Proposal for a COUNCIL DECISION on the fulfilment of the conditions laid down in Article 3 of Decision 3/2002 of the EU-Poland Association Council of 23 October 2002 extending the period set out in Article 8 (4) of Protocol 2 on European Coal and Steel Community (ECSC) products to the Europe Agreement {SEC(2003) 621}

(presented by the Commission)

EXPLANATORY MEMORANDUM

(1) According to Article 8(4) of Protocol 2 of the Europe Agreement with Poland, during the first five years after the entry into force of the Agreement, and by derogation from paragraph 1 (iii) of the same Article, Poland could exceptionally, as regards steel products, grant public aid for restructuring purposes, provided that this leads to the viability of the benefiting firms under normal market conditions at the end of the restructuring period; that the amount and intensity of such aid be strictly limited to what is absolutely necessary in order to restore viability and that the aid be progressively reduced; and that the restructuring programme be linked to a global rationalisation and reduction of overall production capacity.

(2) This initial period expired on 31 December 1996 for Poland.

(3) Poland requested an extension of the above-mentioned period in April 1997.

(4) A realistic restructuring programme, including individual company viability plans, respecting the criteria set out in Article 8 (4) of Protocol 2 of the Europe Agreement, are the necessary basis for agreeing the requested extension of the period during which Poland may grant state aid for restructuring purposes.

(5) In May 2002, the Commission proposed an extension of the period during which Bulgaria, the Czech Republic, Poland and Romania may grant aids to restructure their steel sector, in view of the urgent need to find an acceptable solution to move forward the steel restructuring process in the candidate countries concerned, and pave the way for bringing the accession negotiations on the Competition Chapter to a conclusion.

(6) This extension would provide the legal basis for granting restructuring aid in the period before accession in the framework of the required restructuring plans (i.e. the aid provided should be limited and proportional to capacity reduction); it would also have the effect of retroactively legalising aid that may have been granted illegally since the entry into force or the Europe Agreement.

(7) The extension will come into effect only after the adoption and assessment of a restructuring plan and business plans, which fulfil the criteria of Protocol 2 of the Europe Agreements.

(8) According to Article 8(4) of Protocol 2 of the Europe Agreement, the Association Council shall decide whether the period of five years could be extended.

(9) On 23 October 2002, the EU-Poland Association Council adopted, the Decision 3/2002 providing for extension of the period foreseen by Protocol 2 by a further eight years starting on 1 January 1997, or until the date of the Poland's Accession to the European Union, whichever comes first, subject to the fulfilment of certain conditions.

(10) Protocol 8 of the Treaty of Accession defines the conditions and principles that need to be fulfilled by the steel restructuring process in Poland.

(11) Poland has fulfilled the first condition by submitting to the Commission a restructuring programme and business plans, which have been assessed and agreed by its national State Aid Monitoring Authority (the Office for Competition and Consumer Protection).

(12) The second condition is the final assessment of the restructuring programme and business plans by the Commission, with a view to determining whether the requirements of Article 8(4) of Protocol 2 of the Europe Agreement and the commitments included in the Protocol 8 of the Treaty of Accession are met.

(13) The Commission has made a final assessment which concludes that the restructuring programme and plans submitted by Poland meets the requirements of Article 8(4) of Protocol 2 of the Europe Agreement and the conditions set up in protocol 8 of the Treaty of Accession.

(14) The Commission is proposing a Council Decision approving the Commission's final assessment, as foreseen in Article 3 of the Decision 3/2002 providing for extension of the period foreseen by Protocol 2 of the Europe Agreement and the fulfilment of the commitment agreed in Protocol 8 of the Treaty of Accession. Once the Council has granted its approval, the conditions laid down in Articles 2 and 3 of the Decision 3/2002 and in Protocol 8 of the Treaty of Accession will have been met and the extension of the period foreseen by Protocol 2 of the Europe Agreement and the conditions set up in the Protocol 8 of the Treaty of Accession will take effect.

(15) The Council is therefore requested to approve the attached draft proposal for a Decision on the fulfilment of the conditions laid down in Article 3 of the Additional Protocol to the Europe Agreement establishing an association between the European Communities and their Member States, of the one part, and Poland, of the other part, with regard to an extension of the period foreseen in Article 8(4) of Protocol 2 of the Europe Agreement and on the fulfilment of the conditions set up in Protocol 8 of the Treaty of Accession.

Proposal for a COUNCIL DECISION on the fulfilment of the conditions laid down in Article 3 of Decision 3/2002 of the EU-Poland Association Council of 23 October 2002 extending the period set out in Article 8 (4) of Protocol 2 on European Coal and Steel Community (ECSC) products to the Europe Agreement

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty Establishing the European Community, and in particular Article 87 (3) thereof,

Having regard to EU-Poland Association Council Decision 3/2002 extending the period set out in Article 8(4) of Protocol 2 on European Coal and Steel Community (ECSC) products to the Europe Agreement, and in particular Article 3 thereof;

Having regard to the proposal of the Commission;

Whereas:

(1) A Europe Agreement establishing an association between the European Communities and their Member States, of the one part, and the Republic of Poland, of the other part [1], was signed on 16 December 1991;

[1] OJ L 348, 31.12.1993, p.2

(2) Article 8(4) of Protocol 2 to the above Europe Agreement lays down that during the first five years after entry into force of the Agreement, and by derogation from paragraph 1 (iii) of the same Article, Poland may exceptionally, as regards steel products, grant public aid for restructuring purposes, provided that this leads to the viability of the benefiting firms under normal market conditions at the end of the restructuring period; that the amount and intensity of such aid is strictly limited to what is absolutely necessary in order to restore viability and that aid is progressively reduced; and that the restructuring programme is linked to a global rationalisation and reduction of overall production capacity in Poland;

(3) The initial period of five years expired on 31 December 1996;

(4) Poland requested an extension of the above-mentioned period in April 1997;

(5) It is appropriate to grant an extension of this period for an additional period of eight years starting on 1 January 1997 or until the date of Poland's accession to the European Union, whichever comes first;

(6) To this effect, on 23 October 2002, the EU-Poland Association Council adopted Decision 3/2002 and is provisionally applied from that date;

(7) Article 1 of the EU-Poland Association Council Decision 3/2002 grants an extension of the above-named period, subject to the fulfilment of conditions laid out in Articles 2 and 3.

(8) Under Article 2, of the EU-Poland Association Council Decision 3/2002, the extension of the above-mentioned period is made conditional on the submission by Poland to the Commission of a restructuring programme and business plans for all companies included in the restructuring process which meet the requirements of Article 8(4) of Protocol 2 of the Europe Agreement and have been assessed and agreed by its national State Aid Monitoring Authority (the Office for Competition and Consumer protection);

(9) Protocol No 8 on the restructuring of the Polish steel industry, annexed to the Treaty of Accession of the Czech Republic, the Republic of Estonia, the Republic of Cyprus, the Republic of Latvia, the Republic of Lithuania, the Republic of Hungary, the Republic of Malta, the Republic of Poland, the Republic of Slovenia and the Slovak Republic provides that State aid granted by Poland for restructuring purposes to specified parts of the Polish steel industry shall, under certain conditions, be deemed to be compatible with the common market; the first of those conditions is that the period provided for in Article 8 (4) of Protocol 2 on ECSC products to the Europe Agreement has been extended until the date of accession; Article 6 of that Protocol provides that the restructuring aid granted to the benefiting companies shall be determined by the justifications set out in the approved steel restructuring plan and individual plans as approved by the Council;

(10) In April 2003, Poland submitted to the Commission a restructuring programme and business plans which have been assessed and agreed by the Office for Competition and Consumer Protection; Under Article 3 of the EU-Poland Association Council Decision 3/2002 , the extension of the above-mentioned period is made conditional on a final assessment of the restructuring programme and plans by the Commission;

(11) The Commission has made a final assessment of the restructuring programme and plans submitted by Poland;

(12) The assessment indicates that restructuring aid is necessary to return certain companies in the Polish steel industry to viability;

(13) The assessment confirms that implementation of the restructuring programme and plans will lead to the viability of the companies under normal market conditions by the end of the restructuring period; that the amount and intensity of aid is strictly limited to what is absolutely necessary in order to reach this objective and that restructuring aid to the Polish steel industry will cease by the end of 2003; and that the restructuring programme is linked to a global rationalisation and reduction of overall production capacity in Poland and that the programme respect all the commitments agreed in the Accession negotiations;

(14) The assessment therefore concludes that the restructuring programme and plans submitted by Poland meet the requirements of Article 8(4) of Protocol 2 of the Europe Agreement and in Protocol 8 of the Treaty of Accession;

(15) The conditions laid down in Articles 2 and 3 of the EU-Poland Association Council Decision 3/2002 are accordingly met;

HAS DECIDED AS FOLLOWS:

Article 1

The restructuring programme and business plans submitted to the Commission by Poland on 4 April 2003 pursuant to Article 2 of EU-Poland Association Council 3/2002, with regard to an extension of the period laid down in Article 8(4) of Protocol 2 to the Europe Agreement are in compliance with the requirements of Article 8(4) of Protocol 2.

Done at Brussels,

For the Council

The President