EEC Treaty. The notifications of aid plans required by the Article must be lodged with the Commission at the latest by 30 June 1994 as regards aid covered by Article 5 and 30 June 1996 as regards all other aid.

2. The Commission shall be informed, in sufficient time for it to submit its comments, and by 30 June 1996 at the latest, of any plans for transfers of State resources, by Member States, regional or local authorities or other bodies to steel undertakings in the form of acquisition of shareholdings or provisions of capital or similar financing.

The Commission shall determine whether the financial transfers involve aid elements within the meaning of Article 1 (2) and, if so, shall examine whether they are compatible with the common market under the provisions of Articles 2 to 5.

3. The Commission shall seek the views of the Member States on plans for closure aid, for regional investment aid when the amount of the aided investment or of the total aided investments during 12 consecutive months is in excess of ECU 10 million, and on other major aid proposals notified to it before adopting a position on them. It shall inform the Member States of the position it has adopted on all aid proposals, specifying the form and volume of the aid.

4. If, after giving notice to the interested parties concerned to submit their comments, the Commission finds that aid in a given case is incompatible with the provisions of this Decision, it shall inform the Member State concerned of its decision. The Commission shall take such a decision not later than three months after receiving the information needed to assess the proposed aid. Article 88 of the Treaty shall apply in the event of a Member State's failing to comply with that decision. The planned measures falling within paragraph 1 or 2 may be put into effect only with the approval of and subject to any conditions laid down by the Commission.

5. If the Commission fails to initiate the procedure provided for in paragraph 4 or otherwise to make its position known within two months of receiving notification of a proposal, the planned measures may be put into effect provided that the Member State first informs the Commission of its intention to do so. Where the Commission seeks the views of Member States under the provisions of paragraph 3, the abovementioned time period shall be three months.

6. All individual awards of the types of aid referred to in Articles 4 and 5 shall be notified to the Commission in accordance with the procedure provided for in paragraph 1. The Commission also reserves the right to require that some or all individual awards of aid of the types referred to in Articles 2 and 3 be notified in accordance with paragraph 1.

Article 7

Member States shall supply the Commission twice a year with reports on the aid disbursed over the previous six months, the uses to which the aid was put and the results obtained over the same period. The reports shall include particulars of all financial operations carried out by the Member States or local or regional authorities in relation to publicly-owned steel undertakings. They must be supplied within two months following the end of each six-month period and be set out in a form to be determined by the Commission.

Article 8

The Commission shall draw up annual reports on the implementation of this Decision for the Council and, for information, for the Parliament and the Consultative Committee.

Article 9

This Decision shall enter into force on 1 January 1992.

It shall apply until 31 December 1996. This Decision shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, 27 November 1991. For the Commission

Leon BRITTAN

Vice-President

(1) OJ No L 368, 18. 12. 1989, p. 185. (2) OJ No L 340, 18. 12. 1985, p. 1. (3) OJ No L 38, 10. 2. 1989, p. 8. (4) OJ No C 83, 11. 4. 1986, p. 2. (5) OJ No L 29, 6. 2. 1980, p. 5. (6) OJ No L 228, 13. 8. 1981, p. 17. (7) OJ No L 86, 31. 3. 1989, p. 76. (8) OJ of the ECSC No 9, 11. 5. 1954, p. 345/54.