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COM (85) 515 
 
 
 
Vol. 1985/0192 
  
 
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concernant l'ouverture au public des archives historiques de la Communauté économique 
européenne et de la Communauté européenne de l'énergie atomique (JO L 43 du 15.2.1983, 
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In accordance with Council Regulation (EEC, Euratom) No 354/83 of 1 February 1983 
concerning the openi ng to the public of the historical archives of the European Econom ic 
Community and the European Atomic Energy Communit y (OJ L 43, 15.2.1983, p. 1), as 
amended by Regulation (EC, Euratom) No 1700/2003 of 22 September 2003 (OJ L 243, 
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file have been declassified in conformity with Article 5 of the aforementioned regulation.  
In Übereinstimmung mit der Verordnung (EWG, Euratom) Nr. 354/83 des Rates vom  1. 
Februar 198 3 über die Freigabe der historischen Archive der Europäischen  
Wirtschaftsgemeinschaft und der Europäischen Atomgem einschaft (ABI. L 43 vom  15.2.1983,  
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COMMISSION OF THE EUROPEAN COMMUNITIES
C0M(85) 515 final
Brussels, 4 October 1
COMMUNICATION BY THE COMMISSION TO THE COUNCIL
RULES ON AID AND FINANCIAL TRANSFERS TO THE COMMUNITY 
STEEL INDUSTRY AFTER 1985
(Communication by the Commission to the Council)
C O M (85) 5 1 5  final

RULES ON AID AND FINANCIAL TRANSFERS TO THE COMMUNITY 
STEEL INDUSTRY AFTER 1985
(Communication from the Commission to the Council)
1. The Commission gave a preview of its policy on aid to the steel 
industry after 1985 in its memorandum of 19 July 1985 (C0M(85)376 final).
2. As noted in that memorandum, by the end of this year the objectives which 
the Community adopted in 1980-81 fSV bringing supply into line with 
demand, and which were furthe'r'specified at the meeting of Industry 
Ministers at Elsinore in late 1982, will have been achieved. Supply
and demand will have been brought back into the degree of balance the 
Community was>then aiming for. However, as this was partly determined 
by the limits of technical, social and regional feasibility, it still, 
as expected, leaves overcapacity in the industry, for some product categories 
more than for others.
As well as this adjustment of production capacity, the end of 1985 will 
also find Community steel firms, after a restructuring process that 
has required almost unprecedented levels of public financial support and 
social and regional sacrifices, in a technical and financial shape such 
that they will have a prospect of being viable in normal circumstances, 
provided they continue to adjust their businesses and respond to the 
pressures towards such adjustment exerted by the market as controls are · "  ;  
gradually lifted.
3. Now that there is a better balance between supply and demand and firms'
competitiveness has improved, the special circumstances which justified 
the Commission's taking powers under Article 95 ECSC, by Decision No 
2320/81/ECSC, to authorize a wide range of aid no longer obtain. ^
I ,.

From now on, firms will, in general, have to rely on their own financial 
performance to sustain their operations and to generate the funds to 
pay for the further structural adjustments that will continue to be 
necessary, without the relative chances of the firms that are still 
vulnerable being substantially distorted by aid.
The Council, the Commission and the various Member States have all on many 
occasions separately expressed their support for such a policy and agreed 
that all aid authorized under the 1981 aids code must be paid by the end 
of 1985.
To implement this policy, the Commission needs to take a decision under 
Article 95 ECSC laying down substantive and procedural rules for aid after 
1  January 1986, so that government subsidies do not undo the results of 
the coordinated restructuring exercise that has just been concluded 
or delay or even prevent the additional adjustments that are still 
necessary to bring supply and demand into balance.
As the Community steel industry, though in a much healthier state than 
before, will remain vulnerable for some time, the decision must provide 
for comprehensive Community ruLes on aid, both "specific" aid directed 
mainly at the steel industry and "non-specific" aid available under 
general and regional schemes. All government aid that has similar 
economic effects should be treated alike, regardless of differences 
in the national legal framework.
Here the Commission would point out that without a Community aid scheme 
based on Article 95 ECSC it would in future feel obliged to interpret 
Article 4(c) ECSC as rendering all State aid incompatible with the 
common.steel market.

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5. This is the background against which the Commission intends to seek the 
Council's assent, and the opinion of the Consultative Committee, for 
rules on the following lines, as provided in the attached draft decision
5.1 Aid to cover operating losses and aid for investment, even under 
regional aid schemes and even where the aid would not help to 
expand capacity, will no longer be permitted.
With regard to investment aid, it should be noted that in assessing 
the viability prospects of aided firms and in determining the amount 
of aid it could authorize for them the Commission has allowed for 
their ability to provide for normal depreciation of plant.
5.2 The enforcement of strict rules on aid properly so-called also 
requires scrupulous monitoring by the Commission of Member States' 
acquisitions of shareholdings or provisions of capital or similar 
financing to steel firms.
In view of the vulnerable condition of the industry and of m&ny 
individual firms in it, the Commission needs to be informed 
sufficiently in advance of such financial transfers to be able 
to determine whether the operation involves an aid element and, 
if so, to apply to it the rules for aid (Article 5 of the draft).
The criteria it will apply in determining whether an aid element 
■  is involved will be those set out in the statement on "Public 
authorities' holdings in company capital," which it sent to the 
Member States by letter of 17 September 1984 (SG(84) D/11389).
I,

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Application of the provisions of Directive No 80/723/EEC of 
26 June 1980 on the transparency of financial relations between 
Member States and public undertakings would be insufficient for this 
purpose because the Directive applies only to state-owned firms 
outside the ECSC sector and secondly only provides for ex post 
monitoring of Member States' financial relations with such firms.
5.3. With regard to aid for research and development and environmental 
protection, all the Member States are agreed that it would be an 
unjustified discrimination to deny steel firms the same types of 
aid as are available to firms in other industries, and which are 
in the public interest.
The rules for such aid (Articles 2 and 3 of the draft) follow those 
established in the guidelines which the Commission plans .to issue 
or has already issued respectively for the same types of aid to 
EEC industries. The monitoring procedures will also be the same.
5.4. The Commission still believes that the considerable overcapacity 
that will persist in a number of product categories after 1985 
justifies the authorization of aid to accelerate the closure of 
inefficient plants which, if kept in service, even only temporarily, 
could depress the market to the detriment of the whole Community industp-y'
a
4.

It is true that simple market forces would sooner or later normally 
cause such plants to close. The fact remains, however, that firms 
may be tempted to keep them in service temporarily, either because 
with their overall business again viable they do not feel the same 
urgency to continue their restructuring beyond the stage which they 
have just completed of closing their most obsolete plants, because closure 
of the remaining inefficient plants would upset their balance sheet 
where the plants are down as assets, or finally because they are 
cushioned against the full pressure of market forces by the market 
controls which it will be necessary to maintain for a transitional 
period.
The measures the Commission proposes (Article 4 of the draft) to 
deal with this problem are as follows:
- a continuation of the provisions of Article 4 of Decision No
2320/81/ECSC which allow aid to cover the normal costs occasioned 
by the closure of steel plants;
the payment to firms closing rolling mills of compensation not 
exceeding their value as determined by an independent valuer, 
subject to a maximum of either the discounted net contribution 
•to fixed costs obtainable from the mill over three years 
or the residual depreciation costs of the mill ignoring that 
portion of any asset revaluations since 1980 which exceeded 
the national inflation rate.

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This double ceiling is intended to cover two possible situations:
(a) mills which are fully depreciated butstilLmake a contribution
( 1 )towards fixed costs and (b) more modern mills which still have 
depreciation costs to cover but are operating at a loss.
It is emphasized that such closure aid will not be payable after 
31 December 1988, that the Commission will monitor it to ensure 
that it is not diverted from its purpose to help finance investment
elsewhere that expands production capacity or price discounting, and 
that there will be full consultations with the Member States before 
any such aid is authorized.
6. Conelus ion
6.1. All the above provisions which the Commission wishes to introduce 
are in line with the policy which has received the support of the 
Council, the Commission and each individual Member State that
■4ii(from 1986 the rules on aid should oblige steel firms to finance 
their operations and complete their restructuring from their own 
resources.  .
Just as the market controls must now be progessively - though 
relatively rapidly - removed, in the same way the scope for aid 
must be extremely limited and after three years - the same period 
as is proposed for the maintenance of certain market controls - 
must give way to a complete prohibition of such aid, except for 
aid for research and development and environmental protection.
(1) I.e.,’the value of their output more than covers variable costs.

On the basis of the foregoing, the Commission requests the 
Consultative Committee to deliver its opinion and the Council 
to give its assent by such a date that the Commission can 
adopt its decision in time for the new aid rules to come 
into effect on 1  January 1986, with an expiry date of 
31 December 1990.

DRAFT
C O M M IS S IO N  DECISION N* /85/ECSC
of 1985
establishing Community rules for aid to the steel industry
T H E  C O M M ISSIO N  O F  T H E  E U R O P E A N  COMMUNITIES,
Having regard to the Treaty establishing the European Coal and Steel
Community, and in p a rtic u la r to - the f ir s t  and second paragraphs of .
A rtic le  95 thereof,
Having consulted the Consultative Committee and with the unanimous assent
of the Council,
H A S  A D O P T E D  THIS DECISION :
A rtic le  1
1. Aid to the steel industry, whether sp ecific or non-specific, financed 
by Member States or th e ir regional or local authorities or through 
State resources in any form whatsoever m ay be deemed Community aid 
and therefore compatible with the orderly functioning of the com m on 
market only i f  i t  s a tis fie s  the provisions of A rticles 2  to 4. The 
procedures laid down in A rtic le  5  shall be followed before granting 
such aid.
2. The term "aid" also covers the aid elements contained in transfers
of State resources by Member States, regional or local authorities or 
other bodies to steel undertakings in the form of acquisitions of share­
holdings or provisions of capital or sim ila r financing (such as 
bonds convertible into shares, or loans the interest on which is at 
least p artly dependent on the undertaking's fin an cia l performance) 
which canViot be regarded as a  genuine provision of risk capital according 
to usual investment practice in a  market economy.

-  2 -
A rtic le  2
Aid for research and development
1. Aid to defray expenditure by steel undertakings on research and 
development projects m ay be deemed compatible with the orderly functioning 
of :the· com m on market provided that the research and/or development 
project has one of the follow ing objectives:
reductions in production costs, in p a rtic u la r through energy 
conservation or improvements in p ro d u ctivity,
improvements in the quality of products,
improvements in the performance of iron and steel products or extensions 
of the range of applications of steel,
improvements in working conditions (higher health and safety standards).
2. The to ta l amount of aid granted for this purpose m ay not exceed 2 5 , %  of 
the e lig ib le  costs of the p ro je ct. The e lig ib le  costs shall be thè 
costs d ire c tly  associated with the project, excluding, in p a rtic u la r, 
in d u s tria l applications or commercial exploita tio n  of the re su lts.
3. Aid authorized under this A rtic le  shall not be payable a fte r 3 1  December 1990.
A rtic le  3
Aid for environmental protection
1. Aid to support investment by steel undertakings to bring th e ir plants 
which entered into service before 1  January 19 84' into line with statutory 
environmental standards introduced a fte r 1  January 1986 m ay be deemed

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compatible with the orderly functioning of the com m on market.
\
2. The to ta l amount of aid granted for this purpose m ay not exceed 15 %  of 
the cost of the aided investment. Where the investment is associated with 
an increase in the capacity of the plant, the e lig ib le  cost sh all be 
proportionate to the in it ia l capacity of the plant.
3. Aid authorized under this A rtic le  shall not be payable af.ter 
3 1  December 1990.
A rtic le  4  
A id fo rc lo s u re s
1. Aid to cover normal costs actually arising from the p a rtia l or to ta l 
closure of steel plants that have been in regular production up to 
the time of n o tific a tio n  of the aid, and whose closure was not taken 
into account for the purposes of applying Decision N o  257/80/ECSC of 
1  February 1980, N o  2320/81/ECSC of 7  August 1981 or N o  1018/85/ECSC of 
19 A pril 1985 or for authorizations under A rtic le  54 of the E C S C  Treaty, 
m ay be deemed compatible with the orderly functioning of the com m on 
market.
The costs e lig ib le  for such aid shall be the follow ing:
- payments to workers m ade redundant or accepting early retirement, 
where such payments are not covered by aid pursuant to A rtic le  56(1)(c) 
or (2 )(b) of the E C S C  Treaty,
- compensation to th ird  parties for the termination of contracts, in 
p articula r those covering the supply of raw m aterials,

- 4 -
- expenditure on redevelopment of the s ite , the buildings and/or 
the infrastructure of the closed plant for alternative industrial 
use.
2. Aid for the complete and permanent closure of h o t-ro llin g  m ills which 
have been in regular production up to the date of n o tific a tio n  of the 
aid, and whose closure w as not taken into account for the purposes of 
applying Decisions N o  257/80/ECSC of 1  February 1980, N o  2320/81/ECSC
of 7  August 1981 or N o  1018/85/ECSC of 19 A pril 1985 or for authorizations 
under A rticle  54 of the E C S C  Treaty, m ay also be deemed compatible with 
the orderly functioning of the com m on market, provided that the aid 
does not exceed the higher of the following two values, as determined 
by an independent valuer:
- the discounted value of the contribution towards fixed costs obtainable 
from the m ill over a  three-year period, less any other advantages
the aided firm  derives from the closure (in p a rtic u la r, by transferring 
the m ill's  output to other m ills ), or
- the residual book value of the plant (ignoring that portion of any 
revaluations since 1  January 1980 which exceeded the national in fla tio n  
ra te ).
3. For five  years a fte r receiving closure aid, the aided undertaking m ay
not carry out any investment that would result in an increase in its  
production capacity without authorization from the Commission under 
A rtic le  54 of the E C S C  Treaty. Where such investment would partly 
offset capacity reductions,carried out elsewhere for the sam e category 
of products, aid shall be payable unj^r this A rtic le  only in consideration 
of the net capacity reduction^thereby obtained.

- 5  -
4. The Commission m ay at any time order the suspension of aid payments 
or the reimbursement of aid already paid i f  the aided undertaking 
breaches its  obligations under paragraph 3 or the Community rules on 
p ricin g .
5. Aid authorized under this A rtic le  shall not be payable 
a fte r 3 1  December 1988.
A rtic le  5
1. The Commission shall be informed, in s u ffic ie n t time to enable i t  
to. submit its  comments, of any plans to grant or a lte r aid of 
the types referred to in A rticles 2 to 4 · I t  shall likewise
be informed of plans to grant aid to the steel industry under 
schemes on which i t  has already taken a  decision under.the E E C  
Treaty. N otifications pursuant to this A rtic le  must be lodged with 
the Commission by 30 June 1988 at the latest for the types of aid 
referred to in A rtic le  4 and by 30 June 1990 at the latest for the 
types of aid referred to in A rticles 2  and 3. The planned measures 
m ay be put into effect only with the approval of and subject to any 
conditions laid down by the Commission.
2. The Commission shall be informed, in s u ffic ie n t time for i t  to \ 
submit its  comments, and by 30 June 1990 at the la te st, of any 
plans for transfers of State resources by Member States, regional 
or local authorities or other bodies to steel undertakings in the 
form of acquisitions of shareholdings or provisions of capital or 
s im ila r financing. It shall determine in accordance with the c rite ria  
stated in A rtic le  1C2) whether the fin a n cia l transfers involve
aid elements and, i f  so, sh all examine whether such aid is compatible 
with the com m on market under the provisions of A rticles 2  to 4.
3. The Commission shall seek the views of the Member States on plans
fo r closure aid and other major aid proposals n o tifie d  to i t  before taking 
any decision on them. I t  shall inform a ll the Member States of 
its  decision on each aid proposal.

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4. Where, a fte r in v itin g  interested parties to submit th e ir comments, 
the Commission finds that aid in a  given case is incompatible with
the provisions of this Decision, i t  shall inform the Member State concerned 
of its  decision. The Commission sh all take such a  decision not later 
than three months a fte r receiving the information needed to assess 
the proposed aid. A rtic le  88 of the E C S C  Treaty sh all apply in the 
event of a  Member State's fa ilin g  to comply with that decision.
5. I f  the Commission fa ils  to in itia te  the procedure provided for in 
paragraph 4 or otherwise to make its  views known w ithin two months 
of receiving n o tific a tio n  of a  proposal, the planned measures m ay 
be put into effect provided that the Member State f i r s t  informs the 
Commission of its  intention to do so.
\
6. A ll individual awards of the types of aid referred to in A rtic le  4 
sh all be n o tifie d  to the Commission in accordance with the procedure 
provided fo r in paragraph 1. The Commission also reserves the right to 
require that some or a ll individual awards of aid of the types 
referred to in A rticles 2  and 3 be n o tifie d  in accordance with 
paragraph 1.
A rtic le  6
The Member States shall supply the Commission twice a  year with reports 
on the aid disbursed over the previous six months, the uses to which 
the aid w as put and the results in terms of restructuring obtained over 
the same period. The reports sh a ll include particulars of a ll fin a n cia l 
operations carried out by the Member States, local or regional authorities 
or other bodies in re la tion  to publicly-owned steel undertakings. They 
must be supplied w ithin the two months follow ing the end of each six-month 
period and be set out in a  form determined by the Commission

A rticle  7
The Commission shall draw up regular reports on the implementation 
of this Decision for the Council and, for information, for the 
Parliament and the Consultative Committee.
A rticle  8
This Decision shall not apply to aid governed by the Treaties of 
Accession of Spain and Portugal.
■
'  unrrtc ie 9
This Decision replaces Decision N o  2320/81/E C S C . It shall apply 
u n til 3 1  December 1990.
This Decision shall be binding in its  entirety and d ire c tly  applicable 
in a ll M em ber States.
Done at Brussels, For the Commission