Opinion of the Economic and Social Committee on the 'Proposal for a Council Regulation (EC) laying down detailed rules for the application of Article 93 of the EC Treaty` () (98/C 284/04)

On 11 March 1998, the Council decided to consult the Economic and Social Committee, under Article 198 of the Treaty establishing the European Community, on the above-mentioned proposal.

The Section for Industry, Commerce, Crafts and Services, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 3 June 1998. The rapporteur was Mr Sepi.

At its 356th plenary session (meeting of 1 July 1998), the Economic and Social Committee adopted the following opinion by 135 votes to one, with three abstentions.

1. Introduction

1.1. The Committee has several times acknowledged the need to regulate competition in a thorough and legally valid manner.

1.2. In its opinion () on the 22nd report on competition policy, the Committee had already emphasized how important and necessary it was for the Commission to lay down regulations that would improve transparency and give greater legal certainty to all interested parties.

1.3. The Committee wishes to highlight the greater awareness that is developing in all EU countries on the subject of competition, both among economic and legal practitioners and, more generally, on the part of public opinion. This is due to the good results obtained in price restraint and in increased competitiveness.

1.4. It is precisely in this sphere that legislation is needed to make the Commission's work more methodical and transparent.

1.5. The proposal also follows the regulation on the application of Articles 92 and 93 of the Treaty to certain categories of horizontal state aid ().

1.6. The Committee urges the Commission to continue to extend its regulatory work, in order to build up a corpus of measures which harmonize and clarify the entire competition issue, also in view of enlargement.

1.7. In some key sectors of EU industry, these measures will have to take account of the situation regarding aid granted in competing countries.

1.8. The proposal attempts to strike a balance between efficiency and transparency. The Committee believes that, broadly speaking, Community institutions should pay greater attention to transparency and third party rights.

2. The Commission's document

2.1. The proposed regulation is basically a procedural proposal which on the one hand codifies a tried and tested procedure and on the other 'clarifies certain aspects and tightens up the rules` in order to provide a more effective control system.

2.2. The proposal confirms that the notification and the 'standstill` right provided for in Article 93(3) of the Treaty, form the cornerstone of the control system. Furthermore, the Commission will continue to have the sole decision-making authority on the matter (Articles 2 and 3).

2.3. Article 4 outlines the procedure for the examination of the notification by the Commission and lays down the deadlines for decisions. After such deadlines, if a formal decision has not been taken, aid is deemed to have been authorized.

2.4. Likewise, if the Member State does not supply the information requested by the Commission after a preliminary examination (Article 5), the notification is deemed to have been withdrawn.

2.5. After the formal investigation, the Commission may either (i) decide that the aid is compatible with the Treaty, (ii) approve it subject to certain conditions, or (iii) decide that it is incompatible with the Treaty (Article 7 and Article 11).

2.5.1. If the aid has been granted unlawfully and is incompatible with the common market, the Commission decides that the Member State must recover it from the beneficiary (Article 14).

2.6. Articles 10 and 11 cover the procedure for suspending or provisionally recovering aid which is considered unlawful on the basis of information 'from whatever source`.

2.7. Recovery of aid comes under Article 14, which provides for the use of the legal instruments available to the state in question and lays down that 'remedies under national law shall not have suspensive effect`.

2.8. As well as unlawful aid, 'misuse of aid` (Article 15) is also regulated, as are existing aid schemes which are 'no longer compatible with the common market`.

2.9. Member States may be asked to adopt 'appropriate measures` to ensure that aid is compatible. The regulation also establishes two systems of control - the examination of Member States' annual reports and on-site monitoring (Articles 19 and 20).

2.10. A system of cooperation with national 'independent` competition authorities is also established for particular cases (Article 21).

2.11. The common provisions stipulate that Member States alone are sent the decisions and that they are published in the Official Journal in summary form, although it is possible to obtain a copy of the full text in the authentic language version (Article 25).

2.12. Finally, an advisory committee consisting of representatives of Member States is to be set up. The committee will assist the Commission on the implementing provisions but not on the decisions (Article 27).

3. General comments

3.1. The Committee highlights the importance of this regulation, which integrates and rationalizes a series of practices and principles expressed in the judgements of the Court of Justice, giving them an organized structure.

3.2. The Committee considers, however, that this legislative streamlining of Community action in respect of competition should be further strengthened in order to have, in a few years, greater legal certainty on the subject. The impetus that will stem from the completion of the single market and EMU makes this particularly important.

3.3. The Committee believes that once the Fiscal Code of Conduct has been introduced, the scope of this regulation should cover tax provisions which distort competition between Member States.

3.4. A particular effort should be made to clarify the legal concepts used and to ensure that the translations into the various languages tally, so that they will be interpreted in the same way by everyone. For example, in the present regulation the difference between unlawful aid and 'misuse of aid` should be more clearly defined, bearing in mind that their legal consequences must be the same.

3.5. The Commission has the power both to lay down regulations and to enforce competition rules. Although the Committee has already expressed a favourable opinion on this dual power, the appeal procedure should be specified more precisely, and it should be made clear whether the Commission is obliged to make a decision at the request of any interested party. The vagueness of Article 10(3) on the acquisition of information appears to grant the Commission too many discretionary powers. The Committee believes that interested third parties should be guaranteed the right to appeal, and the Commission should be obliged to give an answer in all cases.

3.6. The introduction of formal rules, however, is also a unique opportunity to create a new culture of increased transparency which guarantees that third parties are secured a right to information, have a right to be heard and a right to comment before decisions are made. Relevant input from third parties will improve the quality of the Commission's work, enhance control and contribute to less distortion of competition in the single market.

3.7. More transparency and better third party rights will strengthen control of state aid. Competitors and other affected parties could contribute to making the investigation in important cases more comprehensive. Information from competing companies would enable the Commission to better assess the impact of a given aid on the market. Enhancing third party rights might therefore help to reduce the overall level of aid.

3.8. The definition of state aid by the Court of Justice and the Treaty also includes aid which does not constitute a subsidy but which distorts competition. The Commission should pay careful attention to the application of the regulation to some of this aid, since Member States do not always see fit to declare it; the Commission should introduce legislation to bring such cases out into the open.

3.9. The Committee asks the Commission to assess whether it would be useful to make Member States' notifications on new aid available to the public, even in summary form.

3.10. The Commission proposal touches on sensitive areas of national structural policy. In view of its political significance, the regulation should contain clear requirements to provide for better compliance with the concepts of transparency and information, not least with regard to the general public.

4. Specific comments

4.1. According to the definition of the Court of Justice, state aid also includes interventions which 'without being subsidies in the strict meaning of the word, are similar in character and have the same effect`. The definition contained in Article 2 of the regulation should be clarified.

4.2. Article 4(6) provides for a de facto dual notification, which renders the procedure unnecessarily complicated.

4.3. As to third party rights in general, the proposal lacks a provision empowering the Commission to publish the fact that individual aid has been notified and basic information about the aid granted. Whereas publication of every notification cannot be justified, a flexible paragraph that allows publication of particularly complex issues would be useful. The lack of such provision harms transparency and inhibits third party rights.

4.3.1. The Committee thinks that any party who has submitted an opinion should receive a copy of the final decision. It should also be stipulated that any party can notify the Commission of unlawful aid or of the unlawful use of aid. If the Commission deems the information provided to be insufficient, it should be obliged to inform the party of this fact. It should also be obliged to send the party the full text of its decision. This would appear to be in line with several judgements passed by the Court of Justice. ()

4.4. The problem of the recovery of unlawful aid is a difficult one because Member States have different judicial and administrative procedures. The Committee therefore supports the Commission's efforts to improve the situation by including the injunction to suspend or provisionally recover aid (Article 11) and stipulating that 'remedies under national law shall not have suspensive effect` [Article 14(3)]. These two provisions make the Commission's action more effective.

4.5. The regulation does not say what will happen if national judicial procedures do not allow the immediate and effective execution of the Commission's decision. Given the elementary principle that there should be a level playing field, Member States should take steps to make immediate recovery possible, and the Commission should ensure that dilatory procedures are not introduced.

4.6. The Committee considers that aid which has been misused should be recovered as soon as it becomes incompatible with Community rules and therefore becomes fundamentally unlawful.

4.7. The Committee considers the on-site monitoring provided for in Article 20 to be of great importance. However, the same Article also envisages an agreement with the Member State on the appointment of experts, which could give rise to prevarication and delays. It would therefore be useful to set a deadline and for the Commission to always have the final say on the appointment of experts.

4.8. On the basis of the Treaty definition, the Commission, in Article 25 of the regulation, suggests an exclusive relationship with national authorities. Since in several Member States a great deal of aid is handled by decentralized authorities, it should be possible to interpret the Treaty in such a way as to allow these Member States to dialogue directly with local authorities. This would shorten the administrative delays that such an exclusive relationship entails. The same goes for the concept of 'state aid` contained in the Treaty - this, however, is more broadly interpreted and includes any type of public aid.

4.9. The publication of 'a summary notice` of the decision in the Official Journal expedites procedures but makes them less transparent. However, in view of translation problems that will progressively increase over the next few years, the publication of a shortened version is probably advisable. It is essential that the notice be published as soon as possible in order for decisions to be effective. Complete and reasonably rapid publication in all languages will require a considerable increase in the Commission's technical resources.

4.10. The ESC therefore regrets that the proposal lacks time limits when the Commission deals with second-phase, formal investigations. The starting date for calculating the two-month period is also not clear. Time limits would provide the parties engaged with more legal certainty. Capacity constraints on the part of the Commission do not justify the absence of time limits. This is particularly true since the Commission plans to apply block exemptions in the future.

4.10.1. The proposal fails to clarify when the aid notification is complete, and when the two-month period for the preliminary examination therefore begins. The Committee would welcome a provision to give legal certainty on this point. A compulsory form, which the Commission could provide for aid notification, would be one answer. The Committee would also welcome other ways of improving legal certainty.

4.10.2. In the interests of legal certainty, the Committee also recommends that aid which was paid unlawfully more than ten years previously should be treated as de facto aid. After this period, neither notification nor recovery would be necessary. Such a provision is justifiable because after ten years there is no danger of competition being distorted or competitors suffering directly.

4.11. The Commission will have to make sure that procedures are rapid and transparent, and that legal certainty and the normal operation of companies cannot be jeopardized under any circumstances.

Brussels, 1 July 1998.

The President of the Economic and Social Committee

Tom JENKINS

() OJ C 116, 16.4.1998, p. 13.

() OJ C 34, 2.2.1994.

() OJ C 129, 27.4.1998.

() Sytraval judgement.