No C 223/4 Official Journal of the European Communities 7. 9. 90 
II 
(Preparatory Acts) 
COMMISSION 
Proposal for a Council Directive on aid to shipbuilding 
COM(90) 248 final 
(Submitted by the Commission on 20 July 1990) 
(90/C 223/04) 
THE COUNCIL OF THE EUROPEAN COMMUNITIES, 
Having regard to the Treaty establishing the European 
Economic Community, and in particular Articles 92 (3) 
(d) and 113 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 87/167/EEC of 26 January 
1987 on aid to shipbuilding (') will expire on 
31 December 1990; 
Whereas the aid policy laid down in that Directive has in 
general met the objectives set out at its introduction; 
Whereas, although since 1989 there have been significant 
improvements in the world market for shipbuilding, a 
satisfatory equilibrium between supply and demand has 
still not been established and the price improvements 
which have taken place are still insufficient in the overall 
context to restore a normal market situation within the 
sector, allowing prices to reflect full production costs 
and a reasonable return on invested capital; 
Whereas, however, according to the forecasts of ship­
building associations and reputable international market 
analysts all over the world the positive trend towards a 
normalization of the market is likely to continue during 
the coming years; 
Whereas parallel to this market amelioration interna­
tional efforts are being carried out inside the framework 
of the OECD to reach a multilateral agreement between 
(«) OJ No L 69, 12. 3. 1987, p. 55. the world's most important shipbuilding nations on a 
rapid phasing-out both of all direct and indirect state 
support measures to shipbuilding, conversion and ship 
repair and of other obstacles to reestablishing normal 
and fair competition conditions inside the sector; 
Whereas a competitive shipbuilding industry is of vital 
interest to the Community and contributes to its 
economic and social development by providing a 
substantial market for a range of industries, including 
those using advanced technology; whereas it contributes 
also to the maintenance of employment in a number of 
regions, including some which are already suffering a 
high rate of unemployment; whereas this is also true of 
ship conversion and ship repair; 
Whereas, a complete abolition of aid to the sector is still 
not possible in view of the present market situation and 
in view of the need to encourage restructuring in many 
yards; whereas a tight and selective aid policy should be 
continued in order to support the present trend in 
production towards more technologically-advanced ships 
and in order to ensure fair and uniform conditions for 
intra-Community competition; whereas such a policy 
constitutes the most appropriate approach in terms of 
ensuring the maintenance of a sufficient level of activity 
in European shipyards and thereby the survival of an 
efficient and competitive European shipbuilding industry; 
Whereas the basic aid policy laid down in the prevailing 
Directive 87/167/EEC, differentiating between on the 
one hand production aid based on a common maximum 
aid ceiling and on the other hand restructuring aid 
supporting the desirable structural charges to be carried 
out, remains the most appropriate way of assuring 
long-term competitiveness to the industry; 
Whereas, although it is proposed to treat ship conversion 
in the same way as shipbuilding, aid to the ship-repair 
sector in view of the continuing overcapacity in this 
7. 9. 90 Official Journal of the European Communities No C 223/5 
sector should not be permitted, except for investments, 
closure and research and development aid; 
Whereas there is every reason for the sake of trans­
parency and equity to continue to include in the present 
aid policy indirect aid granted to shipbuilding through 
investment aid to shipowners for the building and 
conversion of ships; 
Whereas the reduced level of aid acceptable for small 
specialized vessels, for which the competition is mainly 
inter-European, should be applied based on experience 
to the largest possible section of this market; 
Whereas, since increased efficiency is a principal 
objective pursued by this Directive, the principle of aid 
degressivity is a basic one which should be fully 
guaranteed; 
Whereas it is of vital importance for the restoration of a 
healthy shipbuilding industry in the long term that the 
Community together with other main shipbuilding 
nations effectively ensures that structural contractions 
obtained inside its territory through the application of its 
aid policy remains irreversible as long as an adequate 
balance between supply and demand has not been 
achieved; 
Whereas the transitional period accorded to Spain and 
Portugal will expire on 31 December 1990; 
Whereas the efficiency of and the confidence in the 
present aid policy can only be obtained by close and 
timely monitoring by the Commission of the implemen­
tation by Member States of the aid rules; whereas 
therefore the compliance by Member States with their 
reporting obligations, on which such a monitoring 
system is based, should be secured by providing for the 
suspension of all outstanding payments of aid already 
approved until all due reports have been received by the 
Commission; whereas this possibility must also apply to 
the non-transmission reports relating to aid schemes 
which have already been authorized, 
HAS ADOPTED THIS DIRECTIVE: 
CHAPTER 1 
GENERAL 
Article 1 
For the purpose of this Directive the following defi­
nitions shall apply: (a) 'shipbuilding': 
means the building in the Community of the 
following metal-hulled sea-going vessels: 
— merchant ships for the carriage of passengers 
and/or cargo, of not less than 100 GRT, 
— fishing vessels of not less than 100 GRT, 
— dredgers or ships for other work at sea of not 
less than 100 GRT excluding drilling platforms, 
— tugs of not less than 365 kW; 
(b) 'ship conversion': 
means the conversion in the Community of metal-
hulled sea-going vessels, as defined in (a), of not less 
than 1 000 GRT, on condition that conversion oper­
ations entail radical alterations to the cargo plan, the 
hull or the propulsion system or the passenger 
accommodation; 
(c) 'ship repair': 
means the repair of the vessels referred to in (a); 
(d) '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 and any aid elements contained 
in the financing measures taken by Member States in 
respect of the shipbuilding or ship repair under­
takings which they directly or indirectly control and 
which do not count as the provision of risk capital 
according to standard company practice in a market 
economy. 
Such aid may be considered compatible with the 
common market provided that it complies with the 
criteria for derogation contained in this Directive; 
(e) 'contract value before aid': 
means the price laid down in the contract plus any 
aid granted directly to the shipyard. 
No C 223/6 Official Journal of the European Communities 7. 9. 90 
Article 2 
No aid granted pursuant to this Directive may be con­
ditional upon discriminatory practices as to products 
originating in other Member States. 
Article 3 
Aid to shipowners 
1. All forms of aid to shipowners or to third parties 
which are available as aid for the building or conversion 
of ships shall be subject to the notification rules in 
Article 9. 
This aid shall include credit facilities, guarantees and tax 
concessions granted to shipowners or third parties for 
the purposes referred to in the first subparagraph. 
2. The grant equivalent of the aid shall be subject in 
full to the rules set out in Article 4 and the monitoring 
procedures laid down in Article 10, where the aid is 
actually used for the building or conversion of ships in 
Community shipyards. 
3. Aid granted by a Member State to its shipowners or 
to third parties in that State for the building or 
conversion of ships may not lead to distortions of 
competition between national shipyards and shipyards in 
other Member States in the placing of orders. 
4. These provisions shall be without prejudice to any 
future Community rules on aid to shipowners. 
CHAPTER II 
OPERATING AID 
Article 4 
Contract-related production aid 
1. Production aid in favour of shipbuilding and ship 
conversion may be considered compatible with the 
common market provided that the total amount of aid 
granted in support of any individual contract does not 
exceed, in grant equivalent, a common maximum ceiling 
expressed as a percentage of the contract value before 
aid, hereinafter referred to as the ceiling. 
2. The ceiling shall be fixed by the Commission with 
reference to the prevailing difference between the cost 
structures of the most competitive Community yards and 
the prices charged by their main international com­
petitors, with particular regard to the market segments in 
which the Community yards remain relatively most 
competitive. The criteria for setting the ceiling set out in the first 
subparagraph shall be without prejudice to the 
amendments necessary to comply with international obli­
gations entered into by the Community. 
However, the Commission shall pay particular regard to 
ensure that the aid for the building of small specialized 
vessels, a market segment normally served by small 
yards, in particular small ships of a contract price of less 
than 10 million ECU, and for which the competition is 
mainly inter-European, is kept at the lowest possible 
level, nevertheless allowing for the particular situation in 
Greece. 
3. The ceiling will be progressively reduced. For this 
reason the ceiling shall be reviewed every 12 months, or 
sooner if warranted by exceptional circumstances. In its 
review of the ceiling, the Commission shall also ensure 
that there are no undue concentrations of shipbuilding 
activities in specific market segments to an extent 
contrary to Community interests. 
The aid ceiling applicable to a contract shall be that in 
force at the date of signature of the final contract. 
However, this rule shall not apply in respect of any ship 
delivered more than three years from the date of signing 
of the final contract. In such cases the ceiling applicable 
to that contract shall be that in force three years before 
the date of delivery of the ship. 
4. The ceiling shall apply not only to all forms of 
production aid — whether under sectoral, general or 
regional aid schemes — granted directly to the yards but 
also to the aid covered by Article 3 (2). 
5. The combined effect of aid under the various aid 
schemes applied shall in no case exceed the ceiling fixed 
according to paragraph 2; the grant of aid in individual 
cases shall not necessitate prior notification to, or auth­
orization from, the Commission. 
However, where there is competition between yards in 
different Member States for a particular contract, the 
Commission shall require prior notification of the 
relevant aid proposals at the request of any Member 
State. In such cases, the Commission shall adopt a 
position within 30 days of notification; such proposals 
may not be implemented before the Commission has 
given its authorization. By its decision in such cases the 
Commission shall ensure that the planned aid does not 
affect trading conditions to an extent contrary to the 
common interest. 
6. Aid in the form of credit facilities for the building 
or conversion of vessels complying with the OECD 
Council resolution of 3 August 1981 (Understanding on 
export credits for ships) or with any agreement replacing 
the resolution shall not be counted within the ceiling. 
7. 9. 90 Official Journal of the European Communities No C 223/7 
Such aid may be considered compatible with the 
common market provided that it complies with the 
abovementioned resolution or any agreements which 
replace it. 
7. Aid related to shipbuilding and ship conversion 
granted as development assistance to a developing 
country shall not be subject to the ceiling. It may be 
deemed compatible with the common market it if 
complies with the terms laid down for that purpose by 
OECD Working Party No 6 in its Agreement 
concerning the interpretation of Articles 6 to 8 of the 
Understanding referred to in paragraph 6 of this Article 
or with any later addendum or corrigendum to the said 
Agreement. 
Prior notification of any such individual aid proposal 
must be given to the Commission. The Commission shall 
verify the particular development content of the 
proposed aid and satisfy itself that it falls within the 
scope of the Agreement referred to in the preceding 
subparagraph. 
Article 5 
Other operating aid 
1. Aid to facilitate the continued operation of ship­
building and ship conversion companies, including loss 
compensation, rescue aid and all other type of operating 
aid not directly supporting particular restructuring 
measures covered in Chapter III, may be deemed 
compatible with the common market provided that such 
aid together with production aid allocated directly to 
individual shipbuilding and ship conversion contracts in 
accordance with Article 4 (4) does not exceed the ceiling 
expressed as a percentage of the aid recipient's annual 
turnover in shipbuilding and ship conversion. 
2. It shall be incumbent on the Member States to 
furnish evidence of the extent to which the turnover and 
losses of the recipient of the aid result, on the one hand, 
from shipbuilding and ship conversion and, on the other, 
from its other activities, if any, and, if some of the aid is 
intended to offset losses or expenditure arising from the 
restructuring measures referred to in Chapter III, to 
identify and specify those measures. 
CHAPTER III 
RESTRUCTURING AID 
Article 6 
Investment aid 
1. Investment aid, whether specific or non-specific, 
may not be granted for the creation of new shipyards or 
for investment in existing yards if such aid would be 
likely to increase the Member States' shipbuilding 
capacity. Such aid may not be granted for ship repair unless linked 
to a restructuring plan which results in an overall 
reduction in the ship repair capacity of the Member State 
concerned. In this context the Commission may take into 
account capacity reductions carried out in the 
immediately preceding years. 
2. Paragraph 1 shall not apply to the opening of a 
new shipyard in a Member State which otherwise would 
have no shipbuilding facilities or to investments in a 
Member State's only existing yard, provided that the 
effect of the yard in question on the Community market 
is minimal. 
3. In accordance with paragraph 1, investment aid 
may be deemed compatible with the common market 
provided that: 
— the amount and intensity of such aid are justified by 
the extent of the restructuring involved, 
— it is limited to supporting expenditure directly related 
to the investment. 
4. In examining the aid referred to in paragraphs 1 
and 3, the Commission shall take account of the extent 
of the contribution of the investment programme 
concerned to such Community objectives for the sector 
as innovation, specialization, working conditions, health, 
safety and environment. 
Article 7 
Aid for closures 
1. Aid to defray the normal costs resulting from the 
partial or total closure of shipbuilding or ship repair 
yards may be considered compatible with the common 
market provided that the capacity reduction resulting 
from such aid is of a genuine and irreversible nature. 
In order to establish the irreversible nature of aided 
closures the Member State concerned shall ensure that 
the closed shipbuilding and ship repair facilities remain 
closed for a period of not less than 5 years. 
Within this five-year period the closed site may not be 
used for activities in anticipation of a return to ship­
building after the expiry of the five-year period. 
If after a period of five years a Member State wishes to 
reopen a closed shipbuilding or ship repair facility, it 
must obtain the Commission's prior approval. 
No C 223/8 Official Journal of the European Communities 7. 9. 90 
The Commission's decision will be taken with reference 
both to the currently existing worldwide balance between 
supply and demand and to whether aid is being granted 
for reopening the facilities. 
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, 
— expenditure incurred for the redevelopment of the 
yard, its buildings, installations and infrastructure for 
use other than that specified in Article 1 (a), (b) and 
(c), 
— in the event of total closure of a yard, the residual 
book value of its installations (ignoring that portion 
of any revaluation since 1 January 1982 which 
exceeds the national inflation rate). 
3. The amount and intensity of aid must be justified 
by the extent of the restructuring involved, account being 
taken of the structural problems of the region concerned 
and, in the case of conversion to other industrial ac­
tivities, of the Community legislation and rules applicable 
to the new sector concerned. 
Article 8 
Aid for research and development 
1. Aid to defray expenditure by shipbuilding and ship 
repair undertakings for research and development 
projects may be considered compatible with the common 
market. 
2. For the purposes of this Directive, the eligible costs 
shall be only those relating to fundamental research, 
basic industrial research and applied research and devel­
opment, all as defined by the Commission in Annex I to 
the Community framework for State aids for research 
and development ('), excluding those related to industrial 
application and commercial exploitation of the results. 
(') OJ No C 83, 11. 4. 1986, p. 2. CHAPTER IV 
MONITORING PROCEDURE 
Article 9 
1. In addition to the provisions of Articles 92 and 93 
of the Treaty, aid to shipbuilding, ship conversion and 
ship repair undertakings covered by this Directive 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 
Directive; 
(b) any decision to apply any general or regional aid 
scheme to the undertakings covered by this 
Directive; 
(c) any individual application of aid schemes in the cases 
referred to in the second subparagraph of Article 4 
(5) or when specifically provided for by the 
Commission in its approval of the aid scheme 
concerned. 
Article 10 
1. For the Commission's monitoring of the implemen­
tation of the aid rules contained in Chapters II and III, 
Member States shall supply the Commission for its 
exclusive use with: 
— current reports on each shipbuilding and ship 
conversion contract at the time of ordering and 
completion containing details of the financial 
contract support, in accordance with the form set out 
in the annexed Schedule 1, 
— six-monthly reports — to be provided by 1 October 
and 1 April in respect of the preceding half calendar 
years — on aid granted to shipowners, in accordance 
with the form set out in the annexed Schedule 2, 
— yearly reports giving details of the annual results of, 
and total financial support granted to, each indi­
vidual national shipyard which has received aid, in 
accordance with the form set out in the annexed 
Schedule 3, 
— yearly reports on the attainment of the restructuring 
objectives as regards the undertakings which have 
received aid according to Articles 6 and 7, in 
accordance with the form set out in the annexed 
Schedule 4. 
7. 9. 90 Official Journal of the European Communities No C 223/9 
2. On the basis of the information communicated to it 
in accordance with Article 9 and paragraph 1 of this 
Article, the Commission shall draw up an annual overall 
report to serve as a basis for discussion with national 
experts. This report shall state inter alia the level of 
contract-related aid and other operating aid granted in 
each Member State during the period in question, and 
both the total volume of restructuring aid awarded and 
the progress made towards the attainment of the restruc­
turing objectives in each Member State during the same 
period. 
3. If a Member State does not fully conform with its 
reporting obligations as laid down in the first paragraph, the Commission may, after having given due notice, 
require that that Member State suspends all outstanding 
payments of already approved aid until such time as all 
due reports have been received by the Commission. 
Article 11 
This Directive shall apply from 1 January 1991 to 31 
December 1992. 
Article 12 
This Directive is addressed to the Member States.