No C 281 /4 Official Journal of the European Communities 7.11.86 
II 
(Preparatory Acts) 
COMMISSION 
Proposal for a Council Directive on aid to shipbuilding 
(COM(86) 531 final/2) 
(submitted by the Comission to the Council on 2 October 1986) 
(86/C 281/05) 
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 Par­
liament, 
Having regard to the Opinion of the Economic and 
Social Committee, 
Whereas Council Directive 81/363/EEC of 28 April 
1981 on aid to shipbuilding ('), as last amended by 
Directive 85/2/EEC (2), will expire on 31 December 
1986; 
Whereas, although progress has been made in the 
structural adaptation of the Community's shipbuilding 
industry since the adoption of Directive 81/363/EEC 
(the Fifth Directive) the world crisis in shipbuilding 
continues to deepen together with the imbalance between 
shipbuilding capacity and demand, causing prices to fall 
to a level which is often below the fixed cost of 
European shipyards; whereas the price problem has been 
aggravated by the development of very cost-competitive 
capacity in third countries particularly in the production 
of standardized vessels in series; 
Whereas the recovery in demand envisaged in the Fifth 
Directive has not taken place, given that the demand 
outlook for shipbuilding is not encouraging and in view 
of the fact that any resumption in demand is likely to 
lead immediately to an expansion of production facilities 
in certain third countries; 
Whereas a competitive shipbuilding industry is of vital 
interest to the Community and contributes to its 
economic and social development by providing a sub­
stantial market for a range of industries, including those 
(') OJ No L 137, 23. 5. 1981, p. 39. 
(a) OJNoL2, 3. 1. 1985, p. 13. 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 it is now clear that the sector is suffering from 
a fundamental structural crisis, rather than a cyclical 
problem of demand, in which it would be short-sighted 
to continue to respond to the aggravation of the crisis by 
multiplying the volume of operating aids which tend to 
increase the segregation of the internal market and 
constitute a continuing drain on the scarce budgetary 
resources of the Member States without inducing any 
lasting improvement in the competitiveness of the 
Comunity's shipbuilding industry; 
Whereas, in view of the cost differences which exist for 
most categories of ship in comparison to shipyards in 
some third country, the immediate abolition of aid to the 
sector may not be possible in view of the need to 
encourage restructuring in many yards; whereas, a 
tighter and more selective aid policy is nevertheless 
necessary 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 these considerations call for a differentiated 
approach with regard to the various types of aid 
presently granted by Member States; whereas a level of 
production aid which is geared towards supporting 
production where the Community's cost disadvantage is 
7.11.86 Official Journal of the European Communities No C 281 /5 
lowest and where there is a real possibility of restoring 
long-term competitiveness seems to offer the most 
appropriate approach in response to the abovementioned 
objectives of improving competitiveness and reducing 
intra-Community distortions in trade; whereas this level 
of aid should be attained by means of a common 
maximum ceiling to be revised periodically after consul­
tation with the Member States and on the basis of an 
independent study which takes due account of the 
expected long-term development of the shipbuilding 
industry so as to ensure both the optimal activity levels 
justifiable on economic grounds and the continuation of 
structural adjustment; whereas it is necessary, in order to 
avoid discrimination, to make all forms of operating aid 
subject to the common maximum ceiling, including loss 
compensation and such aid as is granted indirectly 
through third persons; whereas, in order to permit all 
Member States to compete equally at this level of 
production aid and in view of the persistent structural 
disparities of yards in the different Member States, it 
may be necessary to authorize restructuring aid to enable 
desireable structural changes to be carried out provided 
that they do not lead to increases in capacity; whereas 
although it is proposed to treat ship conversion in the 
same way as shipbuilding, it is not appropriate to permit 
aid to the ship-repair sector in view of the continuing 
overcapacity in this sector, except for closure and 
research and development aid; 
Whereas the restructuring process in Spain and Portugal 
is less advanced than elsewhere in the Community and 
the immediate application of the common maximum 
ceiling for production aid may cause some difficulties in 
these countries, a certain transitional period should be 
allowed to gradually enable them, after a further period 
of restructuring, to comply with the common maximum 
aid ceiling; 
Whereas in order to ensure full transparency which is a 
vital element in assuring the proper functioning of a 
Community aid system both in respect of operational 
aids and burden-sharing with regard to restructuring 
efforts it will be necessary to strengthen the notification 
rules, including notification of aid to ship owners for the 
acquisition of ships or for ship conversion, together with 
the a posteriori reporting obligations of Member States as 
regards actual aid payments and the achievement of 
restructuring objectives, HAS ADOPTED THIS DIRECTIVE: 
CHAPTER I 
GENERAL 
Article 1 
For the purposes of this Directive the following 
definitions 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 gross tonnes, 
— fishing vessels of not less than 100 gross tonnes, 
— dredgers or ships for other work at sea of not 
less than 100 gross tonnes, 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 of not less than 1 000 gross 
registered tonnes on condition that conversion 
operations entail radical alterations to the cargo 
plan, the hull or the propulsion system or the 
passenger accomodations; 
(c) 'ship repair': 
means the repair of vessels as referred to under (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. 
Article 2 
No aids granted pursuant to this Directive may be 
conditional upon discriminatory practice as to products 
originating in other Member States. 
Article 3 
Aid to shipowners 
1. All aids in any form whatsoever, including credit 
facilities and tax concessions of a specific character, 
granted to shipowners or other third parties for the 
acquisition of new ships or ship conversion are covered 
by this Directive. 
No C 281/6 Official Journal of the European Communities 7.11.86 
2. Aid schemes as referred to in paragraph 1 shall be 
subject to the notification rules set forth in Article 10 
and their application subject to the rules set forth in 
Article 4 and the monitoring procedures laid down in 
Article 11. 
3. Aid granted by a Member State to its shipowners or 
other third parties in that State for the acquisition of new 
ships or ship conversion may not lead to distortions of 
competition between national shipyards and shipyards in 
other Member States in the placing of contracts. 
4. These provisions shall be entirely 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 construction 
contract does not exceed in net grant equivalent a 
common maximum ceiling expressed as a percentage of 
the contract value. 
2. The common maximum aid 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 
its main international competitors with particular regard 
to the market segments in which the Community yards 
remain relatively most competitive. 
3. The aid ceiling shall be reviewed at reasonable 
intervals, which shall not exceed 12 months. In its review 
of the common maximum aid ceiling the Commission 
shall also take into account undue concentrations of 
shipbuilding activities in specific market segments to an 
extent contrary to Community interests. 
4. The maximum aid ceiling shall apply not only to all 
forms of production aid — whether under sectoral or 
general or regional aid schemes — granted directly to 
the yards but also to the aid covered by Article 3 in so 
far as it is employed for shipbuilding or ship conversion 
in Community yards. 
5. The combined effect of aid under the various aid 
schemes applied must in no case exceed the aid ceiling 
fixed according to paragraph 2. The granting of aid in 
individual cases shall necessitate no prior notification to 
and authorisation from the Commission. However, 
where the aid proposal is in competition with a tender 
from a yard in another Member State prior notification must be given to the Commission, which shall adopt a 
position withing 30 days following notification. Such 
proposals may not be implemented before the 
Commission has given its agreement. 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 
abovementioned aid ceiling. Such aid may be considered 
compatible with the common market. 
7. Aid related to shipbuilding and ship conversion 
granted as development assistance to a developing 
country shall not be subject to the abovementioned 
ceiling. It may be deemed compatible with the common 
market if it complies with the terms laid down for that 
purpose by the OECD Working Group 6 in its 
agreement concerning the interpretation of Articles 6, 7 
and 8 of the OECD Understanding referred to in 
paragraph 6 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 that it falls within the 
scope of the abovementioned agreement. 
Article 5 
Other Operating Aid 
1. Aids to facilitate the continued operation of 
shipbuilding and ship conversion undertakings, including 
loss compensation, rescue aid and all other type of 
operating aid not directly supporting particular re­
structuring 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 same common maximum aid ceiling as that 
referred to in Article 4 (1), (2) and (3), expressed as a 
percentage of the aid recipient's annual turnover in 
merchant shipbuilding and ship conversion. 
2. It shall be incumbent on the aid recipient to furnish 
evidence of the source of its turnover from, on the one 
hand, merchant shipbuilding and ship conversion and, on 
the other, 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. 
3. The granting of aid as referred to in paragraph 1 
must always be notified to and authorized by the 
Commission before being put into effect. 
7.11.86 Official Journal of the European Communities No C 281/7 
CHAPTER III 
Restructuring Aid 
Article 6 
Investment aid 
1. Investment aid, whether specific or not 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 State's building capacity. 
2. Other investment aids to the shipbuilding sector 
may be deemed compatible with the orderly functioning 
of the common market provided that: 
— the amount and intensity of such aids are justified by 
the extent of the restructuring effort involved; 
— they are limited to covering expenditure directly 
related to the investment. 
3. In its examination of aids as referred to in 
paragraphs 1 and 2 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 the environment. 
Article 7 
Aid for closures 
1. Aid to defray the normal costs resulting from the 
partial and total closure of shipbuilding or ship repair 
yards may be considered compatible with the orderly 
functioning of the common market provided that the 
capacity reduction resulting from such aid is of a 
genuine and irreversible nature. 
2. The costs eligible for such aid shall be: 
— payment to workers made redundant or retired 
before legal retirement age; 
— payment to workers for vocational retraining; 
— expenditure incurred for the redevelopment of the 
yard, its buildings, installations and infrastructure for 
industrial use other than that specified in Article 
1 (a), (b) and (c). 
3. The amount and intensity of aid must be justified 
by the extent of the restructuring effort involved, 
account being taken of the structural problems of the 
region concerned and in case of conversion to other 
industrial activities full consideration being given to the 
Community legislation and codes 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 orderly 
functioning of the common market. 
2. The eligible costs shall be only those directly 
related to research and development, excluding those 
related to industrial application and commercial 
exploitation of the results. 
CHAPTER IV 
SPAIN AND PORTUGAL 
Article 9 
1. Chapter II shall apply in Spain and Portugal only 
after 31 December 1989. 
2. Until then operating aid for shipbuilding and ship 
conversion in these two Member States may be 
considered compatible with the common market 
provided that: 
— the aid recipient is engaged in the implementation of 
a systematic and specific restructuring programme, 
including capacity reductions, which can be 
considered capable of allowing it after 31 December 
1989 to operate competitively under the provisions 
laid down in Chapter II; 
— the aids are being progressively reduced. 
CHAPTER V 
MONITORING PROCEDURE 
Article 10 
Subject to the specific provisions of this Directive, 
Articles 92 and 93 of the Treaty shall be fully applicable 
to shipbuilding, ship conversion and ship repair. 
In accordance with Article 93 (3) of the Treaty, Member 
States' aid plans, as referred to in this Directive, shall be 
notified to and agreed by the Commission before they 
are put into effect. In addition, individual applications in 
favour of shipbuilding, ship conversion and ship repair of 
already approved general or regional aid schemes must 
be notified to and obtain the agreement of the 
Commission before being put to effect. The same shall 
apply to each individual award under aid schemes in the 
cases referred to in Article 4 (5) and (7) or where 
specifically provided for by the Commission in its 
approval of the aid scheme. 
No C 2 81 / 8 Official Journal of the European Communities 7.11.86 
Article 11 
1. For the Commission's monitoring of the 
implementation 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 attached schedule 1; 
— six-monthly reports — to be provided by 1 Sep­
tember and 1 March in respect of the preceding half 
calendar years — on aid granted to shipowners, in 
accordance with the form set out in the attached 
schedule 2; 
— yearly reports giving details of the annual results of 
and total financial support granted to each individual 
national shipyard which has received aid, in 
accordance with the form set out in the attached 
schedule 3; 
— yearly reports on the attainment of the restructuring 
objectives as regards undertakings which have 
received aid according to Articles 6, 7 and 9, in 
accordance with the form set out in the attached 
schedule 4. 2. On the basis of the information communicated to it 
the Commission shall, at regular intervals, draw up an 
overall report to serve as 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 re­
structuring objectives in each Member State during the 
same period. 
CHAPTER VI 
FINAL PROVISIONS 
Article 12 
1. This Directive shall apply until 31 December 1991. 
2. Two years after the notification of this Directive, 
the Commission shall report to the Council on its 
operation and propose any necessary adjustments to the 
rules. 
Article 13 
This Directive is addressed to the Member States. 
7. 11. 86 Official Journal of the European Communities No C 281/9 
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No C 281/12 Official Journal of the European Communities 7. 11.86 
Schedule 4 
EUROPEAN ECONOMIC COMMUNITY 
REPORT OF MERCHANT SHIPYARD FACILITIES AND EMPLOYMENT 
(See notes on reverse side for completing the form) 
Section 1: Facilities and Date Company 
1. Berth/dock/pad 2. Current use 3. Size 4. Capacity 
Section 2: Merchant orderbook and date 
5. Berth No 
10. Total new orders .... 
11. Total completions 6. Ship No 7. Shiptype 
19 Number 
19 Number 8. CGT 
CGT 
CGT 9. Production Status 
Section 3: Shipbuilding employment and date 
12. By activity 
13. Merchant 
14. Offshore . 
15. Naval 
16. Repair 
17. Other 
18. Total 19. By occupation 
20. Manual 
21. Staff 
22. Total merchant 
23. Sub-contractors direct indirect total 
24. Total redundancies 
25. Total Recruitment 
26. Average hours per employee per annum 
27. Average overtime rate % p.a. 28. Average absenteeism rate % p.a. 
29. Total hours lost due to industrial disputes per annum 
Contact for enquiries Date 
Position Signature