WRITTEN QUESTION E-0375/03

by José Ribeiro e Castro (UEN) to the Commission

(13 February 2003)

Subject: Closure of Clarks factory in Portugal and Community funds

The announcement of the forthcoming closure of a shoe factory belonging to the British multinational C & J Clark, in Castelo de Paiva in northern Portugal, has received widespread coverage in the Portuguese media. This unexpected closure will make almost 600 workers redundant, with extremely severe repercussions on the social level for the households of those who live and work in the municipality (which is, furthermore, located in a region classified as Objective 1 under the Structural Funds).

This footwear multinational received substantial amounts from both national and Community funds in connection with the establishment of this factory in 1988 and its operations in Castelo de Paiva. According to the Portuguese Ministry of the Economy, in 1989 C & J Clark concluded an investment contract with the Portuguese state to the value of PTE 1 billion (ca EUR 5 million), while also receiving PTE 121 million (ca EUR 600 000) under the First Community Support Framework, in return for an undertaking to create 618 jobs. In addition, in 2000 the company signed a protocol with the municipal council of Castelo de Paiva granting it certain privileges in return for committing itself to continuing its operations in the municipality up to at least 2007.

In 2001, the same company closed down a plant having similar characteristics in Arouca, a municipality near Castelo de Paiva, making some 400 workers redundant.

Has the Commission taken any action against C & J Clark in the wake of the adverse social and economic effects of the closure of its factories in Arouca and, now, Castelo de Paiva? Is the Commission in possession of any data which would entitle it to consider this company's business practices as fraudulent, given the fact that, despite having received Community funding (whether directly or indirectly, be it on an exclusive basis or in conjunction with other forms of national aid), it has gone on to close the factory or factories concerned, even before the deadlines agreed when the aids or financial incentives were granted? Should the Commission not possess such data, does it not consider it essential in the future to fight and punish business practices which are damaging, not only to important social and economic interests but also to the EU's own financial interests?

Joint answerto Written Questions E-0374/03, E-0375/03, E-0377/03 and E-0378/03given by Mrs Diamantopoulou on behalf of the Commission

(28 March 2003)

In relation to the period covered by the Community support frameworks 2000-2006, the rules in force regarding the Structural Funds provide for the following measures:

- first, in the Guidelines on national regional aid (1998), the Commission stipulated provisions which oblige recipients to maintain any investment or job arising from such aid in the assisted region for a period of five years.

In the Commission's view, the five-year period stipulated in points 4.10 and 4.14 of the guidelines for maintenance of the investment begins when the investment for which the aid has been granted is completed, i.e. from the moment when the investment is used in the undertaking(1);

- second, along the same lines, the general Regulation on the Structural Funds (1999) provides that productive activities retain the contribution from the Funds only if the location of these activities does not change in the five years following the decision to award the contribution(2);

- third, for a major project (i.e. over EUR 50 million) to receive cofinancing under a European Regional Development Fund programme, a specific request must be submitted to the Commission, and the Member States must complete a questionnaire containing a question on the possibility of it giving rise to a relocation. This aspect is taken into account by the Commission in deciding on the level of ERDF cofinancing (up to 35 % in the Objective 1 regions) which may be awarded, if any.

In relation to the period covered by the Community support frameworks 1994-1999, the five-year rule did not enter into force until 1998, but Regulation (EEC) 2082/93(3) applied as of 1993, and Article 24 of this Regulation provides for reduction or cancellation of the assistance where the measure carried out does not justify the assistance. The Commission must examine this within its partnership with the Member State.

In any case, in the event of aid being used illegally, it is primarily up to the Member State to undertake legal action based on the agreements made with the undertaking when the aid was awarded. Therefore, if the undertaking which received the aid has not complied with Community rules on State aid, it is primarily up to the Member State to ensure that the authorities which granted the aid are reimbursed. Moreover, if the aid if cofinanced by the Structural Funds, the Member State is required to repay the corresponding amount to the Community budget.

(1) Guidelines on national regional aid:http://europa.eu.int/eur-lex/pri/en/oj/dat/1998/c_074/c_07419980310en00090031.pdf. These guidelines apply as of the date of publication in the Official Journal OJ C 74, 10.3.1998. 4.10. Aid for initial investment must be made conditional, through its method of payment or through the conditions associated with its acquisition, on the maintenance of the investment in question for a minimum period of five years.

(2) Council Regulation (EC) No 1260/1999 of 21 June 1999 laying down general provisions on the Structural Funds, Article 30(4)(b) OJ L 161, 26.6.1999 http://europa.eu.int/comm/regional_policy/sources/docoffic/official/regulation/pdf/l_16119990626en00010042.pdf 4. The Member States shall ensure that an operation retains the contribution from the Funds only if that operation does not, within five years of the date of the decision of the competent national authorities or the managing authority on the contribution of the Funds, undergo a substantial modification: (a) affecting ; and (b) resulting either from a change in the nature of ownership in an item of infrastructure or a cessation or change of location in a productive activity.

(3) Council Regulation (EEC) No 2082/93 of 20 July 1993 amending Regulation (EEC) No 4253/88 laying down provisions for implementing Regulation (EEC) No 2052/88 as regards coordination of the activities of the different Structural Funds between themselves and with the operations of the European Investment Bank and the other existing financial instruments OJ L 193, 31.7.1993.