Proposal for a Council Regulation (EC) on aid to shipbuilding (95/C 304/09) (Text with EEA relevance) COM(95) 410 final -

95/0219(CNS)

(Submitted by the Commission on 31 July 1995)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Articles 92 (39) (e), 94, 113 and 228 thereof,

Having regard to the proposal from the Commission,

Having regard to the opinion of the European Parliament,

Having regard to the opinion of the Economic and Social Committee,

Whereas Council Directive 90/684/EEC, as last amended by Directive 94/73/EC, will expire on 31 December 1995;

Whereas within the framework of the Organisation for Economic Cooperation and Development (OECD) an Agreement (1) has been concluded between the European Community and certain third countries respecting normal competitive conditions in the commercial shipbuilding and repair industry;

Whereas that Agreement should enter into force on 1 January 1996;

Whereas the Agreement provides for the elimination of all direct shipbuilding aids except social aids related to closures, and aids to research and development within the limit of certain ceilings;

Whereas indirect measures of support to shipbuilding in the form of credit facilities and loan guarantees for shipowners are permitted by the Agreement provided that these measures are in conformity with the OECD understanding on export credits for ships.

Whereas the Agreement can be reviewed three years after it has come into force,

HAS ADOPTED THIS REGULATION

CHAPTER I GENERAL

Article 1

For the purposes of this Regulation the following definitions shall apply:

(a) 'shipbuilding` means the building in the Community of the following self-propelled seagoing commercial vessels: - vessels of not less than 100 GT (gross tonnage) used for the transportation of passengers and/or goods, - vessels of not less than 100 GT for the performance of a specialized service (for example dredgers and ice-breakers, excluding floating docks and mobile offshore units), - tugs of not less than 365 Kw, - fishing vessels of not less than 100 GT for export outside the European Economic Area, - unfinished shells of the above vessels that are afloat and mobile, but excludes military vessels and modification made or features added to other vessels exclusively for military purposes provided that any measures or practices taken in respect of such vessels, modifications or features are not disguised actions taken in favour of commercial shipbuilding inconsistent with this Regulation; (b) 'ship repair` means the repair or reconditioning in the Community of self-propelled seagoing commercial vessels as defined in (a); (c) 'ship conversion` means the conversion in the Community of self-propelled seagoing commercial vessels, as defined in (a), of not less than 1 000 GT on condition that conversion operations entail radical alterations to the cargo plan, the hull or the propulsion system; (d) 'self-propelled seagoing` means that by means of its permanent propulsion and steering a vessel has all the characteristics of self-navigability on the high seas; (e) 'OECD Agreement` means the Agreement respecting normal competitive conditions in the commercial shipbuilding and repair industry; (f) 'aid` means State aid within the meaning of Articles 92 and 93 of the Treaty, including not only aid granted by the State itself but also that granted by regional or local authorities or other bodies and any aid elements contained in financing measures taken by Member States in respect of shipbuilding, conversion or repair undertakings which cannot be regarded as a genuine provision of risk capital according to standard investment practice in a market economy; (g) 'related entity` means any natural or juridical person (i) who owns or controls a shipbuilder or (ii) is owned or controlled by a shipbuilder, directly or indirectly, whether through stock ownership or otherwise. Control is presumed to arise when a person or a shipbuilder owns or controls an interest of 25 % in the other.

Article 2

1. Aid granted specifically, whether directly or indirectly, for shipbuilding, conversion and repair, as defined under this Regulation, financed by Member States or their regional or local authorities or through State resources in any form whatsoever may be considered compatible with the common market only if it complies with the provisions of this Regulation. This applies not only to undertakings engaged in such activities but also to related entities.

2. No aid granted pursuant to this Regulation may be conditional upon discriminatory practices as to products originating in other Member States.

CHAPTER II COMPATIBLE MEASURES

Article 3

Aid for closures

1. Aid to cover the cost of measures for the exclusive benefit of workers who lose retirement benefits or who are made redundant or otherwise separated permanently from employment in the respective shipbuilding enterprise, when such assistance is related to the discontinuance or curtailment of shipyards, bankruptcy, or changes in activities away from shipbuilding may be considered compatible with the common market.

2. The costs eligible for such aid are, in particular:

- payments to workers made redundant or retired before legal retirement age,

- counselling services to workers made or to be made redundant or retired before legal retirement age including payments made by yards to facilitate the creation of small undertakings,

- payments to workers for vocational retraining.

Article 4

Aid for research and development

1. Aid for research and development to the shipbuilding, conversion and repair industry may be considered compatible with the common market where this public assistance relates to:

(i) fundamental research;

(ii) basic industrial research (provided that the aid intensity is limited to 50 % of eligible costs);

(iii) applied research (provided that the aid intensity is limited to 35 % of eligible costs);

(iv) development (provided that the aid intensity is limited to 25 % of eligible costs).

2. The maximum allowable aid intensity for research and development carried out by small- and medium-sized shipbuilding enterprises (for the purposes of this Regulation defined as enterprises with less than 300 employees whose yearly turnover does not exceed ECU 20 million and which are not more than 25 % owned by a large company) shall be 20 percentage points higher than those specified at (ii) ot (iv) in paragraph 1 of this Article.

3. For the purposes of this Article the following definitions apply to research and development:

(a) eligible costs shall be only those relating to:

(i) costs of instruments, material, land and buildings to the extent that they are used for the specific research and development project;

(ii) costs of researchers, technicians and other supporting staff to the extent that they are engaged in the specific research and development project;

(iii) consultancy and equivalent services including bought- in research, technical knowledge, patents, etc;

(iv) overhead costs (infrastructure and support services) to the extent that they are related to the research and development project, on condition that they do not exceed 45 % of the total costs of the project for basic industrial research and 20 % for applied research and 10 % for development;

(b) the term 'fundamental research` means research activities independently conducted by higher education or research establishments for the enlargement of general scientific and technical knowledge, not linked to industrial or commercial objectives;

(c) 'basic industrial research` is understood to mean original theoretical and experimental work whose objective is to achieve new and better understanding of the laws of science and engineering in general and as they might apply to an industrial sector or to the activities of a particular undertaking;

(d) 'applied research` is understood to mean investigation or experimental work on the basis of the results of the basic research with a view to facilitating the attainment of specific practical objectives such as the creation of new products, production processes and services. It normally ends with the creation of a first prototype and does not include efforts whose principal aim is the design, development or testing of specific items of services to be considered for sale;

(e) 'development` is understood to mean work based on the systematic use of scientific and technical knowledge in a design, development, testing or evaluation of a potential new product, production processes or service or of an improvement of an existing product or service to meet specific performance requirements and objectives. This stage will normally include pre-production models such as pilot and demonstration projects but does not include industrial application and commercial exploitation;

(f) aid for research and development specifically provided to the shipbuilding, conversion and repair industry includes, but is not limited to, the following cases:

(i) research and development projects carried out by the shipbuilding, conversion or repair industry or research institutes controlled by or financed by this industry;

(ii) research and development projects carried out by the shipping industry or research institutes controlled by or financed by this industry when the project is directly related to shipbuilding or repair;

(iii) research and development projects carried out by universities, public and or independent private research institutes and other industrial sectors in collaboration with the shipbuilding industry;

(iv) research and development projects carried out by universities, public and/or independent private research institutions and other industrial sectors, when at the time the project is carried out, it is reasonably anticipated that the results will be of substantial specific importance for the shipbuilding, conversion and repair industry.

4. Information on the results of research and development is to be published promptly, at least annually.

Article 5

Indirect support measures

1. Support to shipowners or third parties in the form of officially supported loans and guarantees available as aid for the building or conversion but not repair of ships may be considered compatible with the common market provided that such measures comply with the OECD Understanding on Export Credits for Ships as set out in document C/WP6(94)6 (2), or any agreements which modify or replace it.

2. Aid related to shipbuilding and ship conversion granted as development assistance to a developing country may be deemed compatible with the common market if it complies with the terms laid down for that purpose in the Understanding referred to in paragraph 1 of this Article or with any later addendum or corrigendum to that Understanding.

3. Support granted by a Member State to its shipowners or to third parties in that State for the building or conversion of ships may not distort or threaten to distort competition between shipyards in that Member State and shipyards in other Member States in the placing of orders.

Article 6

Spain, Portugal and Belgium

Restructuring aid granted in Spain, Portugal and Belgium in the form of investment assistance and any assistance for social measures not covered under Article 3 and paid after 1 January 1996 may be considered compatible with the common market. Release of this aid must be subject to individual notification and prior approval by the Commission before 31 December 1996 and will be subject to the following maximum limits and payments deadlines:

>TABLE>

Article 7

Other measures

1. In extraordinary circumstances, and subject to Article 92 of the EC Treaty, other aids may be deemed compatible with the common market. If the Commission considers that this is the case, it is habilitated to request a derogation from the Parties Group under the provision of Article 5.5 of the OECD Agreement.

2. For research and development projects related to safety and the environment, and subject to Article 92 of the EC Treaty, a higher aid intensity than foreseen in Article 4 (1) (ii) to (iv) may be deemed compatible with the common market. If the Commission considers that this is the case, it is habilitated to request the approval of the project from the Parties Group under the provision of Annex I.B.3 (2) of the OECD Agreement.

3. Where any measures granted pursuant to this Regulation are the subject of Dispute Panel Proceedings pursuant to Article 8 of the OECD Agreement or, in the case of export credits, the subject of consultation mechanisms as provided by the OECD Understanding on Export Credits for Ships, the Community's position will be determined by the Commission after consultation of the special Committee set up pursuant to Article 113 of the EC Treaty.

CHAPTER III MONITORING PROCEDURE

Article 8

1. In addition to the provisions of Article 93 of the Treaty, aid to shipbuilding and repair undertakings shall be subject to the special notification rules provided for in paragraph 2.

2. The following shall be notified to the Commission in advance by the Member States and authorized by the Commission before they are put into effect:

(a) any aid scheme - new or existing - or any amendment of an existing scheme covered by this Regulation;

(b) any decision to apply any generally applicable regional aid scheme to the undertakings covered by this Regulation in order to verify compatibility with Article 92 of the EC Treaty;

(c) any individual application of aid schemes in the case referred to in Article 5 (2) or when specifically provided for by the Commission in its approval of the aid scheme concerned.

Article 9

For the Commission's monitoring of the implementation of the aid rules contained in Chapter II, Member States shall supply the Commission with:

(a) monthly reports on officially supported credit facilities granted for each shipbuilding and conversion contract by the end of the month following the month of signing each contract, in accordance with the annexed Schedule 1;

(b) where Member States have schemes providing for official guarantees and insurance for ships, yearly reports including the annual results of the scheme, claims paid, income from premiums and fees, income from recoveries and any other appropriate information requested by the Commission;

(c) completion reports on each shipbuilding and conversion contract signed before 1 January 1996 by the end of the month following the month of completion in accordance with the annexed Schedule 2;

(d) yearly reports - to be provided by 1 March of the year following the year subject to the report - giving details of the total financial support paid to each individual national shipyard during the previous calendar year, in accordance with the annexed Schedule 3;

(e) in the case of shipyards able to build merchant ships over 5000 GT, yearly reports - to be provided not later than two months after the annual general meeting approves the shipyard's yearly report - giving publicly available information on capacity developments and on the structure of ownership in accordance with the annexed Schedule 4.

Article 10

This Regulation shall apply from 1 January 1996 to 31 December 1998.

(1) OJ No C 375, 30. 12. 1994. Proposal for a Council Decision on the conclusion of the Agreement respecting normal competitive conditions in the shipbuilding and repair industry.

(2) OJ No C 375, 30. 12. 1994, p. 38.

ANNEX

Schedule 1

>START OF GRAPHIC>

EUROPEAN COMMUNITY REPORT ON SUPPORT TO SHIPOWNERS AND OTHER THIRD PARTIES FOR NEW BUILDING OR CONVERSION OF SHIPS

1. Name and nationality of company in receipt of aid:

2. Contract price:

3. Credit granted:

- Form (e.g. export credit, home credit etc.):

- Volume:

- Repayment period:

- Frequency of payments:

- Interest rate:

4. Guarantees granted - Volume:

- Premium paid:

- Duration:

- Other terms and conditions:

5. Month of aid granting 6. New building or conversion contract (please specify which) - Ship type and yard No:

- Deadweight (DWT):

- Gross tonnage (GT):

- Compensated gross tonnage (CGT):

- Performing yard: - Country:

- Name:

- Completion/delivery date:

Contact for inquiries: ..........

Date: ..........

..........

Position: ..........

Signature: ..........>END OF GRAPHIC>

Schedule 2

>START OF GRAPHIC>

EUROPEAN COMMUNITY

REPORT OF MERCHANT SHIP COMPLETIONS

Section 1: Contracts details

Section 3: Financial arrangements

1. New building/conversion

Currency

ECU

(Prevailing rate)

%of

contract price

2. Company

3. Yard

4. Yard No

14. Contract-price

5. Registered owner

15. Estimated contract loss (if any)

6. Holding owner

16. Contract-related aid granted to customer or ultimate owners:

7. Vessel's country of registration

A. Granted to yard:

(a) grants

(b) credit facilities

(c) specific fiscal concession

(d) other support

8. Date contract signed

9. Completion/delivery date

B. Granted to customer or ultimate owners:

(a) grants

(b) credit facilities

(c) fiscal concession

(d) other support

Section 2: Ship details

10. Type of vessel (by OECD category)

Contact for inquiries:

Date:

11. Deadweight

Signature:

12. Gross tonnage (GT)

13. Compensated gross tonnage (CGT)

Position:>END OF GRAPHIC>

Schedule 3

>START OF GRAPHIC>

EUROPEAN COMMUNITY

REPORT OF COMPANY FINANCIAL SUPPORT

Name of company ................................................

Eligible costs

(including for point 1 details of numbers of workers involved)

Aid received

Form

Amount

Legal basis

(including date of approval by Commission)

1. Social aids:

(a) Redundancy payments

(b) Early-retirement payments

(c) Reconversion payments

(d) Vocational retraining

2. Research and development aid:

(a) Fundamental research

(b) Basic industrial research

(c) Applied research

(d) Development

3. Generally applicable regional aids (please specify nature of support)

Contact for inquiries: ..........

Date: ..........

..........

Position: ..........

Signature: .......... >END OF GRAPHIC>

Schedule 4

>START OF GRAPHIC>

REPORT ON YARDS ABLE TO BUILD MERCHANT SHIPS OVER 5 000 GT

1. Name of the company ..........

2. Total available capacity .......... (CGT)

3. Data on the dock/berth

Dock or berth

Maximum size of ships (GT)

( .......... )

( .......... )

( .......... )

( .......... )

( .......... )

( .......... )

4. Description of any plans for future capacity expansion or reduction

5. Structure of ownership (capital structure, share of direct and indirect public ownership) 6. Financial statements (balance sheet, profit and loss statement, including, if available, separate accounts covering the shipbuilding activities of holding)

7. Transfer of public resources (including debt guarantees, bond infusions etc.)

8. Exemptions from financial or other obligations (including tax privileges, etc.)

9. Capital contribution (including equity infusions, withdrawal of capital dividend, loans and their refunding, etc.)

10. Debt write-off

11. Transfer of losses>END OF GRAPHIC>