WRITTEN QUESTION E-0006/98 by Alexandros Alavanos (GUE/NGL) to the Commission (29 January 1998)

Subject: Repayment of subsidies for investment in Portugal

The Portuguese press reports that the Cap Verde company received large amounts of subsidies from Portugal and the EU for investment in fruit and vegetable growing in the Alentejo region of Portugal.

'Odefruta', a company set up in Odemira to implement the EU-funded investment programme, went bankrupt in 1993, leaving behind huge debts and unpaid producers and having caused considerable environmental damage.

As it is Community practice to stipulate that any enterprise in receipt of EU funding must return the subsidies it has received in the event of going out of business, will the Commission say:

1. whether there has been a Community investigation into Odefruta and what its findings are,

2. whether corresponding national or Community stipulations were made in Odefruta's case,

3. whether proceedings have been initiated to recover the subsidies paid to Odefruta, and

4. what measures it has taken to avoid subsidizing companies in future without adequately satisfying itself of the viability of the enterprise and the sound management of the subsidies?

Answer given by Mr Fischler on behalf of the Commission (27 February 1998)

By decision of 21 November 1991 the Commission approved the operational programme to develop the Mira basin (Alentejo, Portugal), where the Odefruta company project referred to by the Honourable Member is located.

In accordance with the subsidiarity principle, the Commission is not involved in the subsequent approval of individual projects financed under such programmes.

It should also be pointed out that 'Cap Verde' is not a company, but rather the trade mark borne by Odefruta's products.

The Commission is able to provide the following information in answer to the questions raised:

1. No Community investigation into Odefruta has been undertaken.

However, on learning that the project's economic viability was at risk, the Commission wrote to the national authorities in September 1993 requesting a detailed explanation. A second letter was sent in May 1994, and the Portuguese authorities continued to keep the Commission abreast of developments.

The Odemira Court of Justice declared the company bankrupt in September 1994.

The national authorities initiated proceedings to recover the aid paid, and informed the Commission accordingly.

2. At both Community and national level, subsidies are granted on the understanding that the contracting parties must comply with the rules laid down and that failure to do so by the recipient will give rise to recovery of the aid. Article 23(1) of 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. )) stipulates that Member States are to take the necessary measures to verify that operations financed by the Community have been properly carried out, to prevent and to take action against irregularities, and to recover any amounts lost as a result of an irregularity or negligence.

3. In this instance, the Member State must initiate proceedings - which it has done. Moreover, the Commission has not yet paid the final balance of the operational programme under which the project was financed.

4. Without prejudice to checks carried out by Member States, the Commission may carry out on-the-spot checks, including sample checks, in respect of operations financed by the Structural Funds and management and control systems.

In view of the number of projects financed jointly under each programme (several thousand), it is quite obvious that the Commission cannot check whether each individual project is running smoothly; this is, in any case, first and foremost the Member States' responsibility.

However, the rules governing expenditure administered directly by the Commission have been improved so as to ensure more targeted monitoring of the resources' path to the recipient.