EN Official Journal of the European Union L 81/19

COMMISSION DECISION

of 22 July 2009

on State aid C 18/05 (ex N 438/04, N 194/05 and PL 34/04) awarded by Poland to Stocznia Gdańsk

(notified under document C(2009) 5685)

(Only the Polish text is authentic)

(Text with EEA relevance)

(2010/175/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Community, and in particular the first paragraph of Article 88(2) thereof,

Having regard to the Agreement on the European Economic Area, and in particular Article 62(1)(a) thereof,

Having called on interested parties to submit their comments (1) pursuant to the provisions cited above and having regard to their comments,

Whereas:

I. THE PROCEDURE

(1) Pursuant to Article 88(2) EC Treaty, Poland notified by letter of 8 October 2004, registered on the same day, restructuring aid measures extended in favour of Stocznia Gdańsk — Grupa Stoczni Gdynia S.A. (Gdańsk Shipyard). Poland informed the Commission of these measures with a view to obtaining legal certainty that they had been granted before accession and therefore did not constitute new aid which could have been examined by the Commission under Article 88 EC Treaty. In the event of the Commission finding these measures to be new aid, Poland asked for them to be approved as restructuring aid. Poland submitted to the Commission the Restructuring Plan for Gdańsk Shipyard (Update) dating from March 2004. The case was registered as N 438/04.

(2) By letter of 11 November 2004 the Commission asked Poland for supplementary information on case N 438/04, to which Poland replied by letter of 17 January 2005, registered on 21 January 2005.

(3) Pursuant to point 3 of Annex IV to the Accession Treaty governing the interim mechanism procedure, Poland had notified previously, on 29 April 2004, restructuring measures in favour of Stocznia Gdynia S.A. (‘Gdynia Shipyard’), at that time the parent company of Gdańsk Shipyard. The case was registered as PL 34/04. By letter of 19 May 2004 the Commission asked Poland to submit certain missing documents. These were provided on 16 June 2004. The Commission requested further information by letters of 30 July 2004, 8 October 2004, 23 November 2004 and 4 March 2005, to which Poland replied, respectively, by letters of 3 September 2004, registered on 7 September 2004, 10 November 2004, registered on 15 November 2004, 17 February 2005, registered on 21 February 2005, 30 March 2005, registered on 1 April 2005 and 18 April 2005, registered on 20 April 2005.

(4) By letter of 8 February 2005, registered on 9 February 2005, Poland agreed to merge the two cases N 438/04 and PL 34/04 as they concerned two companies belonging to the same group — the Gdynia Shipyard Group. The information provided thereafter with respect to PL 34/04 was also deemed relevant to case N 438/04.

(5) By letter of 22 April 2005, registered on the same day, Poland accepted that the Commission would treat the notification of 29 April 2004 of case PL 34/04 as a notification under Article 88(2) EC Treaty with regard to any measures found to constitute new aid. The case was attributed a new number: N 194/05.

(6) On 1 June 2005 the Commission adopted a decision to open the formal investigation procedure with respect to the measures examined in case N 438/04 and N 194/05, which was published in the Official Journal (2), and invited Poland and interested parties to submit comments.

(7) Having been granted an extension of the deadline for submitting comments (letter of 9 August 2005), Poland submitted its comments by letter of 2 September 2005, registered on 5 September 2005.

(8) Gdynia Shipyard Group submitted comments by letter of 10 October 2005, registered on 14 October 2005. Comments were also submitted by Ray Car Carriers (by letter of 7 October 2005, registered on 10 October 2005), by the Danish Permanent Representation to the EU (by letter of 7 October 2005, registered on 11 October 2005), by the Danish shipbuilding association Danish Maritime (by letter of 7 October 2005, registered on the same day), by the Solidarity trade union (by letter of 7 October 2005, registered on 10 October 2005) and by the Polish shipbuilding association (by letter of 10 October 2005, registered on 11 October 2005).

(9) The Commission forwarded these comments to Poland by letters of 26 October 2005 and 12 December 2005 (3). Poland responded to the comments provided by Gdynia Shipyard Group by letter of 16 January 2006, registered on 18 January 2006. Poland did not provide any comments on the submissions of the other third parties.

(10) The Commission sought the assistance of an external consultant for the evaluation of the Restructuring Plan for Gdańsk Shipyard (Update) dated March 2004. The consultant transmitted his report to the Commission in December 2005.

(11) By letter of 13 January 2006, the Commission asked Poland for information on the latest developments in its restructuring strategy for Gdańsk Shipyard and the whole Gdynia Shipyard Group. Poland replied by letter dated 20 February 2006, registered on 22 February 2006, and a meeting between representatives of the Commission, the Polish authorities and Gdynia Shipyard group took place on 22 February 2006. Poland announced that the 2004 restructuring plan for Gdańsk Shipyard was outdated and that it had adopted a new strategy for the restructuring of Gdańsk Shipyard involving its spinning-off from Gdynia Shipyard Group and its privatisation. Poland also announced that an amended restructuring plan was to be submitted to the Commission by 30 June 2006.

(12) As follow-up to this meeting, the Commission sent a letter to Poland on 8 March 2006, to which Poland replied by letter of 13 March 2006, registered on the same day, announcing a privatisation timetable for Gdańsk Shipyard. Poland provided additional information on the privatisation process by letter dated 29 March 2006, registered on 30 March 2006. The Commission asked for further information by letter of 30 March 2006, to which Poland replied by letter of 19 April 2006, registered on 20 April 2006.

(13) By letter of 6 April 2006, registered on 10 April 2006, Poland submitted a first draft of the document ‘A strategy for the shipbuilding sector (maritime construction shipyards) in Poland 2006-10.’ The Commission provided comments by letters of 12 April 2006 and 28 April 2006. The document was finally approved by the Polish Government on 31 August 2006 and sent to the Commission by letter of 1 September 2006, registered on the same day.

(14) By letter of 16 May 2006, Gdynia Shipyard Group submitted to the Commission the ‘Evaluation report of Gdańsk Shipyard — Gdynia Shipyard Group’ dated 30 September 2005.

(15) By letter of 26 May 2006, registered on 30 May 2006, Poland submitted further information on the ongoing privatisation process, including the list of companies which had expressed an initial interest in acquiring Gdańsk Shipyard and the list of companies which had submitted initial offers. By letter of 13 July 2006, registered on 17 July 2006, Poland submitted further information on the ongoing privatisation process, informing the Commission that two companies had submitted binding offers to purchase Gdańsk Shipyard shares and providing a comparative analysis by the privatisation consultant of these offers.

(16) On 9 June 2006, Gdańsk Shipyard submitted to the Commission the first draft of a modified restructuring plan. Commission representatives visited the yard on 14 June 2006 and made initial comments on the modified restructuring plan. The Commission’s external consultant provided his comments in a report dated July 2006. Lastly, the Commission commented on the shortcomings of the modified restructuring plan by letter of 17 July 2006.

(17) Poland submitted additional comments regarding the modified restructuring plan by letter of 13 July 2006, registered on 17 July 2006.

(18) Several meetings attended by representatives of the Commission and the Polish authorities were held on the privatisation process and the preparation of the modified restructuring plan: in Brussels on 31 January, 22 February and 10 May 2006 and on the premises of Gdańsk Shipyard on 13 June 2006.

(19) Poland replied to the Commission’s letter of 17 July 2006 by letter dated 31 August 2006, registered on 1 September 2006.

(20) On 4 September 2006, the final version of the modified restructuring plan of the yard dated August 2006 and entitled ‘Restructuring Plan for Gdańsk Shipyard — Update’ was submitted to the Commission.

(21) By letter of 12 September 2006, registered on 13 September 2006, Poland provided further information on the restructuring process of Gdańsk Shipyard, stating in particular that the capital of Gdańsk Shipyard and Gdynia Shipyard Group had been separated. The majority of shares in Gdańsk Shipyard was taken over by the state-owned Industrial Development Agency and its subsidiaries. Additional information was submitted by letter of 26 September 2006.

(22) Poland notified additional new aid for Gdańsk Shipyard by letter of 21 November 2006, registered on 27 November 2006.

(23) On 7 December 2006 a meeting took place between the Commission and the Polish Minister for Economic Affairs at which the Polish authorities committed to privatise the yard in order to improve the prospects for restoring its viability and to ensure a sufficient own contribution to the restructuring. Poland confirmed this undertaking by letter of 27 December 2006, registered on 4 January 2007, referring to the decision of the Polish Cabinet of 19 December 2006 to adopt a document entitled ‘The state of the shipbuilding industry.’ The undertaking to privatise the yard by 30 June 2008 was then confirmed in the letter from the Polish authorities of 5 January 2007. Poland requested the Commission to enter into talks on the issue of compensatory measures.

(24) The Commission visited the yard on 19 December 2006, assisted by its external consultant, to collect the necessary facts and data to evaluate the compensatory measures. The Commission’s external consultant submitted his report on the current capacity of the yard on 16 January 2007.

(25) The Commission replied to the letter of 27 December 2006 by letter of 29 January 2007, in which it called on Poland to submit a proposal for compensatory measures for Gdańsk Shipyard by the end of February 2007.

(26) By letter of 28 February 2007, registered on the same day, Poland undertook to privatise Gdańsk Shipyard by the end of 2007 and submitted a proposal for compensatory measures.

(27) On that basis a technical meeting between the Commission, the Polish authorities and representatives of the yard took place on 15 March 2007, dealing mainly with compensatory measures but also with the ongoing privatisation process. The Commission and the Polish authorities agreed that the Commission would enter into direct discussions with Gdańsk Shipyard on technical issues in order to assemble all the data necessary for its assessment of the compensatory measures proposed by Poland.

(28) By letter to Gdańsk Shipyard dated 29 March 2007, the Commission requested technical information on the capacity of the yard. By letter of 19 April 2007, registered on 3 May 2007, the yard replied to the above request. As the information provided was insufficient, the Commission requested further information by letter dated 10 May 2007, to which the yard replied by letter of 31 May 2007, registered on 7 June 2007. The Commission asked Poland to provide further clarifications by letter of 14 June 2007, in which it indicated that failure to provide all the requested information might lead the Commission to adopt a decision on the basis of Article 10(3) of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 93 of the EC Treaty (information injunction) (4). Poland replied by letter of 22 June 2007, registered on 26 June 2007. Considering this reply to be insufficient, the Commission adopted a decision pursuant to Article 10(3) of Regulation (EC) No 659/1999 on 19 July 2007.

(29) The Commission requested comprehensive information on new developments in the privatisation process by letter of 29 May 2007 and reiterated its request by letter of 6 June 2007. Poland responded to these requests by letter of 22 June 2007, registered on 25 June 2007 and, following a further request for information of 28 June 2007, completed its submission by letter of 11 July 2007, registered on the same day. The Commission asked for further information regarding the privatisation process and the planned compensatory measures by letter of 31 July 2007.

(30) Poland submitted information on the planned compensatory measures by letter dated 20 August 2007, registered on 21 August 2007. Further information on the compensatory measures was submitted by letter of 30 August 2007, registered on the same day and by letter of 4 September 2007, registered on 10 September 2007. The Commission replied by letter dated 3 October 2007.

(31) From July 2007 the Commission and the Polish authorities corresponded intensively on the privatisation process of Gdańsk Shipyard. The Commission requested information on the privatisation process by letters of 30 July 2007, 13 August 2007, 3 October 2007, 30 November 2007 and 17 January 2008. The Polish authorities submitted information by letters of 21 August 2007, registered on 27 August 2007, 24 September 2007, registered on 25 September 2007, 23 October 2007, registered on 24 October 2007 and 25 October 2007, registered on 29 October 2007. By letter of 19 December 2007, registered on 20 December 2007, Poland indicated that ISD Polska would take over new shares in the yard, thus, acquiring control over the company. Supplementary information was submitted by ISD Polska, the new owner of Gdańsk Shipyard, by e-mail of 25 January 2008.

(32) At the same time, by letter of 14 June 2007, the Commission asked the Polish authorities to provide information on the State aid received by Gdańsk Shipyard after the launch of the formal investigation procedure. The Polish authorities replied by letter of 11 July 2007, registered on the same day. The Commission asked for further explanations by letter of 13 November 2007. Poland replied by letter of 9 January 2008, registered on the same day.

(33) On 24 January 2008, when a meeting took place between the Polish authorities, the new majority owner of Gdańsk Shipyard, ISD Polska, and the Commission, technical discussions started concerning the new majority owner’s plans for restructuring the yard. The Polish authorities submitted information by letters of 25 January 2008, registered on 28 January 2008, and of 30 January 2008 and 4 February 2008, registered on the same days. Further information was submitted by letters of 14 February 2008, registered on 19 February 2008, 15 February 2008 and 21 February 2008, both registered on 3 March 2008, 26 February, registered on 12 March 2008, 10 March 2008, registered on the same day, and 10 April 2008 and 11 April, both registered on 17 April 2008. The Commission replied by letters of 30 January, 14 February, 25 February and 28 February 2008. On 11 February and 18 March 2008 meetings took place involving the Polish authorities, representatives of ISD Polska and the Commission.

(34) By letter of 22 April 2008, the Commission again called on Poland to submit a comprehensive draft restructuring plan for the yard. In that letter the Commission indicated that in the event of failure to provide the requested information it might adopt a decision pursuant to Article 10(3) of Regulation (EC) No 659/1999. Following this letter the Commission received information from the yard by letters dated 23 April 2008, registered on the same day, and 25 April 2008, registered on 29 April 2008. By letter dated 30 April 2008 the Commission repeated its request for information. Poland submitted additional information by letter of 12 May 2008, registered on 13 May 2008, and ISD Polska provided additional information by letters of 9 May 2008, registered on the same day, 16 May 2008, registered on 26 May 2008, and 26 May 2008, registered on the same day.

(35) Given that Poland had failed to provide all the information requested by the Commission, on 23 May 2005 the Commission adopted a decision pursuant to Article 10(3) of Regulation (EC) No 659/1999. Poland replied by letter of 26 June 2008, registered on the same day.

(36) Poland submitted further information by letters of 1 July 2008 and 2 July 2008, both registered on 3 July 2008. By letter of 4 July 2008 the Commission requested additional information, which was provided by Poland by letters dated 7 July 2008, registered on the same day, 8 July 2008, registered on the same day and 8 July 2008, registered on 9 July 2008. Poland submitted further information by letters of 10 July 2008, registered on the same day, and 10 July, registered on 11 July, 11 July 2008, registered on the same day, 16 July 2008, registered on 17 July 2008, 17 July 2008, registered on 18 July 2008, 18 July 2008, registered on 25 July 2008, 21 July 2008, 28 July 2008, 4 August 2008, 13 August 2008, 20 August 2008, 21 August 2008, 25 August 2008, 1 September 2008, 8 September 2008, 9 September 2008, and 10 September 2008, all registered on the date of their submission.

(37) On 12 September 2008 Poland submitted a revised joint restructuring plan for Gdańsk Shipyard and Gdynia Shipyard. Further information was submitted by Poland by letters of 16 September 2008, 17 September 2008, 19 September 2008, 23 September 2008, 25 September 2008, 26 September 2008, 1 October 2008, 2 October 2008, 3 October 2008, all registered on the date of their submission. Further information was submitted by letters of 6 October 2008, registered on 7 October 2008, and 22 October 2008, registered on the same day. By letter of 3 November 2008, registered on 4 November 2008, Poland stated that it would submit a stand-alone plan for Gdańsk Shipyard. By letter of 4 November, registered on 5 November 2008, the Polish authorities submitted an incomplete draft restructuring plan for Gdańsk Shipyard.

(38) On 6 November 2008 the Commission adopted a negative decision on Gdynia Shipyard (5) in which it found the restructuring plan prepared by ISD Polska for Gdynia Shipyard and Gdańsk Shipyard incompatible with the State aid rules.

(39) On 8 December 2008 Poland submitted a stand-alone restructuring plan for Gdańsk Shipyard. Further information was submitted by letter of 11 December 2008, registered on the same day.

(40) By letters of 23 December 2008, registered on 12 January 2008, and 13 February 2009, registered on the same day, the Commission requested further information, which was provided by Poland by letters dated 30 January and 20 February 2009, both registered on the date of their submission.

(41) The Commission requested further clarifications by letter of 8 April 2009, registered on the same day. Poland submitted additional information by letters of 16 and 28 April 2009, both registered on the date of their submission.

(42) On 8 May 2009 Poland submitted a revised restructuring plan for Gdańsk Shipyard. The plan was registered on the same day. Poland submitted further clarifications by letters of 21 May 2009, 1 June 2009 and 5 June 2009, all registered on the date of their submission.

II. DETAILED DESCRIPTION OF THE AID

1. The company

(43) The aid recipient is Stocznia Gdańsk S.A. (‘Gdańsk Shipyard’). The company is located in the Gdańsk-Gdynia-Sopot region in the north of Poland.

(44) The activities of Gdańsk Shipyard comprise construction of sea-going vessels and other shipbuilding-related activities such as production of parts of vessels and steel parts as well as various ancillary services.

(45) Gdańsk Shipyard went bankrupt in 1996 and in 1998 its assets were purchased by the biggest shipyard in Poland, Gdynia Shipyard, located approximately 20 km from Gdańsk Shipyard. The yard was renamed Gdańsk Shipyard — Gdynia Shipyard Group. Since then, Gdynia Shipyard has concluded contracts, purchased materials and arranged financing for Gdańsk Shipyard’s production. Although Gdańsk Shipyard became to a large extent dependent on the parent company, in 2006 the Polish authorities decided within the framework of government strategy that the yards should be separated. In August 2006 the majority of shares in Gdańsk Shipyard were taken over by the State-owned Industrial Development Agency (‘the IDA’) and its subsidiary Centrala Zaopatrzenia Hutnictwa by way of a debt-for-equity transaction. This transaction separated Gdańsk Shipyard from Gdynia Shipyard.

(46) Having undertaken in December 2006 to privatise Gdańsk Shipyard to improve the prospects for restoring its viability, on 17 September 2007 the Polish authorities launched the tender procedure for the subscription of shares in the newly increased capital of Gdańsk Shipyard, as per the Resolution of the Extraordinary General Meeting of 10 August 2007. ISD Polska, a subsidiary of Ukrainian steel producer Donbas and already a minority shareholder in Gdańsk Shipyard, submitted a binding offer to purchase the new shares in November 2007. Since January 2008, ISD Polska has been the majority shareholder in Gdańsk Shipyard. Since June 2008 ISD Polska has held 83,6 % of shares, with the remaining stake held by the IDA. The share capital amounts to PLN 405 million.

(47) Gdańsk Shipyard rents three slipways with a total capacity of approximately 160 000 CGT (according to company figures). The company used to produce mainly container ships, bulk carriers, sections, blocks and hulls for its parent company Gdynia Shipyard and other companies. Following privatisation, in 2007 and 2008 the yard focused on producing hulls of smaller specialised vessels and semi-equipped hulls. In addition the yard produces blocks and sections for other yards and steel structures for various industries and construction businesses.

(48) At end-2006 the yard employed 2 893 workers, 60 % being directly engaged in production. In 2008 the workforce was reduced to 2 235, a fall of 23 %.

(49) The restructuring of Gdańsk Shipyard began as early as 1998, immediately after it was declared bankrupt and its assets were taken over by Gdynia Shipyard. According to the information provided by the Polish authorities, Gdynia Shipyard Group (to which Gdańsk Shipyard belonged until August 2006) first experienced difficulties in 2002. In fact, after the bankruptcy in 1996, Gdańsk Shipyard made a profit for the first time in the first half of 2002 and afterwards began to make significant losses. The problems of the Group naturally spilled over to Gdańsk Shipyard. The factors contributing to the difficult financial situation were external, such as Asian competition, the zloty’s strong position against the dollar, difficulties with accessing financing for ships following the problems of Stocznia Szczecin Porta Holding S.A. and the fall of a gantry crane in Gdynia Shipyard during a storm in 1999. Other factors were of a more internal nature. In its attempt to fill its order book, especially after the increase in its production potential following the acquisition of Gdańsk Shipyard in 1998, Gdynia Shipyard took a number of managerial decisions which proved to be problematic. Gdynia Shipyard assumed design, technological, financial and commercial risks (new products, prototypes, loss-making construction of vessels new for the yard: small bulk carriers, chemical carriers, ro-lo vessels, chemical-gas carriers, bulk-container carriers and general cargo vessels). The rate at which the yard reduced operating costs was also unsatisfactory.

(50) The Group’s financial difficulties led to arrears in settling public and civil law obligations and wages, shortages in supplies of materials, slowdowns in production processes, increased costs (labour consumption, penalties), and delays in completing contracts.

(51) The following data on the operation of the shipyard has been made available. Table 1 Operation of Gdańsk Shipyard (in PLN million) 1999 2000 2001 2002 2003 2005 2006 2007 2008 Turnover 153 212 251 168 98 185,6 221 308 248 Operating result (1999 to 2003); Net result (2005 to 2008). –32 –49 –38 –14 (6) –47 – 100 –71 – 237 –17

2. Decision to initiate proceedings under Article 88(2) of the EC Treaty

(52) In its decision to open a formal investigation, the Commission decided that a number of measures indicated in part A of Annex II to the decision had been granted to Gdańsk Shipyard prior to 1 May 2004 and were not applicable after accession within the meaning of point 3 of Annex IV to the Accession Treaty and, therefore, would not be examined under the procedure laid down in Article 88(2) of the EC Treaty. Those measures are therefore not caught by this decision. Nonetheless, they had to be taken into account when assessing the compatibility with the common market of the measures granted after accession.

(53) The Commission also indicated that some of the measures for Gdańsk Shipyard constituted new aid because they had been granted after Poland’s accession to the EU on 1 May 2004 or had not yet been granted at the time of the decision. The Commission listed these measures in part B of Annex II to the decision.

(54) In essence, the Commission argued that no legally binding decision had been taken on the measures listed in part B of Annex II to the decision prior to Poland’s accession, although it recognised that some preliminary steps had been taken at that time with a view to adopting a legally binding decision.

(55) With regard to the restructuring of public debt under the Chapter 5a procedure based on the State Aid (Enterprises of Special Significance for the Labour Market) Act of 30 October 2002, as amended (7) (measures 10-16 of part B of Annex II to the Decision) the Commission concluded that a restructuring decision issued by the Chairman of the IDA, the government agency responsible for administering the Chapter 5a procedure, would constitute a legally binding decision to award aid. In this case, however, no such restructuring decision had been issued prior to accession (8). A decision issued by the Chairman of the IDA on 30 April 2004 approving the March 2004 restructuring plan for Gdańsk Shipyard did not fulfil the procedural and substantive requirements to qualify as a restructuring decision and thus did not constitute a legally binding decision to award aid.

(56) The Commission accepted Poland’s explanation that the interest accrued on these public-law debts would be automatically written off together with the principal in view of its ancillary nature, without it being necessary to issue a separate decision.

(57) The Commission did not find any evidence of legally binding decisions for a series of measures listed as measures 17-22 in part B of Annex II to the decision. These measures related to restructuring of public liabilities on the basis of legal acts other than the above-mentioned Act of 30 October 2002. As regards the guarantee listed as measure 23 of part B of Annex II to the decision, the Commission responded in particular to Poland’s main argument, namely that this measure had been included in the March 2004 restructuring plan for Gdańsk Shipyard, which had been approved by the shipyard’s Supervisory Board, on which the Treasury was represented.

(58) The Commission found in particular that the Supervisory Board had not been empowered to adopt decisions with financial repercussions for the shareholders in so far as the shareholders had not taken the requisite steps to that end. The Commission also found that, even assuming that the Supervisory Board was entitled to take such decisions on behalf and on account of the shareholders, it remained unclear whether such a decision would create a positive obligation on the part of the Treasury to award State aid, since it is not normally possible to assimilate actions taken by the state as a market player with actions taken by the state in pursuance of various public goals.

(59) The Commission also noted that notification had been given of measures 24 and 25 of part B of Annex II to the Decision (cancellation of debt and capital injection) as alternatives in the light of Gdynia Shipyard’s being unable to realise the planned capital injection in Gdańsk Shipyard; hence it was clear that these measures had not been granted before accession and that they constituted planned new aid.

(60) Furthermore, the Commission noted that Gdynia Shipyard Group had been benefitting from production guarantees provided by the Export Credit Insurance Corporation, the Polish export credit agency. The Commission raised doubts as to the commercial nature of these guarantees since they had been issued within the framework of the Export Credit Insurance Corporation’s non-commercial activities (with Treasury guarantees). Considering that the group was in financial difficulties, the Commission doubted whether the premiums charged properly reflected the risk involved and whether the collateral required by the Export Credit Insurance Corporation was sufficient.

(61) Having found that a number of measures for Gdańsk Shipyard constituted new aid, the Commission expressed doubts that any of the conditions for the aid to be approved as restructuring aid had been met.

3. Comments from interested parties

(a) Comments by Gdynia Shipyard Group

(62) The Commission notes that Gdańsk Shipyard itself did not submit comments on the decision to open the formal investigation. However the comments submitted by its parent company also addressed the Commission’s conclusions on its competence in respect of the measures listed in part B of Annex II to the decision and in respect of the Commission’s doubts on the compatibility of this aid.

(63) With regard to the restructuring of public debt under the Chapter 5a procedure, Gdynia Shipyard Group argued that the aid had been awarded by the restructuring decision issued by the Chairman of the IDA. Gdynia Shipyard Group maintained, however, as did Poland in the initial phase of the Commission’s investigation, that the decision concerning Gdańsk Shipyard had been adopted by the Chairman of the IDA prior to accession, on 30 April 2004.

(64) Gdynia Shipyard Group argued that it was the agreement of all the individual public creditors to the restructuring under the Chapter 5a procedure which constituted the award of the aid, prior to accession (9).

(65) Contrary to what Poland stated in the first phase of the Commission’s investigation, Gdynia Shipyard Group argued that no default interest had accrued after 30 June 2003 on the public-law debts restructured under Chapter 5a.

(66) Gdynia Shipyard Group also commented on other aspects of the decision. In particular, it stated that the production guarantees provided to the yard by the Export Credit Insurance Corporation did not constitute State aid. Gdynia Shipyard Group argued that the Export Credit Insurance Corporation guarantee scheme was a self-financing system in which, over the long-term, the premiums collected exceeded the risks covered and the amounts actually paid out. Gdynia Shipyard Group described the conditions in which the Export Credit Insurance Corporation issues these guarantees (premiums and type of collateral required).

(67) With regard to the requirement that aid be limited to the minimum necessary, the recipient argued that the amount of the aid had been limited to the strict minimum, and that it would be justified to award more aid, if available. Gdynia Shipyard Group also suggested that even if the Commission defined the restructuring costs narrowly (i.e. as not including the running costs of the yard), the financing component of these costs free of State aid would still be of the order of 30 %, thus satisfying the 1999 Restructuring Guidelines (10).

(68) Gdynia Shipyard Group also argued that the State aid to the group did not distort competition in Europe, claiming that the real competitive threat to European shipyards came from the Far East. The recipient acknowledged that container vessels were also built in other European shipyards, particularly in Germany, but claimed that these vessels differed in terms of design and technical specifications.

(b) Comments by other interested parties

(69) Denmark and Danish Maritime supported the Commission’s efforts to ensure that State aid was granted in line with the applicable rules. They pointed out that, as a result of the competitive situation in the world shipbuilding market, a number of Danish shipyards had closed or faced bankruptcy without any State aid being provided. They also confirmed that the product range of the Danish yards was similar to that of the Polish yards, with the result that the Danish yards could be affected by unfair competition. Denmark also urged the Commission to require a reduction in capacity at Gdańsk Shipyard so that State aid was not used to increase overcapacity worldwide.

(70) Ray Car Carriers, as the largest customer of Gdynia Shipyard Group and a minority shareholder of the parent company of Gdańsk Shipyard, stressed the importance of the group to its own operations in view of its ongoing contracts with the yard.

(71) The Solidarity trade union highlighted the declining situation at the yard, arguing that speedy restructuring was needed. The union described some of the restructuring measures already undertaken at the yard and expressed the belief that, with the technology and workforce available to it, it would join the ranks of the profitable European shipyards. State aid was therefore necessary to implement the restructuring plan.

(72) The Polish shipbuilding association Forum Okrętowe explained the reasons for the yard’s difficulties and expressed its support for the restructuring process and for the use of State aid to that end.

(c) Comments by Poland

(73) Like the Gdynia Shipyard Group, Poland commented on aspects relating to both the Commission’s competence and the compatibility of the aid with the common market.

(74) With regard to the restructuring of public debt under Chapter 5a, Poland did not put forward any additional arguments. However, in its response to the Gdynia Shipyard Group’s comments, Poland expressed disagreement with the latter’s interpretation of Polish law.

(75) With regard to the measures indicated in part B of Annex II to the decision, Poland did not rebut the conclusions of the Commission as indicated in the decision to open a formal investigation.

(76) As regards the compatibility of the new aid with the common market, Poland stated that the March 2004 restructuring plan constituted a sound economic basis for the yard’s restructuring process. While Poland acknowledged that the restructuring process had been carried out with limited financial resources, it argued that it had already improved the yard’s financial situation. In addition, the Polish authorities provided a brief description of the restructuring measures enshrined in the March 2004 restructuring plan in order to demonstrate that restructuring was not purely financial in scope. They defended the compensatory measures proposed in the March 2004 restructuring plan and implemented within Gdynia Shipyard Group. With regard to the requirement that aid be limited to the minimum necessary, Poland stated that the aid was not used for purposes other than restructuring and claimed that the aid intensity amounted to 31 %, i.e. aid as a percentage of the total restructuring costs, including operating costs. Poland argued that the planned capital injection from Gdynia Shipyard to Gdańsk shipyard, re-negotiation of contract prices and the cumulated profits and positive cash flow generated by the yard in future should be regarded as constituting an ‘own contribution’.

(77) The Polish authorities described in detail how the Export Credit Insurance Corporation’s guarantee system operated and argued that these guarantees had been provided on market terms and thus did not constitute State aid.

4. Chronological description of decisive events following the Commission’s decision to open the formal investigation

(78) The Commission investigation and the events which occurred in the course of it are summarised below.

(79) In reply to the Commission’s decision to open the formal investigation, the Polish authorities submitted explanations of two types in autumn 2005: first, questioning the competence of the Commission to act in respect of the measures identified as new aid in its decision, and, second, arguing that even if these measures constituted new aid, they were compatible with the common market as restructuring aid. The reaction of Gdynia Shipyard Group to the Commission’s decision was of a similar nature. Both are described above.

(80) In support of its argument on the compatibility of the aid, Poland referred to the 2004 restructuring plan for Gdańsk Shipyard submitted to the Commission in October 2004 with regard to which the Commission opened the formal investigation because of doubts as to its credibility and robustness. Nevertheless, the Commission carefully studied the 2004 restructuring plan and sought assistance from an external consultant. The Commission concluded that the 2004 restructuring plan did not fulfil any of the conditions for the approval of restructuring aid prescribed by the relevant guidelines. At a meeting on 22 February 2006 the Commission explained its main concerns to the Polish authorities. The Commission highlighted the main weaknesses of the 2004 restructuring plan: low investments, low planned productivity, high production costs, in particular overheads, and insufficient strengthening of the yard’s own capital base. The aid provided to the yard had to be regarded as operating aid in support of debt restructuring and the yard’s continued operation.

(81) In December 2005 the Commission learned from public sources (11) that Korporacja Polskie Stocznia (‘KPS’), a capital group under public ownership, had been created with the aim of integrating the three largest Polish shipyards in Gdynia, Gdańsk and Szczecin under one umbrella (‘the consolidation plan’). The main role of KPS was to finance the shipyards’ production. Poland did not inform the Commission about the consolidation plan at any stage of the procedure, either prior to or after the decision to open the formal investigation.

(82) At the same time, the Commission learned from the press about ongoing talks on the sale of the shipyards in Gdynia and Gdańsk to strategic investors and on the separation of the two companies, which until that date had operated as part of the same group. The Commission asked the Polish Government by letter of 13 January 2006 to spell out what its strategy for Gdynia Shipyard Group actually was.

(83) Poland explained by letter of 20 February 2006 that a consolidation plan had indeed been envisaged previously but that it had been discarded and a new restructuring strategy for the Polish shipbuilding sector would be adopted shortly.

(84) At the meeting of 22 February 2006 and by letter of 13 March 2006 the Polish authorities informed the Commission that the 2004 restructuring plan for Gdańsk Shipyard was outdated and had to be amended. The Polish authorities undertook to submit the amended restructuring plan by June 2006. They also presented the main features of the new restructuring strategy for the Polish shipbuilding sector. First, Gdańsk Shipyard was to be separated from Gdynia Shipyard Group as soon as possible. Second, the Government was to allow an injection of private capital into Gdańsk Shipyard with the long-term objective of fully privatising the yard.

(85) The Commission received the first draft of the 2006 restructuring plan on 9 June 2006. Having visited the yard and received the opinion of an external consultant, the Commission expressed serious concerns about this draft during the on-site visit on 14 June 2006 and in writing on 17 July 2006, pointing out that the restructuring plan did not appear to be achievable and would be unlikely to allow the yard to restore long-term viability without unduly distorting competition. The Commission noted that the restructuring strategy did not seem to be based on a thorough analysis of the profitability of the different activities of the yard in the past, but instead assumed considerable expansion in shipbuilding activity, that there was no real prospect of financing restructuring from resources free of State aid and, lastly, that in view of its expansionist nature, the plan clearly failed to comply with the compensatory measures requirement. Referring to continuous reliance on ship financing guarantees provided by the Export Credit Insurance Corporation, a government agency, the Commission warned the yard and the Polish authorities that these guarantees constituted State aid.

(86) Despite these warnings, the 2006 restructuring plan eventually submitted by Poland in September 2006, with a two-month delay, did not differ substantially from the first draft.

(87) In August 2006, the majority of shares in Gdańsk Shipyard were taken over by the ARP and its subsidiary Centrala Zaopatrzenia Hutnictwa by way of a debt-for-equity transaction (Gdynia Shipyard’s shares in Gdańsk Shipyard served as collateral for a loan awarded by the ARP to Gdynia Shipyard, part of which became payable in June 2006). As a result Gdańsk Shipyard was separated from Gdynia Shipyard Group.

(88) At a meeting on 7 December 2006 and by letter of 29 January 2007 the Commission indicated to the Polish authorities that a preliminary examination had concluded that the 2006 restructuring plan for Gdańsk Shipyard did not comply with any of the conditions for the approval of restructuring aid under the current guidelines.

(89) The Polish authorities announced at that meeting that they intended to privatise Gdańsk Shipyard. Poland indicated that the privatisation process was to be completed by June 2008. By letter of 28 February 2007 Poland undertook to privatise Gdańsk Shipyard by end-2007. Pending preparation of the privatisation documents, Poland asked the Commission to issue a statement on the necessary compensatory measures for Gdańsk Shipyard so that potential investors could be provided with the correct information.

(90) In the following months the management of Gdańsk Shipyard conducted talks with various potential investors with a view to finding a strategic investor for the yard who would acquire newly issued shares in the company, thus providing the funds necessary for the restructuring process and taking control of the company.

(91) At the same time, following an agreement reached with the Polish authorities in December 2006, the Commission was engaged in intensive discussions with the Polish authorities and Gdańsk Shipyard with a view to determining the necessary compensatory measures. By letter of 28 February 2007 Poland undertook to close one slipway at Gdańsk Shipyard after outstanding orders had been completed, i.e. as of January 2010.

(92) The Commission asked Gdańsk Shipyard to provide information so that it could determine whether this proposal constituted a genuine compensatory measure. Since the information submitted was not complete and did not demonstrate that the compensatory measures proposed by Poland for the yard were sufficient, on 19 July 2007 the Commission adopted a decision pursuant to Article 10(3) of Regulation (EC) No 659/1999 enjoining Poland to submit the information necessary to resolve the issue of compensatory measures at Gdańsk Shipyard.

(93) The Polish authorities replied by letter of 20 August 2007, arguing that the closure of more than one slipway was not an option as this would make it impossible to restore the yard’s long-term viability. However, the study submitted in support of this position was based on the assumption that no restructuring or adjusting measures would be implemented after the slipways were closed. The Polish submission also suggested that the future owner of the yard might consider purchasing a new launching facility, given that the slipways used by the yard to date were rented from third parties. Therefore by letter of 3 October 2007 the Commission noted that the issue of the necessary compensatory measures remained unsolved and that Poland should duly inform potential investors interested in acquiring Gdańsk Shipyard about the State aid it had received after Poland acceded to the European Union, and of the need to prepare a credible restructuring plan based on the adoption of genuine compensatory measures. The Polish authorities also proposed that the scope and method of implementation of the necessary compensatory measures be agreed with the yard’s new owner.

(94) In September 2007 the Polish authorities launched the tender procedure for the subscription of shares in the newly increased capital of Gdańsk Shipyard in accordance with the Resolution of the Extraordinary General Meeting of 10 August 2007. ISD Polska, a subsidiary of Ukrainian steel producer Donbas and already a minority shareholder in Gdańsk Shipyard, submitted a binding offer to purchase the new shares in November 2007. The newly subscribed shares were registered by the competent court in January 2008. ISD Polska also purchased most of the existing shares in Gdańsk Shipyard from Gdynia Shipyard, the IDA and its subsidiary Cenzin. As of January 2008, ISD Polska held 79 % of shares in Gdańsk Shipyard. In April 2008 ISD Polska’s parent company set up a new subsidiary: ISD Stocznia. Subsequently, the shares in Gdańsk Shipyard were transferred from ISD Polska to ISD Stocznia, which became the formal owner of Gdańsk Shipyard.

(95) On 24 January 2008 the first meeting between the Polish authorities, the Commission and the new majority owner of Gdańsk Shipyard — ISD Polska — took place. Intensive technical discussions subsequently took place on the new majority owner’s plans for restructuring the yard. On 11 February and 18 March 2008 additional meetings took place between the Polish authorities, representatives of ISD Polska and the Commission.

(96) In reply to the Commission’s requests for information Poland submitted several documents presenting in a non-detailed way alternative strategies for ISD Polska as regards the State aid investigation.

(97) First, the Commission received a summary document highlighting some features of ISD Polska’s restructuring strategy for the yard and based on the assumption that the State aid (EUR 20 million in the opinion of ISD Polska) would be repaid. This was allegedly the basis of ISD Polska’s decision to acquire the yard. ISD Polska later indicated at a meeting on 18 March 2008 that this alternative was no longer under consideration, since the recoverable State aid was higher than originally estimated by ISD Polska.

(98) Second, the Commission received a draft version of the business plan providing for restructuring to be undertaken in accordance with the Guidelines. Under this scenario the yard would diversity into three activities: shipbuilding as the core activity, production of wind power plants and production of steel structures. As regards the yard’s capacity, the plan provided for activities to be carried out on the three existing slipways until 2012; these would be replaced by a new floating dock as of 2013. The draft business plan provided for investment of EUR 183 million.

(99) Third, the Commission received a short analysis from ISD Polska allegedly demonstrating that the immediate closure of two slipways and an output limitation as of 2013 would prevent the yard from restoring viability.

(100) None of the above-mentioned documents presented by the Polish authorities following privatisation can be regarded as constituting a comprehensive, cohesive restructuring plan as required by the Guidelines.

(101) By letter of 22 April 2008 the Commission again called on Poland to submit a draft plan for the comprehensive restructuring of the yard. Since the information provided was deemed insufficient, on 23 May 2008 the Commission adopted a decision (12) pursuant to Article 10(3) of Regulation (EC) No 659/1999 enjoining Poland to supply all the documentation, information and data necessary to assess whether viability would be restored to Gdańsk Shipyard, and if so, when, whether sufficient compensatory measures would be implemented, whether State aid would be limited to the minimum necessary and what would be the own contribution free of State aid as required by the Guidelines, i.e. to assess whether restructuring aid for Gdańsk Shipyard would be compatible with the common market. The deadline for submitting the information requested was 26 June 2008.

(102) At a meeting held on 10 June 2008 it emerged that the Polish authorities were conducting intensive talks with ISD Polska and Gdańsk Shipyard on the possible purchase of Gdynia Shipyard and a merger of the two yards. Poland proposed compensatory measures to be implemented in the merged yard and indicated that the new investor had requested additional State aid as a condition for taking part in the privatisation of Gdynia Shipyard. Poland also informed the Commission that ISD Polska was preparing a joint restructuring plan for both yards to be submitted to the Commission by 26 June 2008 further to the information injunction referred to above.

(103) At the request of the Polish authorities, the Commission informed Poland and ISD Polska at the meeting of 10 June 2008 and again at the meeting of 13 June 2008 that certain framework conditions would have to be met if ISD Polska was to purchase Gdynia Shipyard with the intention of operating it jointly with the one in Gdańsk. These framework conditions were that ISD Polska would have to present a joint restructuring plan for both yards by 26 June 2008, contribute significantly to the restructuring costs and adopt genuine compensatory measures in accordance with the relevant guidelines. The Commission stated that ISD Polska’s proposed contribution to the restructuring costs was insufficient, bearing in mind the amount of State aid that the two yards had received in the past and the additional aid that ISD Polska had applied for in connection with privatisation.

(104) On 26 June 2008 the Commission received a draft restructuring plan dated June 2008 and prepared by ISD Polska entitled ‘Restructuring Plan for the New Gdańsk-Gdynia Shipyard’, presenting a joint restructuring strategy for the shipyards in Gdańsk and Gdynia (hereinafter the ‘joint restructuring plan (ISD)’).

(105) On 12 September 2008 Poland submitted the final ‘Restructuring Plan for the New Gdańsk-Gdynia Shipyard’ prepared by ISD Polska (‘the joint restructuring plan of 12 September’), which was essentially an updated version of the joint restructuring plan of 26 June 2008.

(106) On 6 November 2008 the Commission concluded the investigation into restructuring aid for Gdynia Shipyard, finding the aid for the yard incompatible with the common market and ordering its recovery (13). In this decision the Commission rejected the joint restructuring plan of 12 September, since it had not been demonstrated that this plan would restore the long-term viability of the two yards operating within one group, that the aid would be limited to the minimum necessary and that provision would be made for measures to limit the distortion of competition created by the aid.

(107) In November 2008 the Commission received a draft stand-alone restructuring plan for Gdańsk Shipyard prepared by ISD Polska. Following intensive correspondence between the Commission, the Polish authorities and ISD Polska, on 8 May 2009 the Commission received the final restructuring plan for Gdańsk Shipyard, entitled ‘Restructuring Plan for Gdańsk Shipyard. Revised version of the plan of 5 December 2008’ and dated 7 May 2009 (‘the 2009 Restructuring Plan’).

5. The 2009 Restructuring Plan

(108) The 2009 Restructuring Plan recalls the failure of the 2006 Restructuring Plan to restore viability to the yard and identifies the causes of the yard’s current financial difficulties. It underlines the failure to privatise the yard in 2006 and to raise the yard’s capital to levels permitting restructuring. The plan identifies macroeconomic factors such as the Polish zloty’s appreciation against the US dollar, the increase in steel prices and external factors such as the outflow of qualified workforce from the yard, high absenteeism, poor organisation and low productivity.

(a) Sales strategy

(109) The plan is based on an assumption that the yard will diversify its activities. It is assumed that the company will process around [… more than 100] (14) thousand tonnes of steel each year: [… around 15 %] tonnes for shipbuilding, [… around 40 %] tonnes for wind tower production and [… around 45 %] tonnes for the production of steel structures.

(110) As regards the shipbuilding business, ISD Polska will target the market segment of semi-equipped hulls of specialist off-shore vessels and seismic vessels.

(111) The market analysis is based on a comparison with the production of other European shipyards and the experience of Gdańsk Shipyard. Under the plan, the yard is to concentrate on producing semi-equipped off-shore and seismic vessels as a subcontractor of other yards. The 2009 Restructuring Plan describes the previous experience of Gdańsk Shipyard in building hulls for off-shore vessels and explains that the yard has orders for vessels of this type.

(112) According to the planned production portfolio, up to […] hulls/vessels will be produced each year. The yard plans to conclude long-term cooperation agreements with shipyards specialising in the off-shore vessel segment and to build parts of complete vessels for these yards.

(113) As regards its non-shipbuilding business, ISD Polska intends to start production of wind towers and steel structures. Under the plan, wind tower production is to start in 2012 at […] wind towers, rising to […] wind towers as of 2015 (with a height of 80 meters).

(114) The plan provides for the production of various steel structures (e.g. jibs, prefabricates, storage structures, steel structures for the building industry), rising from [… more than 10 000] tons in 2008 to [… more than 50 000] tons as of 2013 (15).

(115) The restructuring plan describes the know-how of ISD Polska (or of other companies belonging to the Donbas group) in the steel structures field. Provision is made for some production to move from Huta Częstochowa to Gdańsk Shipyard. The plan summarises the results of a market study by an independent consultant undertaken in preparation for the development of the steel structure segment in Gdańsk Shipyard after the entry of ISD Polska at the beginning of 2007. The study forecasts growth in the steel structure segment in Europe and Poland in particular (e.g. development of infrastructure with the help of Structural Funds). The plan explains that Gdańsk Shipyard has potential to develop steel structure activity in view of anticipated growth in the market for steel structures, the yard’s good location by the sea, enabling cheap transport, and the experience acquired by ISD Polska Group.

(116) ISD Polska started production of steel structures at Gdańsk Shipyard immediately after it took over the yard. In 2008 the yard sold around [… more than 10] thousand tonnes of steel structures, mainly wind tower parts.

(117) The 2009 Restructuring Plan contains various forecasts for the volume of production of steel structures, as shown in the following Table 2. Table 2 Planned production of steel structures in tonnes (2009 Restructuring Plan) Products 2008 2009 2010 2011 2012 2013 2014 Jibs […] […] […] […] […] […] […] Prefabricates […] […] […] […] […] […] […] Storage structures […] […] […] […] […] […] […] Steel structures for building […] […] […] […] […] […] […] Total [… more than 10 000] […] […] […] […] [… more than 50 000] [… more than 50 000]

(b) Industrial and operational restructuring

(118) The 2009 Restructuring Plan observes that the production assets of the yard have deteriorated significantly and are at the level of European shipyards at the beginning of 1990s. The planned investments amount to PLN [… below 100] million for shipbuilding and PLN [… around 200] million for non-shipbuilding production (PLN […] million for wind towers and PLN […] million for steel structures).

(119) The investments in shipbuilding will be implemented between 2009 and 2011. The main components (16) are investments in new launching infrastructure, portals for cutting, panel processing and ventilation. These investments, in combination with organisational changes, should result in a productivity improvement from the current 45 man-hours/CGT to the target of 27 man-hours/CGT (17).

(120) The main organisational needs are identified in the following areas: sales (contracts), purchase of materials and services, design capabilities, production, human resources and information technology.

(121) The 2009 Restructuring Plan envisages the creation of a Planning Centre tasked with planning production efficiently at all levels of organisation of the yard. It is designed to eradicate deficiencies in the planning, scheduling, budgeting and monitoring of the production process.

(122) In the area of contracting, ISD Polska intends to introduce indexation clauses to protect the yard from increases in prices for materials and wages by transferring the risk to the shipowner. The yard also intends to reduce penalties for construction delays. The yard should introduce a new model contract. Extracts from some existing shipbuilding contracts were attached to the Restructuring Plan with a view to demonstrating that the yard is able to negotiate indexation clauses insuring the risk of steel price fluctuations.

(123) To protect itself from the risk of currency fluctuations, the yard intends to introduce the necessary infrastructure, after having identified costs and revenue generating currency-related risks and defined the permissible exposure to these risks. The Restructuring Plan proposes to address this risk with four pillars: taking this risk into account when defining the strategy of the yard (definition of risk-tolerance, control of risk), adjusting the organisational structure, using information technology and adopting various risk-limitation methods (natural hedging, indexation clauses in contracts and purchase of financial products such as currency options and forwards). The plan describes the currency hedging policy proposal in greater detail. It identifies three hedging instruments the yard should use (natural hedging, fx forward transactions and currency options); it quantifies the exposure of the order book to currency risks until 2012 and estimates the costs of these hedging instruments on that basis. According to the plan, ISD Polska has contacted a number of banks, which, for the purpose of preparing hedging offers requested ISD to submit a satisfactory hedging strategy. According to the plan, this strategy should be drawn up in the first six months of restructuring.

(124) In the area of production, the objective is to address the problem of inefficient logistics resulting from the long distances between the prefabrication area and the ship assembly facilities. The plan proposes to change the yard’s layout and to revise the shipbuilding technology. In order to shorten the ship production cycle the yard will ensure an optimised supply of materials and smooth functioning of the production process, with the potential labour reserves resulting from the cyclical nature of shipbuilding production deployed in the more flexible steel structure business.

(125) Where purchases and management of materials are concerned, the main objective is to cut costs. Restructuring measures include managing a single, cohesive database of materials, purchasing according to the production plan, implementing framework agreements and electronic auctions to achieve savings, stock management, purchasing materials by selecting from at least three offers, cooperation on purchasing with Huta Częstochowa etc.

(126) In the IT field, the yard plans to recruit and train qualified workforce, extend the use of and modernise existing information technology and introduce a single IT system in the yard integrated with all or almost all organisational units.

(127) In the employment field, the objective is to tackle high rotation and absenteeism. ISD Polska plans to cooperate with a local recruitment agency. Internally, the plan provides for career development policies, the introduction of a motivational system of remuneration (overtime management, evaluation of employees, monitoring of absenteeism, remuneration based on projects and the timeliness and quality of implementation) and development of the company’s identity. The plan states that the number of employees must be reduced.

(128) At the end of 2008 the company employed 2 235 people. In other words, the number of employees had been reduced by 658 from 2 893 at end-2006.

(129) The plan provides for a reduction by end-2011 in the number of employees directly engaged in production by […] and in the number of employees in the administration and other persons on permanent contracts by […]. On the other hand the company plans to gradually increase employment in non-shipbuilding activities by around […] workers (in 2013) in wind tower production and by […] workers (in 2013) in the steel structure business. As a result, the number of persons employed by the company would be reduced by […]. The planned employment target for shipbuilding is [… fewer than 1 500] workers.

(130) The revised plan includes a calculation of the costs and effects of employment restructuring.

(131) In the field of design activities, the plan provides for the work of the design office to be rationalised and for improved links to the production process. The plan assumes that additional instruments and systems will be purchased for the design office; however, where shipbuilding is concerned, it assumes that standardised projects will be implemented, thus reducing the costs of developing new designs.

(132) The plan contains a brief, general description of the desired effects of these organisational restructuring measures and quantifies them in a summary way when it asserts that the productivity improvement due to these measures will be about 12 man-hours/CGT (18).

(c) Financial restructuring

(133) In the area of financial restructuring, the plan provides for new State aid in the form of a PLN 46,7 million capital injection and a PLN 103,3 million loan. In total, the new aid would amount to PLN 150 million (nominal value).

(d) Costs of restructuring and own contribution

(134) The 2009 Restructuring Plan quantifies the costs of restructuring incurred by Gdańsk Shipyard in the past (after 1 May 2004) at PLN 405 million. The planned investments amount to PLN [… around 300] million. The plan provides for the repayment of accumulated public debts of PLN 95,3 million and of accumulated civil liabilities of PLN […] million. The costs of employment restructuring are expected to amount to PLN […] million. It is assumed that PLN […] million will be needed to balance the yard’s finances (coverage of past losses, provision of sufficient liquidity and capital). In total, restructuring costs would amount to PLN [… more than 1 000] million.

(135) The plan assumes that PLN [… around 500] million will be financed from resources free of aid, i.e. own contribution. This amount includes PLN 305 million in the form of a capital injection provided by ISD Polska (already registered and paid), PLN […] million from selling and leasing redundant assets and PLN […] million from an investment loan to be obtained on the market and designed to finance investments in non-shipbuilding activities.

(136) As regards the revenue from selling and leasing assets, the yard plans to sell its shares in Kuznia Gdańsk ([…] % of shares). The yard has started negotiations with potential buyers and received an offer for the shares, which was taken into account in the restructuring plan. The amount offered was PLN […] million. Furthermore, the yard plans to lease assets to neighbouring cooperating companies, with an estimated revenue (on the basis of existing lease agreements) of PLN […] million from the lease of land (2009-12) and PLN […] million from the lease of production facilities (2009-12).

(137) As regards the investment loan of PLN […] million for the development of wind tower production, this business will be operated by a special-purpose company.

(138) To demonstrate that wind tower production will attract external capital, the Polish authorities submitted conditional undertakings by two banks to provide financing to ISD Stocznia for this project dated 1 June 2009. Having reviewed the business plan for wind tower production and the financial projections, the banks declared that they regarded the financial assumptions underlying the business plan as reflecting current market conditions, that the wind tower project had significant potential and that they considered the project to be viable and profitable.

(139) The banks’ undertakings to provide financing for the wind tower project are subject to fulfilment of the following conditions: a) a positive decision by the Commission regarding the 2009 Restructuring Plan for Gdańsk Shipyard, b) ISD Stocznia obtaining all the administrative permits necessary to implement the wind tower project, c) collateral in form of a mortgage on a designated area of Gdańsk Shipyard and d) a positive decision regarding financing of the project by the Bank’s lending committee and management board. One of the banks has stated that it is willing to finance up to PLN […] million and the other is prepared to provide up to PLN […] million, i.e. PLN […] million in total. In addition, the Polish authorities have submitted an agreement between the two banks and ISD Stocznia in which the banks declare that they are willing to grant a consortium credit or two parallel credits to finance the project. The banks have confirmed that their financing will be provided at the prevailing market conditions without any State guarantees.

(e) Financial projections

(140) The plan’s financial projections are based on the following assumptions, mostly derived from estimates by external experts.

(141) The assumptions underlying the financial projections set out in the 2009 Restructuring Plan are presented in Table 3. Table 3 Assumptions underlying the financial projections set out in the 2009 Restructuring Plan 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Inflation 1,80 % 2,13 % 2,44 % 2,31 % 2,28 % 2,26 % 2,24 % 2,19 % 2,15 % 2,11 % WIBOR 3M 3,42 % 3,34 % 3,69 % 3,85 % 3,85 % 3,85 % 3,85 % 3,85 % 3,85 % 3,85 % USD/PLN 3,00 2,70 2,50 2,35 2,32 2,32 2,32 2,32 2,32 2,32 EUR/PLN 3,90 3,75 3,50 3,30 3,25 3,25 3,25 3,25 3,25 3,25 Steel prices (EUR) […] […] […] […] […] […] […] […] […] […] Change in energy prices […] % […] % […] % […] % […] % […] % […] % […] % […] % […] %

(142) The assumptions concerning changes in consumer prices and the annual average level of WIBOR 3M were based on the Global Insight forecast of 6 February 2009 (19). As for exchange rates, the forecast was inspired by a Goldman Sachs report which predicted that the PLN would appreciate against the euro over the next four years, rising to a level of PLN/EUR 3,25.

(143) The plan anticipates an increase in shipbuilding wages. Pay was expected to be [… around 15 %] higher in 2009 than in 2007. In the following years the anticipated wage increase amounts to […] % p.a. The restructuring plan notes that, as a result of the financial crisis and the liquidation of the other two Polish yards in Szczecin and Gdynia, workers’ financial expectations have shrunk and therefore it seems reasonable to assume that wage increases over the coming years will be modest.

(144) The financial projections are based on the assumption that shipbuilding activity, i.e. the delivery of 6 semi-equipped offshore vessels annually, will generate 30 % of the yard’s revenue. The anticipated revenue is based on the prices agreed in the existing contracts of the yard, letters of intent and other market sources. The plan assumes that revenue from shipbuilding will amount to PLN [… more than 300] million in 2009, and to PLN [… around 300] million p.a in 2011-15. The yard expects to generate profits throughout the restructuring period (PLN […] million in 2009, PLN […] million in 2010, PLN […] million in 2011 and in excess of PLN […] million in the following years). The plan forecasts positive cash flows as of 2009, estimating the aggregate net present value of the shipbuilding business for 2009-18, also taking into account the residual value of this investment, at PLN [… between 400 and 500] million. The expected internal rate of return amounts to [… more than 20 %].

(145) The restructuring plan assumes that production will start in 2012 with an output of […] towers, and will subsequently increase to […] towers in 2013, […] towers in 2014 and the target capacity of […] towers in 2015.

(146) The plan assumes that revenue from the production of wind towers will amount to PLN […] million in 2012 and will increase in the following years to a level in excess of PLN […] million as from 2015 onwards. The company has submitted evidence that the yard will be able to obtain the requisite materials from the ISD group at prices denominated in euro. Since the materials will account for […] % of costs of wind tower production, no additional hedging policy is considered necessary for this activity.

(147) The estimated net present value of the wind tower business is PLN [… more than 200] million and the internal rate of return to [… around 20] % (for the period 2009-18).

(148) The plan anticipates a significant increase in revenue from the steel structure business, rising from PLN […] million in 2009 to PLN […] million in 2010, PLN […] million in 2011, PLN […] million in 2012 and around PLN […] million in the following years. Gross margins are expected to increase from […] % in 2009 to more than […] % as of 2013. The plan justifies this assumption with reference to ISD Polska’s existing know-how and experience in the steel structure business. Nevertheless, the plan also observes that the anticipated margins are a conservative estimate and are lower than the margins actually achieved by ISD Polska in 2008 (20). The estimated net present value amounts to PLN [… around 200] million for 2009-18 and the internal rate of return to [… more than 50] % (annually). This high internal rate of return derives from the fact that the calculation does not take into account the investments made to date by ISD Polska (in particular the capital injection into Gdańsk Shipyard of PLN 305 million), but is based on revenue from steel structure production since 2009. In addition, the company argues that this high internal rate of return is caused by synergies between the yard and the ISD group, thanks to which significant revenue from the yard’s assets can be guaranteed even with limited investments.

(149) The company has submitted evidence that the yard will be able to obtain the requisite materials from the ISD group at prices denominated in euro. Since materials will account for […] % of costs of wind tower production, no additional hedging policy is considered necessary for this activity.

(150) The expected pay-back period is […] years (in nominal values) and […] years in discounted terms. According to the plan’s financial projections, the discounted pay-back (taking into account the changing value of money over time) will be achieved in […] years after the entry of the investor i.e. in 2017. This calculation takes into account only the investor’s financial exposure (PLN […] million: capital injection of PLN 305 million and PLN […] million for the purchase of existing shares).

(151) The estimated net present value of the project as a whole is around PLN [… more than 800] million for 2009-18 and the internal rate of return is [… more than 20] %.

(152) ISD Polska indicates that these financial results are very attractive for investors. The project generates synergy for the ISD group. All three activities of Gdańsk Shipyard will create demand for Huta Częstochowa’s products. This vertical integration will allow more accurate demand forecasting at Huta Częstochowa and will also be beneficial for Gdańsk Shipyard, which will have guaranteed regular supplies, including even some prefabricates produced at Huta Częstochowa for shipbuilding.

(153) The 2009 Restructuring Plan comprises a sensitivity analysis scrutinising the effect of certain changes in the main assumptions underlying the 10-year EBIDTA and 10-year accumulated profits. In particular, the plan illustrates the financial consequences of the following risk factors: — further appreciation in the PLN to PLN 3,0 for EUR 1 in 2009-12, — an additional increase in the cost of employment by 200 b.p. above the base scenario, — steel prices 10 % higher than assumed in the base scenario, — lower efficiency than assumed in the base scenario. The materialisation of any of these factors would increase the pay-back period from […] years assumed in the base scenario to […] years. The company argues that this result indicates that the plan is not vulnerable to changing market conditions. In all scenarios the net present value of the project remains attractive.

(f) Avoidance of undue distortion of competition

(154) In order to limit the distortion of competition created by the aid, the 2009 Restructuring Plan provides for implementation of the following measures. First, the yard will close two of the three currently used slipways, which are production assets used to launch vessels and indispensable to shipbuilding activities. The yard has already terminated the lease agreement for slipway B5 (as of 1 July 2009) and for slipway B3 (as of 1 January 2010).

(155) Second, the yard has undertaken not to use more than one launching facility. If the yard purchases or otherwise acquires access to (e.g. by renting or leasing) another launching facility, it will take slipway B1 out of the production process (i.e., as the situation stands at the time of the decision, discontinue the renting agreement with the owner of slipway B1). Any other launching facility used by the yard will have a capacity of not more than 100 000 CGT approx.

(156) Lastly, the yard has undertaken to comply with an annual production cap of 100 000 CGT for 10 years following the adoption of this decision.

6. State aid granted to Gdańsk Shipyard

(157) According to the Polish authorities, since 1 May 2004 Gdańsk Shipyard has received a number of State aid measures that are listed in Table 4 below (see after recital 174).

(158) Table 4 sets out the aid granted after 1 May 2004, the date of Poland’s accession to the EU. Notification of most of these measures was given by Poland by letters of 13 July 2007 and 9 January 2008. An updated list of these measures was attached to the 2009 Restructuring Plan (Annex 12). The list includes some of the measures described in part B of Annex I to the decision to open a formal investigation.

(159) Poland provided additional explanations on the restructuring of liabilities under Chapter 5a. The Polish authorities explained that the yard transferred to the Operator (21) assets corresponding to 31,6 % of the value of the liabilities transferred to the Operator ARP Sp. z o.o. (22). According to Poland, the aid element is therefore equivalent to 68,4 % of the nominal value of the liabilities transferred to the Operator. This nominal value is set out in Table 4 below.

(160) The guarantee provided by the Treasury and referred to as measure 16 in Table 4 below was formally granted to Gdynia Shipyard Group, but for the production of vessels at Gdańsk Shipyard. The Polish authorities provided this information in their letter of 13 July 2007. Furthermore, the information regarding State aid for Gdańsk Shipyard presented in the 2009 Restructuring Plan included the Treasury guarantee. The loan covered by the Treasury guarantee was granted at an interest rate equal to LIBOR 3M + 100 basis points, whereas the risk of default when the guarantees were issued was estimated by the Polish authorities at 60 %. The Treasury guarantees were granted against collateral in the form of a blank promissory note issued by the yard and a notarial deed in which the yard agreed to the enforcement of its assets up to 120 % of the value of the guarantee. The Treasury charged a premium equivalent to 0,4 % of the guaranteed amount.

(161) Measure 17 in Table 4 is a guarantee provided to Gdańsk Shipyard by the IDA for a restructuring credit granted by NORD/LB Bank Polska S.A. The guarantee was granted in line with the agreement of 17 August 2005. In their submission of 9 January 2008 the Polish authorities claimed that this measure was included in Part A of Annex II to the opening decision as measure No 7, i.e. it was one of the measures granted before accession and not applicable after accession. However, the Commission notes that the guarantee agreement was signed on 17 August 2005, clearly after the Polish accession to the EU. Furthermore, in the annex to the 2009 Restructuring Plan, the guarantee is presented as one of the State aid measures.

(162) Table 4 also sets out loans granted by KPS to finance the yard’s working capital requirements. Poland claims in its submissions of 11 July 2007 and 9 January 2008 that these loans do not constitute State aid because the interest charged corresponded to the risk assessment for the project for which the loans were sought.

(163) For the loans granted in 2005-06, KPS charged interest ranging from 9,70 % to 11,62 %. It also charged a one-off fee ranging from 0,1 % to 0,4 %. According to the Polish authorities, KPS required collateral in the form of acceptance of enforcement, an agreement on cession of receivables, an unconditional payment order, a blank promissory note or asset pledges (23).

(164) KPS was created in 2004 as a wholly-owned subsidiary of the IDA to operate as a risk capital fund for the Agency. Its initial role was to serve as a vehicle for the consolidation of the three largest shipyards in Poland, a project abandoned in 2006. According to the information provided by Poland in 2006 (24), KPS was to be financed by a capital injection from the IDA, by a contribution in kind (shares in third companies) provided by the Agency and by a revolving bank loan guaranteed by the Agency, which was specifically earmarked as financial aid for the shipyards. According to the Polish Government’s website, KPS was also to support shipbuilding operations in Poland by issuing bonds fully guaranteed by the IDA. Indeed, the document entitled ‘A strategy for the shipbuilding sector (maritime construction shipyards) in Poland 2006-10’ (25) confirms that KPS should generate funds by issuing debt instruments to an amount of around USD 100 million, secured on the assets earmarked for restructuring the shipbuilding industry in form of funds transferred by the Treasury to the IDA.

(165) Table 4 also includes Gdańsk Shipyard’s outstanding public-law liabilities as presented by the Polish authorities in their submission of 9 January 2008 and in the annex to the 2009 Restructuring Plan. Poland confirmed in that letter that Gdańsk Shipyard had not been settling its public law liabilities regularly.

(166) Gdańsk Shipyard also benefited from advanced payment guarantees from the Export Credit Insurance Corporation (hereinafter ‘advance payment guarantees’ or ‘production guarantees’). The list of guarantees from which the yard benefited was submitted by Poland by letter of 11 July 2007. The Polish authorities indicated that although these guarantees were formally granted to Gdynia Shipyard Group, they were used for the production of vessels at Gdańsk Shipyard. In total after 1 May 2004 Gdańsk Shipyard benefitted from 20 Export Credit Insurance Corporation guarantees with a total nominal value of PLN 346 372 107,33.

(167) A common feature of the industry is that shipyards typically are not able to raise sufficient working capital for the construction of vessels internally and rely on external financing, whether through borrowing (production loans) or advance payments from shipowners to pre-finance production. Shipowners typically pay 80 % of the price upfront in instalments, coinciding with certain decisive stages of the vessel’s completion, the remaining 20 % being paid on delivery. Shipowners’ involvement in financing shipbuilding is therefore crucial. Export Credit Insurance Corporation guarantees were provided to the yard to secure advance payments from shipowners against the risk of the shipyard defaulting on its obligation to deliver the vessel.

(168) Various submissions by Poland on the operation of the Export Credit Insurance Corporation guarantee system (26) indicate that these guarantees were granted to the yard in the following way. First, a contract was signed with the shipowner, which was typically conditional on the yard proving within a certain period of time that financing of production would be guaranteed by the Export Credit Insurance Corporation. The Export Credit Insurance Corporation issued a resolution undertaking to ensure financing of the ship as a whole by guaranteeing the advance payments. In subsequent individual agreements, the Export Credit Insurance Corporation activated the guarantee for each individual advance payment (typically four). Typically the Export Credit Insurance Corporation’s overall exposure to the risk of the shipyard defaulting on its obligation to deliver the vessel was 80 % of the purchase price, i.e. the total amount of the advance payments made by the shipowner prior to delivery. This overall exposure was known when the Export Credit Insurance Corporation issued the resolution securing the financing of the ship by the shipowner. The guarantee expired on delivery of the vessel.

(169) The Export Credit Insurance Corporation’s operations are varied (27) and are essentially divided between commercial activities and activities effected on behalf of, and guaranteed by, the Treasury. A separate bank account in the name of ‘Interes Narodowy’ is kept for the purpose of the latter activities. The guarantees granted to Gdynia Shipyard Group, including those for the benefit of Gdańsk Shipyard, are part of the business re-guaranteed by the Treasury.

(170) According to the information provided by Poland, the Export Credit Insurance Corporation granted advance payment guarantees against a fee which varied according to the amount of the guarantee. The fee amounts to 2 % per annum for guarantees not exceeding PLN 35 million and 1 % per annum for guarantees exceeding PLN 35 million. The Export Credit Insurance Corporation requires as collateral the transfer of ownership of the ship, the ship under construction or the construction materials.

(171) Table 4 shows that Gdańsk Shipyard has benefited from aid with a total nominal value of PLN 405 030 629,80 (about EUR 90 million) since 1 May 2004.

(172) The plan also provides for new State aid in the form of a PLN 46,7 million capital injection and a PLN 103,3 million loan. In total, the new aid would amount to PLN 150 million (nominal value).

(173) Furthermore, the 2009 Restructuring Plan assumes that until the end of the restructuring period Gdańsk Shipyard will continue to benefit from Export Credit Insurance Corporation guarantees to a value of around PLN 180 million annually. It is assumed that the guarantee fees would be, in so far as possible, in line with the guarantee scheme approved by the Commission as free of State aid (28). Pursuant to this scheme, the premium charged to companies in the highest risk category but still eligible for guarantees under the scheme, is […] % for guarantees under 2 years and […] % for guarantees above 2 years.

(174) To conclude, the nominal value of all the restructuring aid measures is PLN 555 030 629,80 (PLN 405 million of aid already granted and PLN 150 million of planned aid) and the total nominal value of the Export Credit Insurance Corporation guarantees is approximately PLN 526 million (in nominal terms, PLN 346 million being the value of the guarantees already granted and PLN 180 million the maximum annual exposure of the Export Credit Insurance Corporation for these guarantees). Table 4 State aid granted to Gdańsk Shipyard after 1 May 2004, according to the information provided by the Polish authorities and ISD Polska (PLN) No Awarding body Aid instrument Legal basis Number of decision or agreement Date of award of aid Date of entry into force Period for which aid was awarded Nominal value of aid 1. 2. 3. 4. 5. 6. 7. 8. 9. 1. Social Insurance Fund write-off Act of 30.10.2002 Decision by the President of the ARP of 30.12.2004 No UPP/12/3/2004 30.12.2004 15.3.2005 one-off transaction 13 521 851,00 (29) 2. Pomerania Tax Office write-off Act of 30.10.2002 Decision by the President of the ARP of 30.12.2004 No UPP/12/3/2004 30.12.2004 15.3.2005 one-off transaction 24 215 557,00 (29) 3. Gdańsk I Tax Office write-off Act of 30.10.2002 Decision by the President of the ARP of 30.12.2004 No UPP/12/3/2004 30.12.2004 15.3.2005 one-off transaction 1 215 460,00 (29) 4. Marshal of Pomerania Voivodship write-off Act of 30.10.2002 Decision by the President of the ARP of 30.12.2004 No UPP/12/3/2004 30.12.2004 15.3.2005 one-off transaction 698 462,00 (29) 5. Social Insurance Fund write-off Act of 30.10.2002 Decision by the President of the ARP of 15.12.2005 No UPP/12/4/2005 15.12.2005 9.1.2006 one-off transaction 2 975 558,00 (29) 6. Pomerania Tax Office write-off Act of 30.10.2002 Decision by the President of the ARP of 15.12.2005 No UPP/12/4/2005 15.12.2005 9.1.2006 one-off transaction 5 398 177,00 (29) 7. Marshal of Pomerania Voivodship write-off Act of 30.10.2002 Decision by the President of the ARP of 15.12.2005 No UPP/12/4/2005 15.12.2005 9.1.2006 one-off transaction 138 531,00 (29) 8. KPS loan statutory activity of KPS loan agreement No 03/06.2005 6.6.2005 9.6.2005 26.8.2005 7 000 000,00 9. KPS loan statutory activity of KPS loan agreement No 02/10.2005 27.10.2005 28.10.2005 31.1.2006 6 000 000,00 10. KPS loan statutory activity of KPS loan agreement No 01/01.2006 11.1.2006 17.1.2006 30.6.2006 9 000 000,00 11. KPS loan statutory activity of KPS loan agreement No 03/07.2006 27.7.2006 7.8.2006 31.10.2006 4 000 000,00 12. KPS loan statutory activity of KPS loan agreement No 03/07.2006 27.7.2006 22.9.2006 28.2.2007 8 000 000,00 13. KPS loan statutory activity of KPS loan agreement No 01/11.2006 8.11.2006 16.11.2006 20.7.2007 4 000 000,00 14. PHZ Cenzin capital injection Polish Company Code of 15.9.2000 Act of 21.12.2006 21.12.2006 27.12.2006 (1st tranche of PLN 7 million) and 29.12.2006 (2nd tranche of PLN 13 million) one-off capital injection 20 000 000,00 15. Gdynia Shipyard capital injection Polish Company Code of 15.9.2000 Act of 27.6.2005 27.6.2005 July 2005 (1st tranche of PLN 12 million) and August 2005 (2nd tranche of PLN 8 million) one-off capital injection 20 000 000,00 16. Treasury guarantee — vessels 8184/9-10, 8184/12-13 and 8184/18 Act of 8 May 1997 on guarantees granted by the Treasury and some legal persons (Journal of Laws 2003/174 item 1689 as amended) Decree of the Council of Minister No 222/2004 of 21.9.2004 21.9.2004 1.10.2004 until 15.1.2008 161 285 903,00 17. ARP Guarantee for NORD/LB loan statutory activity of ARP Act of 17.8.2005 17.8.2005 17.8.2005 until 30.6.2000 20 000 000,00 18. Social Insurance Fund non-enforcement of liabilities — — — 1.5.2004 31.9.2009 (30) 95 354 830,80 (31) 19. Gdańsk municipality non-enforcement of liabilities — — — 1.5.2004 31.9.2009 (30) 20. Gdańsk municipality write-off Tax Act of 29.8.1997 not yet granted — — — 2 226 300,00 TOTAL 405 030 629,80

III. EVALUATION

1. Competence of the Commission

(175) Point 3 of Annex IV to the Accession Treaty describes the interim mechanism procedure. It constitutes a legal framework for the assessment of aid schemes and individual aid measures which are put into effect in a new Member State before the date of its accession to the EU and are applicable after accession.

(176) Measures that were put into effect before accession and are not applicable after accession cannot be examined by the Commission either under the interim mechanism procedure or under the procedure laid down in Article 88(2) of the EC Treaty.

(177) However, measures that were not put into effect before accession will be assessed by the Commission as notified aid or as unlawful aid pursuant to the procedure laid down in Article 88(2) of the EC Treaty.

(178) The criterion used to determine the point in time when a given measure was put into effect is the legally binding act by which the competent national authority undertakes to award aid (32). Whether an administrative act is legally binding is a matter of national law. The Commission, however, must be able to review, especially in border-line cases, these administrative acts and, judging on their form and content, to assess whether they could have given rise to legitimate expectations on the part of the beneficiaries enforceable before a Polish court of law. This capacity to review national administrative acts is indispensable for the exercise of the Commission’s exclusive competence to approve derogations from the general prohibition of State aid with regard to measures put into effect in Poland after 1 May 2004.

(179) A measure put into effect prior to accession is applicable after accession if it can still give rise to the award of additional aid or to an increase in the amount of aid already granted, i.e. if the precise economic exposure of the State is not known on the date on which the measure was put into effect and remains unknown on the date of accession.

(180) In its decision to open the formal investigation, the Commission concluded, on the basis of the information provided by Poland, that a series of measures of which it had been notified on 8 October 2004 actually constituted new aid, either unlawful or notified, because it was granted after 1 May 2004, the date of Poland’s accession to the EU. The comments provided by Poland and third parties after the investigation was opened did not lead the Commission to alter its conclusion. In particular, the Commission maintains that it is competent to assess whether the measures indicated in part B of Annex II to the decision to open the formal investigation are compatible with the common market. The Commission nevertheless notes that some of these measures have been abandoned (measures 23-25 of part B of Annex II to the decision to open the formal investigation).

(181) Below the Commission indicates why it cannot accept the arguments put forward by Poland and the interested parties.

(a) Restructuring of public-law debt under Chapter 5a

(182) The Commission agrees with the comment of Gdynia Shipyard Group that the event which gave rise to the partial write-off of public-law liabilities under Chapter 5a was the adoption of the restructuring decision by the Chairman of the IDA. The Commission, however, cannot accept the statement that this decision was adopted on 30 April 2004, i.e. prior to Poland’s accession to the EU. The Commission explained the reasons for its stance in the decision to open the formal investigation, and neither Poland nor the Gdynia Shipyard Group has submitted any further arguments which change this position. The Commission reiterates that the decision of 30 April 2004 merely approved the March 2004 Restructuring Plan, and did not agree to the restructuring of public-law liabilities pursuant to Chapter 5a. The Chairman of the IDA was not in a position to issue a complete restructuring decision before accession because, at that time, he did not possess, as required by Chapter 5a, either the agreement of all the relevant public-law creditors to the restructuring of their liabilities or the agreement of the Operator. The Commission notes that the Chairman of the IDA recognised this fact when he mentioned in his decision of 30 April 2004 that a further decision would be necessary to complete restructuring of public-law liabilities under Chapter 5a and when he eventually issued the restructuring decision on 30 December 2004, i.e. after Poland’s accession to the EU.

(183) The Commission cannot accept the argument of Gdynia Shipyard Group that the agreement of all the public-law creditors to the restructuring of their receivables under Chapter 5a constituted the legally binding act required by Polish law. Gdynia Shipyard Group argued that Chapter 5a was not lex specialis in relation to other laws permitting restructuring of public law liabilities and that the function of the Chairman of the Industrial Development Agency was to administer and facilitate the restructuring process, not to act for the relevant public-law creditors in respect of specific liabilities. The Commission notes that this interpretation of Polish law is at odds with all the submissions from Poland to date and with the text and logic of Chapter 5a itself. Admittedly, as Gdynia Shipyard Group argued, the Act of 30 October 2002‘does not prohibit the restructuring authorities from issuing any write-off decisions in so far as they are allowed to do so by general provisions’. Nevertheless, if they did so, those liabilities would no longer fall under Chapter 5a with all the advantages associated therewith: eligibility for a loan from the IDA, suspension of any ongoing enforcement proceedings, suspension of bankruptcy and non-accrual of interest on amounts due.

(184) The Commission cannot accept the argument of Gdynia Shipyard Group that no interest accrued after 30 June 2006 on the liabilities restructured under Chapter 5a. This interpretation of Polish law has been rejected by Poland.

(b) Measure 23 of part B of Annex II to the decision to open the formal investigation

(185) The Commission cannot accept Poland’s argument that this aid was granted de facto by virtue of the fact that all the relevant awarding authorities made verbal statements at a meeting of the Government working group on the restructuring of shipyards in Poland (the shipbuilding industry team). Such statements, if any, were purely verbal and further implementing measures were clearly necessary to create legitimate expectations under Polish law.

(c) Measures 24-25 of part B of Annex II to the decision to open the formal investigation

(186) Lastly, the Commission notes that neither Poland nor Gdynia Shipyard Group has contested its conclusion that measures 24-25 of part B of Annex II to the decision to open the formal investigation constituted new aid and thus fall under the remit of the Commission under Article 88 of the EC Treaty.

2. State aid within the meaning of Article 87(1) of the EC Treaty

2.1. Existence of State aid

(187) Article 87(1) of the EC Treaty states that 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 and affects trade between Member States is incompatible with the common market.

(188) The Commission finds that all the aid described in recitals 105-170 and in Table 4 was granted by the State or through State resources and, being directed to one particular undertaking, was selective.

(189) Gdańsk Shipyard is a large European shipyard and a major competitor on the shipbuilding market. After 1 May 2004 the yard continued building container ships, competing with shipyards in Germany and Denmark in particular, as Poland and Gdynia Shipyard Group have acknowledged and as was noted by Denmark and the Danish shipbuilding association in their comments on the Commission’s decision to open the formal investigation. Container vessels accounted for 26 % of European shipyards’ order books at the end of 2006 (33). The yard has been producing steel structures, blocks and sections, thereby competing with many other companies acting as subcontractors for other shipyards building complete vessels. In the last two years the yard has started to produce off-shore vessels, which is a segment in which other European shipyards, for example the Norwegian ones, are active.

(190) The continuous subsidising of Gdańsk Shipyard, for example via non-enforcement of public liabilities, production guarantees as well as numerous capital injections and loans, allowed the yard to conclude contracts without full recognition and remuneration of all the risks involved. Otherwise its competitors might have taken over at least part of its market share.

(191) On the basis of the above, the Commission concludes that the State aid granted to Gdańsk Shipyard affected trade between Member States.

(192) The Commission also needs to determine whether the measures granted to Gdańsk Shipyard conferred an undue advantage on it and thereby distorted or threatened to distort competition.

(193) The Commission takes the view that reliance on State aid enabled Gdańsk Shipyard to engage in anti-competitive practice such as pricing below production costs without suffering the consequences that such practices normally entail, namely elimination from the market.

(194) The Commission also notes that one of Gdańsk Shipyard’s main long-term problems was the conclusion of contracts which proved to be loss-making as the zloty appreciated against the dollar, the dominant currency in the shipbuilding business, and the price of steel plates increased worldwide. These external factors were already identified as the main threats to the yard’s continued operation in the Restructuring Plan for 2003-08, and then subsequently in the amended version of March 2004, in the new 2006 Restructuring Plan and, lastly, in the 2009 Restructuring Plan.

(195) Despite the fact that the yard’s management was aware of these threats, the yard continued to conclude contracts without taking any measures to mitigate the risk. This business practice continued during the unprecedented boom in the shipbuilding market between 2004 and 2008, when shipbuilding prices rose to record levels. As a result of this practice, the yard managed to maintain activity and employment, but at the cost of large losses on regular shipbuilding production.

(196) On that basis, the Commission concludes that all the aid granted to Gdańsk Shipyard described in recitals 105-170 was such as to distort or threaten to distort competition on the shipbuilding market.

(197) The Commission notes that the Polish authorities did not dispute the classification of the measures covered by the present decision as State aid, with two exceptions. Firstly, they claimed that the loans granted to Gdańsk Shipyard by KPS did not constitute aid. Second, they questioned the aid character of the guarantees provided by the Export Credit Insurance Corporation which were alleged to comply with the market economy operator principle. In addition, the Polish authorities did not give notification of the continuous non-enforcement of public-law liabilities as a separate State aid measure.

(198) The Commission will explain below why it regards these three measures as constituting a competition-distorting advantage.

(a) Continuous non-enforcement of public-law liabilities

(199) According to established case-law (34), continuous n