98/194/EC: Commission Decision of 1 October 1997 concerning the extension of the 8 % investment premium for investment projects in the new Länder pursuant to the Finance Law 1996 (Only the German text is authentic) (Text with EEA relevance)
Date: 1997-10-01
Institutions: European Commission
Subjects: German Democratic Republic, Germany, State aid, investment aid, tax system, type of business

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Official Journal of the European Communities

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COMMISSION

COMMISSION DECISION

of 1 October 1997

concerning the extension of the 8 % investment premium for investment
projects in the new L(cid:132)nder pursuant to the Finance Law 1996

(Only the German text is authentic)

(Text with EEA relevance)

(98/194/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Community, and in particular to Articles 92 and 93
thereof,

Having given the other Member States and interested
parties, pursuant to Article 93(2) of the EC Treaty, a
period in which to submit their comments,

Having regard to the comments submitted,

Whereas:

Article 3 of the Investment Premium Law 1993 (InvZulG)
was amended by Article 18(1) of the Finance Law 1996 (2)
to the effect that the 8 % premium is now granted to
investments which were begun after 31 December 1992
but before 1 July 1994 and which will be concluded
before 1 January 1999. This extended the time-limit for
the implementation of assisted investment projects by two
years, but did not change the provisions governing the
start of the investment. The Finance Law 1996 came into
force on 1 January 1996. By letter dated 17 November
the Federal Ministry of Finance informed the
1995,
L(cid:132)nder tax authorities that the said provision must not be
applied before the Commission has approved the aid
pursuant to Articles 92 and 93 of the EC Treaty. The
letter was published in the Federal Tax Gazette (Bundes-
steuerblatt) 1996, Series I, No 1.

I

II

By decision dated 11 November 1992 (1), the Commission
authorized an 8 % investment premium for investment
projects in the new L(cid:132)nder begun before 1 July 1994 and
completed before the end of 1996. The aid intensity of
8 % gross (approximately 5,2 % net) relates exclusively to
the cost of acquiring assets for fixed investment.

The investment premium is granted direct by Federal law,
so that every undertaking which fulfils the statutory
requirements can claim the premium without the author-
ities having to take a discretionary decision. The premium
consists of a reduction of corporation tax and can result in
a negative tax claim by the State, so that instead of a tax
reduction the recipient undertaking receives a sum of
money.

The Commission was informed of the amendment to the
Investment Premium Law in a communication dated 19
December 1995, i.e. six working days before the entry
into force of the Finance Law 1996; the amendment was
therefore registered as a non-notified aid (NN 6/96).

On 3 July 1996 the Commission decided, because the
period in which the 8 % investment premium may be
claimed was being extended, to initiate the procedure
under Article 93(2) of the EC Treaty. Its reason for so
doing was that the extension constituted additional State
aid for investment projects which were begun before 1
July 1994 and which will be completed in 1997 and

(1) State aid N 561/92, letter of 24 November 1992, ref. SG (92)

D/16623.

(2) BGBl. 1995, I-1250.

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1998, since no extra investment compared with the ori-
ginal situation was being promoted. The measure would
therefore not assist any new investment projects which
could contribute to the regional economic development
of the former GDR.

Consequently, the aid would only boost the equity of the
undertakings which before July 1994 had begun to invest
it would accordingly have to be
in the new L(cid:132)nder;
regarded as operating aid, which, as the Commission has
consistently held, is compatible with the common market
only if certain conditions are met and the aid serves
exclusively to assist the economic development of areas in
accordance with Article 92(3)(a) of the EC Treaty. The
Commission took the view, however, that the aid could
also stimulate economic development outside these
assisted areas, with the result
the question was
whether the aid could exceptionally be declared compat-
ible with the common market.

that

Germany was informed by letter dated 31 July 1996 (1) of
the initiation of the procedure and, like the other Member
States and interested parties, was invited by publication of
that
letter in the Official Journal of the European
Communities (2) to submit its comments.

Germany submitted its comments by letter dated 9
September 1996, and the French undertaking Elf Aqui-
taine SA (Elf) by letter dated 29 October 1996. On 30
October 1996, the French Government gave its views
making reference to Elf’s submission. It is clear from Elf’s
comments that the measure in question relates to invest-
ment by the Elf subsidiary Mitteldeutsche Erd(cid:148)l-Raffin-
erie (MIDER), which is building a new refinery at Leuna
in Saxony-Anhalt. As a result of unforeseen technical
is not res-
difficulties, which the undertaking says it
ponsible for, the investment has been delayed. Without
the proposed extension of the time-limit, the investment
premium for the entire project could not be claimed,
which would put MIDER at a considerable economic
disadvantage.

The letters from Elf and the French Government were
forwarded for comment
to the Federal Republic of
Germany by letter dated 26 November 1996.

Between December 1996 and July 1997 the matter was
discussed at
several meetings between the German
authorities and the Commission’s departments.

III

In Germany’s view, the extension of the time-limit for
investment projects
for which the 8 % investment
premium can be claimed is compatible with the common
market. The extension will avert a reduction of invest-

(1) SG(96) D/7034.
(2) OJ C 290, 3. 10. 1996, p. 8.

In this way,

ment aid for large projects where delays have occurred on
account of
in eastern
the particular circumstances
the equity of undertakings
Germany.
investing in the new L(cid:132)nder will be increased,
thus
contributing to their economic stability. According to
Germany, it is not known how many cases are affected by
the general extension of the time-limit for claiming the
investment premium. Basically, the extension applies to
all
investment projects which were begun after 31
December 1992 and before 1 July 1994 and which had
not been completed by the end of 1996.

In the MIDER/Leuna 2000 case, which the competent
authorities had in mind when they proposed the said
provision, the undertaking could not conclude the invest-
ment project in time by the end of 1996 on account of
unforeseeable technical and administrative problems for
which the undertaking could not be held responsible. The
total aid package for the Leuna 2000 refinery would have
than had been
been some DEM 360 million lower
accepted when
agreement was
concluded. For legal reasons, it was not possible to pass a
Federal law just for the MIDER case. The Federal Govern-
ment, however, declared its readiness to apply the Invest-
ment Premium Law as amended by the Finance Law
1996 to MIDER only and to notify individually any
further cases to which the amendment would apply.

privatisation

the

IV

The investment premium is State aid within the meaning
of Article 92(1) of the EC Treaty and Article 61(1) of the
EEA Agreement.

The extension of the time-limit for investment projects in
respect of which an 8 % premium can be requested from
2 1/2 to 4 years to 4 1/2 to 6 years constitutes additional
State aid.

How many investment projects might be covered by the
general extension of the time-limit is not known. Ba-
sically,
investment
projects which were begun after 31 December 1992 and
before 1 July 1994 and which had not been concluded by
the end of 1996.

the new time-limits apply to all

Undertakings which began investment projects between
January 1993 and June 1994 took their decision in the
full knowledge that projects which were not completed by
the end of 1996 either would not qualify at all for the
investment premium, since the finished part would not
be regarded as a complete but smaller than planned
investment, or, if the part completed in time is treated as
investment, albeit smaller than planned, would
a full
qualify only to a certain extent. The particular problems
which prevent
implementation of complex
investment projects on the territory of the former GDR,

the swift

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such as organisational difficulties of regional and local
authorities, possible environmental burdens and problems
arising from the rules on the restitution of immovable
property in the new L(cid:132)nder, were known and were the
subject of comprehensive discussions before July 1994.
Investment projects which were begun in the full know-
ledge that they could not be concluded in time and in
respect of which the investment premium cannot there-
fore be claimed would nevertheless now be eligible for
assistance, thus generating a windfall profit for undertak-
ings which had originally calculated their investment in
such a way that
it would have been profitable even
without such aid.

Undertakings which have taken investment decisions
regarding the 8 % investment premium without allowing
time for investment-related risks have accepted invest-
ment aid which turns out to be potentially lower than if
they had met the requirements laid down in the Invest-
ment Premium Law 1993, and despite those risks have
regarded their investment as profitable. The extension of
the time-limit does not generate any extra investment and
will probably have no effect on the termination of invest-
ment projects already begun.

Aid which does not stimulate any additional investment
cannot be regarded as investment aid. State aid which,
accordingly, constitutes only an additional payment that
should not have been taken into account or which,
according to the rules on regional
investment aid
applying at the time of the investment decision, was
uncertain is to be regarded as operating aid for increasing
the equity of the undertaking concerned, as was already
explained by Germany before the initiation of
the
procedure in its communication of 19 December 1995.

In its Communication on the method for the application
of Article 92(3)(a) and (c) of the EC Treaty to regional
aid (1),
the Commission explained that operating aid,
despite the fact that it is such as seriously to distort
competition, may exceptionally be regarded in assisted
areas as compatible with the common market in accord-
ance with Article 92(3)(a), if it is necessary for the main-
tenance of the operation of existing plant. These consid-
erations, however, do not apply to those undertakings
which would benefit from the measure in question. Such
undertakings decided before July 1994, with regard to the
regional investment aid available under the law applicable
at the time, to invest in the new L(cid:132)nder. Their invest-
ments were calculated in such a way that they would be
achievable and show a steady profit without operating aid.
There are therefore no extraordinary circumstances which

(1) OJ C 212, 12. 8. 1988, p. 2.

would justify de facto operating aid in the form of an
extension of the time-limit for claiming the 8 % invest-
ment premium as a contribution to the regional develop-
ment of the disadvantaged regions.

This de facto operating aid would, moreover, not only
stimulate the economy in eastern Germany. Undertakings
which meet the conditions may also maintain plant else-
where and could thus use the aid to finance activities
outside eastern Germany.

The aid in question does not contribute, therefore, to the
achievement of one of the objectives referred to in Article
92(2) and (3) of the EC Treaty, which the recipient under-
takings under normal market conditions could not
achieve either by their own efforts or with the help of
existing approved State aid. The investment decisions
were taken in the knowledge that the aid in question
cannot be claimed if the time-limits are not observed. Aid
which does not contribute to the achievement of one of
the objectives recognised as justification for the excep-
tional approval of measures which distort competition
cannot be regarded as compatible with the proper func-
tioning of the common market (2).

The Federal Government’s proposal to apply the amend-
ment of the Investment Premium Law 1993 made by the
Finance Law 1996 only to MIDER/Elf Aquitaine and to
notify further cases individually in advance does not alter
the assessment. The Finance Law is a law passed by the
Bundestag which may be relied on directly by any under-
taking which meets the general assistance conditions. The
number of potential recipients cannot be determined with
certainty.

The scope of the relevant provision of the Finance Law
1996 is not limited to the case of MIDER/Elf Aquitaine.
There is no provision stating that it is up to the author-
ities to decide whether the premium will be granted. The
commitment offered by Germany cannot effectively be
made, since the Federal Government cannot declare a law
passed by the Bundestag to be inapplicable or applicable
on certain conditions. The authorities do not have the
power to apply the relevant provision only in individual
cases where it seems reasonable to them to do so. The
relevant provision is therefore to be assessed with regard
to all potential cases of application and not just to the
MIDER case.

The above comments, however, are without prejudice to a
possible individual notification by Germany of particular
measures modifying the aid package for MIDER’s invest-
ment in eastern Germany. Such an amendment would be
examined by the Commission with regard to the special
circumstances of this particular investment and the pos-
itive decision of the Commission on this project (3).

V

In conclusion, therefore, the Commission finds that the
aid in question does not contribute to the promotion of
additional
in the new L(cid:132)nder and is not
necessary for the maintenance of existing economic activ-

investment

(2) See also the judgment of the Court of Justice in Case 730/79

Philip Morris [1980] ECR I-2671, paragraph 16 et seq.

(3) Letter SG(93) D/11541, OJ C 214, 7. 8. 1993, p. 9.

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ities in them. As a result, the aid does not contribute to
the achievement of one of the objectives referred to in
Article 92(2) and (3) of the EC Treaty and is not compat-
ible therefore with the proper functioning of the common
market.

The aid scheme was wrongly brought into force on 1
January 1996 without prior approval by the Commission.
The Commission has noted that Germany has instructed
the authorities in the new L(cid:132)nder to apply the Law only
after it has been approved by the Commission. This
communication, however, cannot be opposed to the direct
application of a Federal
law which gives all potential
recipients who meet the conditions a legal claim, without
a discretionary decision by the authorities being neces-
sary,

HAS ADOPTED THIS DECISION:

Article 1

Article 18(1) of the Finance Law 1996, which amends
Article 3 of the Investment Premium Law 1993 to the
effect that the 8 % investment premium is now granted
for
investment projects which were begun after 31
December 1992 and before 1 July 1994 and are
completed before 1 January 1999 (instead of before 1
January 1997), introduces new, additional State aid for
undertakings which have made investments in the new
L(cid:132)nder. This aid is unlawful, since it was put into effect
in disregard of Article 93(3) of the EC Treaty. The aid is

incompatible with the common market, since it does not
contribute to the achievement of one of the objectives
referred to in Article 92(2) and (3) of the EC Treaty.

Article 2

Article 18(1) of the Finance Law 1996 shall be repealed.
Germany shall recover all aid which was granted pursuant
to this provision. The aid shall be repaid in accordance
with the procedures and provisions of German law with
interest running from the date of grant of the aid calcu-
lated on the basis of the rate serving as the reference
interest rate used in assessing regional aid programmes.

Article 3

Germany shall
inform the Commission within two
months of the date of notification of this Decision of the
measures it has taken to comply herewith.

Article 4

This Decision is addressed to the Federal Republic of
Germany.

Done at Brussels, 1 October 1997.

For the Commission

Karel VAN MIERT

Member of the Commission