98/353/EC: Commission Decision of 16 September 1997 on State aid for Gemeinnützige Abfallverwertung GmbH (notified under document number C (1997) 2903) (Only the German text is authentic) (Text with EEA relevance)
Date: 1997-09-16
Institutions: European Commission
Subjects: Germany, State aid, competition law, control of State aid, processing industry, waste recycling

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COMMISSION

COMMISSION DECISION

of 16 September 1997

on State aid for Gemeinn(cid:129)tzige Abfallverwertung GmbH

(notified under document number C (1997) 2903)

(Only the German text is authentic)

(Text with EEA relevance)

(98/353/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Community, and in particular the first subparagraph of
Article 93(2) thereof,

Having regard to the Agreement establishing the Euro-
pean Economic Area, and in particular Article 62(1)(a)
thereof,

Having given the parties concerned the opportunity to
submit their comments, in accordance with Article 93 of
the EC Treaty,

Whereas:

labour office, are given contracts of employment for a
limited period. The aim in employing them with GAV is
to train such persons and subsequently to reintegrate
them into the ‘normal' labour market. So as to be able to
perform this particular task of training and reintegrating
persons
facing special problems, GAV also employs
specialist staff (social workers, educational staff) to look
after them. From 1987 to 1995, GAV employed and
trained a total of 440 persons through the use of tem-
porary employment contracts. In 1993, GAV’s turnover
amounted to DEM 2,8 million, equivalent to 0,004 % of
the overall German market, whose total
turnover was
DEM 75 billion. GAV had a turnover of DEM 3,6 million
in 1994 and a turnover of DEM 4,1 million in 1995. The
company’s balance sheet total was DEM 4,7 million in
1995.

I

the EC Treaty against aid for

On 15 December 1995, in response to several complaints,
the Commission initiated proceedings pursuant to Article
93(2) of
the Aachen
company Gemeinn(cid:129)tzige Abfallverwertung GmbH (GAV).
GAV is a non-profit-seeking enterprise operated by
Sozialwerk Aachener Christen eV. It operates on the waste
the Germany dual
disposal market, where, as part of
system (Duales System Deutschland (cid:190) DSD), it collects
and sorts recyclable waste and sells it as secondary raw
materials. GAV competes in this sector with profit-
seeking private firms. They consider
that GAV has
displayed aggressive market behaviour, which is why they
lodged complaints with the Commission.

GAV normally employs between 40 and 60 persons, 25 %
of whom are handicapped and 50 % of whom are long-
term unemployed persons who are difficult to place in
employment. These ‘problem' categories, who are not
selected by GAV itself but by the local social services and

Until 1992, GAV performed the collection of recyclable
waste (which at that time was a purely municpal function)
solely for the city of Aachen and received from the city an
amount to offset the costs involved in performing this
activity. Since GAV was running up substantial deficits,
the city of Aachen decided to integrate it into the new
municipal waste-disposal plan. The city of Aachen’s
decision was based on the conclusions and recommenda-
tions of an independent consultant whose job it was to
submit annual reports to the city of Aachen on GAV’s
economic situation and, if necessary, recommendations
for improving its viability and hence reducing the finan-
cial support for GAV provided by the city of Aachen. The
consultant’s report for 1992 recommended that GAV’s
activities should be integrated in the German dual system
(DSD), which is a non-State-assisted private-sector system
for the collection of packaging waste and is based on an

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agreement between a large number of commercial firms
which are in competition with one another. GAV was
obliged to collect, sort and market all recyclable waste in
the city of Aachen. Since the owner of the sorting-depot
originally leased by GAV had given notice to terminate
the lease, GAV undertook, with a view to performing this
activity, to build a new sorting-depot on a site belonging
to the city of Aachen, to which it acquired the leasehold.
The annual lease currently amounts to DEM 118 000.

Since, because of its precarious financial situation, GAV
was not in a position to finance the new sorting-depot
entirely from its own resources (the total capital costs
amounted to some DEM 4 million), it received an ad hoc
government.
subsidy
from the Cologne municipal
According to its administrative decision, however,
the
subsidy was granted with the proviso that the firm should
use the building only for the sorting of recyclable waste
and that
it should continue to employ disadvantaged
people for at least 25 years. If that condition was not met,
GAV would have to repay the subsidy immediately.

In addition, GAV received from the city of Aachen
annual subsidies for measures connected with work moti-
vation. According to the agreement between the city of
Aachen and GAV, the financial contribution consisted of
a payment of up to DEM 240 000 in 1992, plus a subsidy
that would be necessary in order to fully cover the lease.
For 1993,
the total payments
including a lease subsidy should not exceed DEM
240 000. The agreement provided that, as from 1994, the
subsidies would decrease to a level amounting to no more
than the annual lease. In accordance with the agreement,
GAV received the following amounts from the city of
Aachen:

it was provided that

GAV’s competitors, who had lodged complaints with the
Commission, simultaneously applied to German adminis-
trative courts for interim legal protection against
the
decision of
to subsidise the
the Cologne government
construction of the new sorting-depot. They based their
applications on an alleged infringement of German
competition law and of Articles 92 and 93 of the EC
Treaty. They therefore attempted to persuade two admin-
istrative courts to impose an immediate halt on the
payments, but were turned down by both courts. Both
courts held that the competitors, in contrast to GAV, were
achieving large profits and that, if interlocutory decisions
were given in favour of the competitors, GAV would have
to declare itself bankrupt. Furthermore, both courts
harboured doubts that the measures to assist GAV were
‘aid' within the meaning of Article 92 of the EC Treaty.
Lastly, they held that the competitors had been unable to
prove any aggressive market behaviour.

In assessing the financial support for GAV, the Commis-
sion came to the conclusion that the measures were indi-
vidually notifiable aid within the meaning of Article 92(1)
of the EC Treaty. In addition, it doubted that the criteria
for applying the derogations in Article 92(2) and (3) of the
EC Treaty were met. It
therefore decided to initiate
proceedings.

II

By letter dated 2 April 1996, the German authorities
submitted their comments on the Commission’s decision
to initiate proceedings pursuant to Article 93(2) of the EC
Treaty in respect of the aid for GAV.

1992

1993

1994

DEM 244 968

DEM 179 243

DEM 59 621.

In that letter, they reiterated their view that the measures
did not constitute State aid, since 75 % of GAV’s activi-
ties related to the collection of household waste. They
pointed out that the Commission had taken the view that
incentives for such collections did not constitute State aid
so long as the secondary raw materials were sold at market
prices.

Although they were not based on any approved aid
schemes, neither the subsidy for the building of the new
sorting-depot nor the payments by the city of Aachen
were notified to the Commission, as both the Aachen and
the Cologne authorities took the view that no State aid
within the meaning of Article 92(1) of the EC Treaty was
involved. They based this view on two arguments. Firstly,
they argued that GAV was not a profit-seeking enterprise,
but an undertaking of public utility. Secondly, the money
made available to GAV served only to offset additional
costs imposed by the employment, training and support
of young unemployed people and the disadvantaged. The
authorities did concede that GAV was in competition
with other firms. However, they said that they monitored
GAV and had not identified any aggressive market beha-
viour on its part.

In addition, in their view, the payments to GAV were not
aid, since GAV was not a profit-seeking enterprise and,
this status, could not be compared with
because of
‘normal' enterprises operating on the same market.

In this connection, they pointed out once again that
GAV’s main purpose was not to operate on the waste-
recycling market in competition with other firms, but to
train disadvantaged persons. Such persons, who would
otherwise be excluded from the ‘normal' labour market,
could be much more easily integrated into that market at
the end of their temporary contract with GAV and con-
sequently did not need any further financial support from

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the State. The annual subsidies from the city of Aachen
merely offset the additional costs which GAV incurred as
a result of its special status as a non-profit-seeking firm
and its objective of training disadvantaged persons.

Essen, since GAV’s activities were without exception
intended to promote the integration or reintegration of
disadvantaged persons into the labour market and GAV
would not be able to pursue those activities without finan-
cial support from the public authorities.

The German authorities also emphasised that steps had
been taken to ensure that the annual subsidies did not
enable GAV to undercut prices for final products. The
agreement between the city of Aachen and GAV provided
that, before each payment by the city, checks were to be
carried out at various levels by mutually independent
auditors. The subsidies were granted each year on condi-
tion that:

(cid:190) GAV employed an independant auditor to report
continuously on the firm’s financial prospects,

(cid:190) the municipal auditing office had permanent access to
the firm’s balance sheets and could carry out effective
checks,

(cid:190) the Youth Assistance Committee of

the city of
Aachen received regular reports on GAV’s economic
situation and the use made of the subsidies received.

These checks carried out before each payment ruled out
any possibility that GAV could abuse its position and
behave aggressively on the market.

As regards the investment subsidy of DEM 2,7 million
from the Cologne administration for the construction of
the new sorting-depot, the German authorities pointed
out that the construction of this building had become
necessary not only because the owner of the old, leased
building had given notice to terminate the lease, but also
because the old building did not meet the requirements
in
of German environmental protection legislation,
particular the rules on air and water pollution and the
prevention of noise. Since the old building did not meet
these environmental requirements, official authorisation
for GAV to carry out its activites there had always been
provisional and limited in time. The move to a new
sorting-depot was therefore necessary for the continued
existence of the firm, which, however, was unable to
finance the building from its own resources because of its
the
difficult
German authorities reiterated that the granting of the
investment
administrative
decision, subject
to the proviso that GAV used the
building solely for the sorting of recyclable waste and
continued to employ disadvantaged persons for at least 25
years. If it failed to meet this condition, GAV had to repay
the subsidy immediately.

subsidy was, under

In this connection,

situation.

financial

the

Lastly, the German authorities argued that all the meas-
ures in support of GAV were in line with the fifth recom-
mendation of the European Council at its meeting in

III

By letter dated 10 July 1996, the Commission communi-
cated to Germany the comments submitted by interested
parties in response to the notice on initiation of proceed-
ings (1), namely comments from a lawyer representing a
regional competitor in Germany and from the German
association ‘Sekund(cid:132)rrohstoffe und Entsorgung' (second-
ary raw materials and disposal). The lawyer representing
the German regional competitor expressly agreed with the
Commission’s view that the measures in support of GAV
were to be regarded as aid within the meaning of Article
92(1) of the EC Treaty. In his view, none of the excep-
tions provided for in Article 92(2) and (3) of the EC Treaty
were applicable. Consequently, the aid had to be recov-
ered.

As far as the annual payments by the city of Aachen were
concerned, the lawyer acknowledged that, because of its
special status, GAV had to bear higher costs than a
normal firm, so that some compensation for these extra
costs might be justified. However, the payments made by
the city of Aachen went beyond mere compensation and
enabled GAV to use the funds for its business and to act
aggressively on the market. In such circumstances his
client, who received no aid, was no longer competitive
and was losing his customers. In this connection, the
lawyer also denied emphatically that
the municipal
authorities in Aachen were carrying out an effective
monitoring of GAV’s pricing policy.

regards

the investment

As
subsidy provided by the
Cologne government, the lawyer doubted that there was
any connection between such payment and the offsetting
of the additional costs incurred by GAV. On the contrary,
the construction of the new building actually allowed
GAV to expand its activities and hence to step up the
competition with other firms in the recycling sector that
did not receive any public funds. Consequently,
the
support provided for the construction of the new sorting-
depot also resulted in an unacceptable distortion of
competition.

The German association ‘Sekund(cid:132)rrohstoffe und Entsor-
gung' shared the lawyer’s opinion that
the payments
made by the city of Aachen overcompensated for the
economic disadvantages of GAV. The association also
disputed any connection between the investment subsidy
provided by the Cologne government and the ad-

(1) OJ C 144, 16. 5. 1996, p. 9.

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ditional costs to be borne by GAV. GAV had received
more public money than was required to offset its disad-
vantages and had thereby been enabled to act agressively
on the market and to distort competition. Such conduct
was not justified under the Community rules on State aid.
Consequently, the aid must be recovered.

IV

By letter dated 29 August 1996, Germany sent its reply to
the comments submitted by interested third parties. At
the Commission’s specific request, made in a letter dated
28 October 1996 and at a meeting held on 15 April 1997,
the reply was supplemented by two letters dated 11
December 1996 and 7 July 1997. Numerous annexes
were attached to these letters in order to substantiate
GAVS’s special status, its pricing policy and the moni-
toring carried out by the authorities, and also the need for
State support for the building of the sorting-depot.

The company’s balance sheets for the period from 1990
to 1995 indicated that, while the firm had equity capital
of DEM 350 000 in 1990, this contrasted with a loss
carryover of DEM 370 000. This
loss carryover was
reduced over the reporting period as a result of modest
annual profits, but still amounted to DEM 42 400 at the
end of 1995.

charged by GAV between February 1994 and January
1996. The figures contained in this report showed that
GAV had not at any time undercut the prices determined
by EUWID. Extracts from contracts between GAV and
some of its customers were also submitted to the Comis-
sion, and these confirmed the conclusions of the consul-
tant, since it had consistently been agreed that the prices
for each delivery of recycled paper would be based on the
EUWID price index valid at such time.

A copy of the framework agreement between the city of
Aachen and GAV governing their respective tasks and
obligations showed that each payment by the city of
Aachen had to be preceded by checks carried out at
levels by mutually independent auditors. The
several
minutes of
the Youth Assistance Committee meeting
held on 3 September 1991, which was presented as an
example of the carrying-out of the checks, confirmed that
such a check had in fact been carried out and that the
firm had presented all economic data in accordance with
the framework agreement.

The copies of two administrative decisions taken on 24
February and 3 September 1993 in which GAV was
exceptionally and provisionally authorised to continue its
activities in the old sorting-depot pending the construc-
tion of the new building confirmed that production in the
old building did not comply with German environmental
protection rules (in particular, those governing air pollu-
tion and the prevention of noise). A copy of the notice
served on 27 December 1994 showed that the owner of
the old building wished to terminate the lease at the end
of 1995 and was not prepared to extend the leasing agree-
ment beyond then.

A detailed list of names showed that from 1987 to 1995,
440 persons had been employed and trained on a tem-
porary basis by GAV.

V

A report drawn up in November 1994 by an independent
consultant contained, amongst other things, a comparison
between the public funds received and the extra costs
which GAV incurred as a result of the employment and
training of disadvantaged persons in the period from 1991
to 1995. The comparison showed that the amount of
public funds exceeded the economic disadvantages of
GAV in 1991 (cid:190) the last year in which GAV had been
exclusively active in waste disposal for the city of Aachen
and had thus performed an exclusively municipal func-
tion (cid:190) by DEM 700 000, but that this excess was contin-
ually reduced to the point where, in 1994, the economic
disadvantages exceeded the public allocations by DEM
124 000. For 1995,
the
economic disadvantages would be DEM 393 000 higher
than the public allocations.

it was even estimated that

A further report drawn up in March 1996 by an indepen-
dent consultant contained a comparison between the
average prices for recycled paper calculated monthly by
the independent market research company Europ(cid:132)ischer
and the prices
Wirtschaftsdienst GmbH (EUWID)

In the course of the Article 93(2) proceedings, the view
taken by the Commission in initiating the proceedings
that the measures taken by the city of Aachen and by the
Cologne government were to be regarded as State aid
within the meaning of Article 92(1) of the EC Treaty
became more firmly established.

As was explained above, GAV received payments from the
public authorities totalling DEM 3 183 832,
including
DEM 2,7 million in the form of an investment subsidy in
1992 and DEM 483 832 in the form of annual subsidies
in the period 1992, 1993 and 1994 (in the agreement
between the city of Aachen and GAV, such subsidies were
no longer provided as from 1995).

The classification of such payments as aid within the
meaning of Article 92(1) of the EC Treaty is not to be
ruled out simply because GAV collects household waste.
The Commission has in the past stated (answer to Written
Question No 2057/92) (1) that incentives for such collec-
tions do not constitute State aid so long as the secondary
raw materials are sold at market prices. Germany has
emphasised to the Commission, and has substantiated

(1) OJ C 47, 18. 2. 1993, p. 14.

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a

large number of

through reports, that at least 75 % of GAV’s activities
relate to the collection of household waste. However, it
was not demonstrated that GAV thereby performs a task
which, under German law, is normally the responsibility
of the municipalities or that no competition is involved
here. Rather, since the introduction of the dual system,
the collection, sorting and marketing of recyclable waste
system
has been a private-sector activity. The dual
involves
in
competition with one another. It is entirely possible that
this may involve cross-border competition, particularly if
the assisted firm is located not far from the frontier with
other Member States. Consequently, payments to such
firms may amount to aid that distorts competition within
the EC Treaty and
the meaning of Article 92(1) of
adversely affects trade between Member States. It must
also be noted that the payments to GAV were not granted
as an incentive for the separate collection of recyclable
waste but to support the employment by GAV of unem-
ployed persons who are difficult to place in employment.

firms which are

In addition, the fact that GAV is owned by Sozialwerk
Aachener Christen eV and, like its owners, is not profit-
seeking, is not relevant to assessing the effects of the aid
on trade and competition so long as GAV is competing
on the waste market with profit-seeking firms. The argu-
ment that the aid merely offsets additional costs does not
alter the fact that it is aid, though this point should be
taken into account in assessing whether the aid is eligible
for any of the derogations provided for in Article 92(3) of
the EC Treaty.

Neither the investment subsidy of DEM 2,7 million nor
the annual subsidies which GAV received from 1992 to
1994 was notified in advance in accordance with Article
93(3) of the EC Treaty, even though they were not based
on any approved aid schemes. The aid was thus granted
unlawfully.

However, both the investment subsidy and the annual
subsidies could be eligible for one of the exemptions
provided for in Article 92 of the EC Treaty and Article 61
of the EEA Agreement.

The derogations provided for in Article 92(2) of the EC
Treaty are not applicable in this case, given the character-
istics of the aid and the fact that it does not meet the
conditions that would allow the derogations to be applied.

Furthermore, it should be pointed out that the city of
Aachen is not situated in an area eligible for regional aid
pursuant to Article 92(3)(a) or (c) of the EC Treaty.

However, in view both of the social aspect of the annual
subsidies that were paid in order to enable GAV to recruit
and train disadvantaged persons and the importance of

the new sorting-depot (built as part of the implementa-
tion of a restructuring plan) to the continuation of GAV’s
social activities and the fact that the aid was not misued
for the purposes of aggressive market behaviour,
the
Commission concludes that trading conditions are not
adversely affected to an extent contrary to the common
interest. For these reasons and having regard to the
following considerations
relating to the Community
guidelines on aid to employment (1) and the Community
guidelines on State aid for rescuing and restructuring
firms in difficulty (2), the Commission concludes that the
aid is covered by the derogation provided for in Article
92(3)(c) of the EC Treaty and can be approved as aid to
facilitate the development of certain economic activities.

The annual
(payments now suspended)

subsidies

totalling DEM 0,48 million

It must be borne in mind here that although, as a firm
in
operating in the waste recycling sector, GAV is
competition with other firms, its role goes beyond such
economic activities. The firm is required to employ
handicapped persons and the long-term unemployed for
a limited period and to train them. This benefits such
persons in two ways. First, they have a job for a certain
period at least, and second, the special training provided
by GAV may increase their prospects of finding employ-
ment on the ‘normal' labour market, from which they
would perhaps
been permanently
excluded. GAV’s activity is thus in line with the recom-
mendations of the European Council at its meeting in
Cannes, which called for priority to be given to the
strengtening of measures to promote the employment of
disadvantaged groups such as the long-term unemployed,
young people and older employees.

otherwise have

Nor, moreover, are GAV’s activities in conflict with the
Community guidelines on aid to employment, point 13
of which expressly states that ‘the Commission has tradi-
tionally been sympathetic to employment aid, particularly
where it is entended to encourage firms to create jobs or
to hire individuals who face particular difficulties in
finding work'. The annual subsidies which GAV received
from 1992 to 1994 were in fact intended to induce it to
recruit disadvantaged rather than ‘normal'
job seekers;
however, since it is in any case obliged, under its articles
of association, to employ such persons, the abovemen-
tioned provision may not be applicable to the annual
subsidies. In addition, the annual subsidies do not directly
contribute to the creation of long-term jobs for such
persons. However, as may be deduced from point 21

(1) OJ C 334, 12. 12. 1995, p. 4.
(2) OJ C 368, 23. 12. 1994, p. 12.

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of the guidelines, in the case of the employment of disad-
vantaged persons, the requirement of long-term employ-
ment and net job creation is not essential if the temporary
recruitment (cid:190) as in the case of GAV (cid:190) is voluntarily
terminated; the main reason for the provision in point 13
is to ensure that a firm regularly employing disadvantaged
persons on the basis of temporary work contracts does not
then dismiss them when the temporary work contract has
expired, only to recruit further disadvantaged persons, for
a limited period once again, with the help of further aid.
Such conduct would be a clear abuse of employment aid
and, rather than helping to create jobs for disadvantaged
persons, would merely provide operating aid for the rele-
vant firm. As already explained, as regards GAV’s activi-
ties, any such risk is excluded by its objective of helping
to overcome the employment problems of disadvantaged
persons (440 such persons were in fact recruited and
trained between 1987 and 1995). GAV’s activities can,
therefore, quite readily be regarded as being compatible
with the Community guidelines on aid to employment.

Furthermore, there is no evidence whatsoever that GAV
might misuse the aid in order to undercut prices. The
German authorities have shown unequivocally that such
conduct is out of the question thanks to the procedure for
monitoring GAV’s activities. The agreement between the
city of Aachen and GAV provides for use of the aid to be
supervised by the Youth Office, an independent adviser
and the Audit Office. The documents presented by
Germany show that these checks actuallly take place.

Moreover, the report drawn up in November 1994 by an
independent consultant shows that the amount of the
annual subsidies was not only limited, but also decreased
from year to year to the point where the economic disad-
vantages incurred by GAV as a result of its special social
task were actually DEM 124 000 higher than the public
funds which it had received by way of compensation.
Furthermore, the two reports drawn up by independent
consultants in November 1994 and March 1996 and
passed on to the Commission show clearly that GAV’s
prices were not below the average market prices, but in
most cases actually exceeded them.

the social effects of

the aid, which was
In view of
supposed to enable GAV to perform its special social
tasks, and the fact that the aid was not misused for the
purposes of persuing aggressive market behaviour, it can
be assumed that
trading conditions are not adversely
affected to an extent contrary to the common interest and
that the derogation provided for in Article 92(3)(c) of the
EC Treaty can be applied to the annual subsidies.

was not intended directly to offset the additional social
costs which GAV incurred as a result of its particular task
of employing and training disadvantaged persons.

However, in the course of the Article 93(2) proceedings, it
emerged that there are a whole series of grounds for
granting the subsidy, including the successful implemen-
tation of the decision by the city of Aachen to integrate
GAV into the city’s new waste removal system in order to
reduce GAV’s annual deficits, and thus to enable it to
continue to carry out its social activities. The investment
subsidy could therefore be authorised under the deroga-
tion provided for in Article 92(3)(c) of the EC Treaty in
conjunction with the Community guidelines on State aid
for rescuing and restructuring firms in difficulty, on
condition, however, that the conditions laid down in the
guidelines are met in the case of GAV.

declared

circumstances

In 1992, GAV could certainly be regarded as a firm in
difficulties within the meaning of the guidelines, since at
that time it was overloaded with debt and should in
normal
bankruptcy.
have
According to its 1992 balance sheet, its loss carryover was
DEM 20 000 higher than its equity capital, and it has no
other assets to offer as securities. In such a situation, no
private bank would have granted GAV a loan that would
have enabled it
the
building and thus continue to perform its social activities
the employment and training of disad-
consisting of
vantaged persons.

to finance the construction of

The construction of the new building was urgently neces-
sary in order to integrate GAV into the German dual
system, a plan which had been proposed by an indepen-
dent consultant and approved by the city of Aachen in
order to cut back the enormous deficits which the firm
had built up when it was still operating exclusively within
the ambit of
the city of Aachen’s municipal waste
removal.

The consolidated annual accounts presented to the
Commission show that the goal of reducing GAV’s defi-
cits and thus improving its viability was achieved. The
firm’s loss carryover, which in 1992 had amounted to
DEM 370 000, was reduced to DEM 42 400 as a result of
modest annual profits.

The investment subsidy

As regards the investment subsidy of DEM 2,7 million
granted in 1992 for the construction of a new sorting-
depot, it should be noted at the outset that the subsidy

Furthermore,
it became clear during the Article 93(2)
proceedings that the financial support for building the
new sorting-depot provided by the public authorities was
implementing the new
an essential precondition for
policy of integrating the firm into the waste disposal
system of the city of Aachen and hence for consulting its
social activities.

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3. 6. 98

The old sorting-depot had only been leased, and the
owner had given notice to terminate the lease. Con-
sequently, GAV would have had to cease business if the
new depot had not been built.

The German authorities have also pointed out that the
building of the new sorting-depot was necessary in order
to bring GAV’s activities into line with German environ-
mental protection provisions, particularly those on air and
water pollution and the prevention of noise. Since
production in the old building did not meet the require-
ments of these provisions, the administrative decisions
authorising GAV to perform its activities in the old
building were only provisional and temporary. The stand-
ards incorporated into the new building actually go
beyond those laid down in the provisions.

Moreover, it is clear from the administrative decision of
the Cologne government that there was a close connec-
tion between the granting of the investment subsidy and
GAV’s social activities; the granting of the investment
subsidy was made subject
to the proviso that GAV
continue to employ disadvantaged persons for at least 25
years. Otherwise it will have to repay the subsidy.

Furthermore, as regards its balance sheet, turnover and its
workforce ranging between 40 and 60 persons, GAV is
very similar to a small enterprise within the meaning of
the Community guidelines on State aid for small and
medium-sized enterprises. In addition, GAV’s share of the
German market for recyclable waste in 1993 amounted to
only 0,004 % and consequently to a much smaller share
of the total Community market.

Nor should it be forgotten that GAV itself contributed
substantially to the construction of the sorting-depot and
hence to the restructuring of its activities by providing
DEM 1,3 million from its own resources for the invest-
ment amounting in total to DEM 4 million.

Lastly, it must be borne in mind that the German author-
ities have demonstrated that GAV has not behaved
aggressively on the market and has therefore not misused
for such purposes the aid which it has received.

In view of these arguments and in particular the impor-
tance of the new building for the continuation of GAV’s
social tasks, it can be concluded that trading conditions
are not adversely affected to an extent contrary to the
common interest and that the derogation provided for in
Article 92(3)(c) of the EC Treaty in conjunction with the
Community guidelines on State aid for rescuing and
restructuring firms in difficulty can be applied to the
investment subsidy provided by the Cologne government
administrative division.

VI

Since GAV has only a limited market share and has
demonstrably not engaged in any aggressive market
behaviour, and since the abovementioned arguments in
the aid outweigh any disadvantges for the
favour of
common market, the aid for GAV can be approved. In
addition, if the Commission were to reject the aid, this
would contradict its own policy of promoting employ-
ment possibilities for disadvantaged persons. However,
approval of the aid must be made subject to the condition
that Germany continue to carry out appropriate measures
to monitor GAV’s market behaviour and in particular its
pricing policy,

HAS ADOPTED THIS DECISION:

Article 1

The annual subsidies totalling DEM 0,48 million in the
period from 1992 to 1994 and the investment subsidy of
DEM 2,7 million which were granted to Gemeinn(cid:129)tzige
Abfallverwertung GmbH (GAV) by the city of Aachen
and by the Cologne government administrative district
are unlawful aid pursuant to Article 93(3) of the EC
Treaty, since they were not notified to the Commission in
advance.

to carry out

The aid referred to in the first paragraph is compatible
with the common market on condition that Germany
continues
to
monitor GAV’s market behaviour and in particular its
pricing policy, and that the aid is intended to facilitate
the development of certain economic activities and does
not adversely affect
to an extent
contrary to the common interest.

the appropriate measures

trading conditions

Article 2

Germany shall
inform the Commission, within two
months of being notified of this Decision, of the meas-
ures taken to comply with it.

Article 3

This Decision is addressed to the Federal Republic of
Germany.

Done at Brussels, 16 September 1997.

For the Commission

Karel VAN MIERT

Member of the Commission