98/95/EC: Commission Decision of 21 October 1997 concerning aid granted by the Region of Sardinia (Italy) to shipping companies in Sardinia (Only the Italian text is authentic) (Text with EEA relevance)
Date: 1997-10-21
Institutions: European Commission
Subjects: Sardinia, State aid, control of State aid, infringement of EU law, maritime shipping, regional aid

L 20/30

‹

EN

‹

Official Journal of the European Communities

27. 1. 98

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 21 October 1997

concerning aid granted by the Region of Sardinia (Italy) to shipping companies
in Sardinia

(Only the Italian text is authentic)

(Text with EEA relevance)

(98/95/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 point (a) of Article
62(1) thereof,

Having given the parties concerned the opportunity to
submit their comments, in accordance with the above-
mentioned Articles (1),

Whereas:

I

By letter of 24 June 1996 (2), the Commission informed
the Italian authorities of its decision to initiate the proce-
dure provided for in Article 93(2) of the EC Treaty in
respect of an unlawful aid scheme set up by the region of
Sardinia, in favour of shipping companies.

In opening the procedure, the Commission, on the basis
of the information at its disposal, has expressed serious
doubts as to the compatibility of the aid, for the following
reasons:

— the aid scheme contains provisions which involved
discrimination on the grounds of nationality in that

(1) OJ C 368, 6. 12. 1996, p. 2.
(2) See footnote 1.

ship operators were obliged, inter alia, as an effective
condition of aid, to employ Sardinian seafarers on
board their vessels,

— the scheme conflicts with the principle of freedom of
establishment since aid was conditional, inter alia, on
operators having their head office in Sardinia,

— the scheme involves aid to encourage investment in
ships in a way which is liable to infringe Community
rules.

II

the procedure,

Following the opening of
the Italian
Government submitted comments to the Commission by
letter of 31 October 1996. The Sardinian authorities
submitted comments by letters of 11 October 1996 and
22 January 1997.

No comments were submitted by other Member States or
third parties within the time limit of one month from
publication of the decision to open the procedure. It may
be noted, however,
third parties
submitted comments outside this deadline.

that a number of

In their comments, the Italian and Sardinian authorities
did not contest the objections of the Commission. They
also informed the Commission of amendments to the aid
scheme which, according to them, would meet the objec-
tions of the Commission. The main amendment is made
by Regional Law No 9 of 15 February 1996 of the Region
of Sardinia. It is to be noted that these amendments,
including Law No 9/1996, are not the subject of this
Decision and will be dealt with separately.

27. 1. 98

‹

EN

‹

Official Journal of the European Communities

L 20/31

III

the aid
The Commission learned of
scheme in question from a complaint regarding a case in
which the scheme was applied.

the existence of

The aid scheme is established by Sardinian Regional Law
No 20 of 15 May 1951, as amended by Regional Laws No
15 of 11 July 1954 and No 11 of 4 June 1988.

loans

to shipping companies

Law No 20/1951, as amended by Law No 15/1954 (here-
inafter: ‘Law No 20/1951’) established a fund for the grant
of
intending to build,
purchase, convert or repair vessels. These loans were to be
granted only to companies whose head office, country of
domicile for tax purposes and port of register were in the
region of Sardinia. The loans could not exceed 20 % of
the investment costs in the case of building, conversion or
repair work where the applicant had already received aid
for such work under national legislation in force at the
time. Where no such aid under national legislation had
been awarded, loans could not exceed 60 % of investment
costs.

Under Law No 20/1951, interest, commission and other
charges related to the loan could not exceed 4,5 % per
year of the loan where aid had also been received under
national legislation, and 3,5 % where no such aid had
been received (an average interest rate subsidy of 10 to 12
percentage points). The capital was to be refunded in not
more than 12 annual payments,
from the third year
following entry into service of the ship for which the loan
had been granted.

By Regional Law No 11/1988, substantive amendments
were made to the aid scheme established by Law No
20/1951. The Italian Government
failed to notify the
amendments to the Commission in accordance with
Article 93(3) of the EC Treaty and thus the amended aid
scheme (hereinafter: ‘aid scheme’) constituted a non-noti-
fied aid, as the Commission noted in its decision to open
the procedure pursuant
to Article 93(2). The Italian
Government did not contest that finding in its comments.

Under the aid scheme, the granting of aid was made
subject to the following requirements on the beneficiary
companies:

‘(a) that

the undertaking should have its head office,
administrative headquarters and shipping business
its main stores, depots and
and, where applicable,
accessory equipment permanently in one of the ports
of the region;

(b) that all the vessels owned by the undertaking should
be entered in the ports of registry of the region;

(c) that

the undertaking should use the ports of
the
region as the centre of its shipping activities, making
them a normal port of call as part of those activities,

and, where regular services are operated, that these
should terminate or regularly call at one or more of
those ports;

(d) that the undertaking should commit itself to carrying
out refitting work in the ports of the region, provided
that shipyards have the operational capacity and that
there are no grounds of force majeure, unavoidable
chartering requirements or obvious economic or time
constraints;

(e) that, as regards the crewing of vessels with a gross
tonnage of more than 250 tonnes, the undertaking
should establish a special complement, comprising all
the seafarer categories needed to crew the vessel for
which it was
requesting aid, using solely crew
members registered in the general duty roster of the
registry, and to take from those rosters,
port of
whether general or special, all the crew required, the
sole restrictions being the national regulations on the
employment of seafarers . . .’.

The aid scheme also introduced the option whereby the
Sardinian authorities could grant a contribution to the
costs of a lease where a shipping company had opted for a
lease instead of a loan. The contribution is equal to the
difference between the interest actually owed on a loan,
corresponding to the annual amortisation rate, calculated
at the commercial reference interest rate for shipping in
Italy and the interest payable on the same loan calculated
at 5 % (an average interest rate subsidy of about 10
percentage points). At the end of the contract, a vessel for
which a contribution has been paid may be acquired by
the lessee for an amount equal to 1 % of the purchase
price.

According to data provided by the Sardinian authorities,
the aid scheme has, since its entry into force, been used
totalling Lit
provide
to
12 697 450 000.

contributions

loans

and

IV

The aid scheme constitutes State aid within the meaning
of Article 92(1) of the EC Treaty, since:

(a) the beneficiary companies are relieved of a financial
burden which they would normally bear
(normal
commercial interest rates and other charges on loans/
leases);

(b) the burden is borne by State resources (the Sardinian

authorities);

(c) the aid is selective (being reserved to the shipping

sector);

(d) the aid affects trade between Member States.

L 20/32

‹

EN

‹

Official Journal of the European Communities

27. 1. 98

As regards point (d) above, it was noted in the decision
opening the procedure that over 90 % of goods from
Member States are transported to Sardinia by sea and that
over 90 % of goods originating in Sardinia are transported
to Member States in the same way. In addition, it was
noted that 65 % of tourist traffic (passengers and vehicles)
between the Community and Sardinia is handled by ship-
ping
in their
comments did not contest the above statistics, nor indeed
the designation of the aid scheme as State aid within the
meaning of Article 92(1).

Italian authorities

companies. The

other seafarers are objectively equally, or more, suited for
the tasks to be carried out.

It is to be noted that,
in their comments, the Italian
authorities did not contest the above arguments of the
Commission regarding a breach of Articles 6, 48(2) and 52
of the Treaty.

However, even if the aid did not conflict with basic prin-
ciples of Community law, it would still be incompatible
with the common market for the reasons set out below.

V

The aid is unlawful, since Law No 20/1951 was amended
substantially by Law No 11/1988, that is, since the entry
into force of the EEC Treaty, without prior notification of
to the
the amendments by the Italian authorities
Commission in accordance with Article 93(3).

In the case at issue, the exceptions provided for in Article
92(2) of the Treaty are not applicable because the aid
scheme is not directed towards the attainment of the
objectives set out. Nor has such an exemption been
requested by the Italian authorities.

VI

Article 92(1) of the EC Treaty provides that aid meeting
the criteria laid down therein is,
incom-
patible with the common market.

in principle,

In the case at issue, the exceptions provided for in Article
92(2) and (3) of the Treaty cannot apply because the aid
conflicts with fundamental principles of Community law:
freedom of establishment (Article 52 of the Treaty) and
non-discrimination on grounds of nationality (Articles 6
and 48(2)).

As to freedom of establishment, the aid scheme requires
not only establishment of the beneficiary in Sardinia but,
inter alia, the siting of the head office of the beneficiary
in Sardinia. Furthermore, it requires that all the vessels of
the beneficiary company, not only those aided under this
scheme, be registered in Sardinia. Those requirements
alone are sufficient to constitute a breach of Article 52 of
the Treaty, since companies established in Sardinia but
having their head office elsewhere or vessels registered
elsewhere are automatically excluded from aid.

As to non-discrimination on grounds of nationality, the
aid scheme requires, for vessels of over 250 tonnes gross, a
minimum contingent of seafarers who are registered in
the general duty roster of the (Sardinian) port of registry
of the vessel. This requirement is, in effect, an obligation
on the beneficiary company to employ a quota of locally-
based seafarers who will in practice be Sardinian, even if

Article 92(3) of the Treaty lists aid which may be con-
sidered compatible with the common market. Compat-
ibility must be determined in the context of
the
Community as a whole and not in the context of a single
Member State. In order to ensure the proper functioning
of the common market, and having regard to the prin-
ciple embodied in point (g) of Article 3 of the Treaty, the
exceptions provided for in Article 92(3) must be construed
narrowly when any aid scheme or individual aid award is
scrutinised. In particular, they may be relied on only
when the Commission is satisfied that, without the aid,
market forces alone would be insufficient to guide the
recipients towards patterns of behaviour that would serve
one of the objectives of the said exceptions.

Applying the exceptions to aid which does not contribute
to the attainment of such an objective, or where the aid is
not necessary for that purpose, would be tantamount to
conferring advantages on industries or firms of certain
Member States whose financial position would be artifi-
cially strengthened,
and to affecting trade between
Member States and distorting competition without any
justification based on the common interest as required by
Article 92(3) of the Treaty.

Article 92(3)(a) exempts aid which promotes the develop-
ment of areas where the standard of living is abnormally
low or where there is serious underemployment. Although
Sardinia is eligible for regional aid under Article 92(3)(a),
the aid in question was not granted under an aid scheme
designed primarily to promote regional development
since it is limited to shipping companies. In any case,
Article 92(3) does not apply to an aid scheme which, as
the present one, breaches Community guidelines on aid
to specific sensitive sectors such as maritime transport.

27. 1. 98

‹

EN

‹

Official Journal of the European Communities

L 20/33

With regard to the exceptions provided for in Article
92(3)(b), the aid at issue is not intended to promote the
execution of an important project of common interest nor
to remedy a serious disturbance in the Italian economy,
nor does it have any of the features of such projects.
Furthermore, the Italian authorities, in their comments to
the Commission, have not requested exemption on those
grounds.

With regard to the exceptions provided for in Article
92(3)(c) relating to aid to facilitate the development of
certain economic activities, the aid scheme affects trading
conditions to an extent contrary to the common interest,
since:

— both the guidelines on State aid to shipping com-
panies of 3 August 1989 (1) and the Community
guidelines on State aid to maritime transport (2)
require that aid which is available to shipping com-
panies for building, conversion or repair of ships (as in
this case) be presented in a transparent way for the
legislation on con-
purposes of applying Council
tract-related shipbuilding aid to Community yards
(Council Regulation (EC) No 3094/95 (3), amended by
Regulation (EC) No 1904/96 (4)); this requirement also
applies where, as in this case, aid is granted in an area
qualifying for Article 92(3)(a) status; the aid scheme at
issue contains no mechanism to ensure its adherence
to those Community provisions,

— as far as aid for the leasing of ships is concerned, such
aid constitutes operating aid of the type not allowed
by either the 1989 or the 1997 guidelines.

VII

In conclusion, the aid scheme in question is unlawful and
incompatible with the common market.

According to the Italian authorities, arrangements have
already been put in place in order to render the aid
scheme compatible with the common market, inter alia,
by the adoption of Sardinian Regional Law No 9 of 15
February 1996. These arrangements are not the subject of
this Decision.

Nevertheless, it remains the case that loans/leases total-
ling Lit 12 697 450 000 have been granted on favourable
terms for the whole period falling between Regional Laws
No 11/1988 and No 9/1996.

The aid element of these loans/leases must be repaid by
the beneficiaries in accordance with the procedures and

(1) SEC(89) 921 final, of 3 August 1989.
(2) OJ C 205, 5. 7. 1997, p. 5.
(3) OJ L 332, 30. 12. 1995, p. 1.
(4) OJ L 251, 3. 10. 1996, p. 5.

provisions of Italian law, with interest applicable as from
the date on which the unlawful aid was paid out. Interest
is to be calculated using the reference rate for regional
aid.

The Commission has not been enabled to quantify for
itself the aid element to be recovered from each benefi-
ciary, nor the total sum of aid to be recovered from all
beneficiaries. For that reason, in adopting the implemen-
ting measures required for compliance with this Decision,
the Italian authorities must determine themselves and
communicate to the Commission the amount to be re-
covered from each beneficiary.

This Decision is without prejudice to any Commission
appraisal of amendments communicated by Italy with a
view to rendering the aid scheme in question compatible
with Community law, and in particular Regional Law No
9/1996. That Law will be the subject of a separate exam-
ination,

HAS ADOPTED THIS DECISION:

Article 1

The loans/leases totalling Lit 12 697 450 000 granted to
companies in the shipping sector under Regional Law No
20 of 15 May 1951 of the Region of Sardinia, as amended
by Regional Laws No 15 of 11 July 1954 and No 11 of 4
June 1988, contain elements which constitute State aid
within the meaning of Article 92(1) and are unlawful for
having been granted in breach of Article 93(3) of the EC
Treaty.

above

loans/leases

incompatible with the
are
The
common market because they do not fulfil the criteria for
the exceptions to Article 92(1) of the Treaty set out in
Article 92(2) and (3) thereof.

Article 2

Italy shall recover from each beneficiary of a loan/lease as
described in Article 1, an amount corresponding to the
difference between, on the one hand, the total of interest
and/or other charges which the beneficiary in question
would have paid for the loan/lease under normal market
conditions prevailing at the date at which the loan/lease
was contracted and, on the other hand, the sum of the
interest and/or the other charges actually paid by the
beneficiary for that loan/lease.

L 20/34

‹

EN

‹

Official Journal of the European Communities

27. 1. 98

Where a loan/lease is still outstanding at the date of this
Decision, Italy shall ensure that the remainder of the
loan/lease is discharged by the borrower/lessee under
normal market conditions. In addition to recovering the
amount referred to in the first paragraph,
the Italian
authorities shall charge interest thereon, running from the
date of grant of the loan/lease. Interest shall be calculated
at the reference rate used by the Commission for regional
aid.

Article 3

Italy shall inform the Commission within two months of
notification of this Decision of the measures taken to
comply with it.

Article 4

This Decision is addressed to the Italian Republic.

Done at Brussels, 21 October 1997.

For the Commission

Neil KINNOCK

Member of the Commission