1999/140/ECSC: Commission Decision of 17 June 1998 concerning aid granted by Luxembourg to Profil Arbed in connection with its investment in environmental protection (notified under document number C(1998) 1764) (Only the French text is authentic) (Text with EEA relevance)
Date: 1998-06-17
Institutions: European Commission
Subjects: Luxembourg, State aid, investment aid, iron and steel industry, redemption, regional aid

19. 2. 1999

EN

Official Journal of the European Communities

L 45/51

COMMISSION DECISION

of 17 June 1998

concerning aid granted by Luxembourg to ProfilARBED in connection with its
investment in environmental protection

(notified under document number C(1998) 1764)

(Only the French text is authentic)

(Text with EEA relevance)

(1999/140/ECSC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Coal and Steel Community, and in particular Article 4(c)
thereof,

Having regard to Commission Decision No 2496/96/
ECSC of 18 December 1996 establishing Community
rules on aid to the steel industry (1), and in particular
Article 6 thereof,

Whereas:

I

By letter dated 30 December 1993, registered by the
Commission on 4 January 1994, the Luxembourg author-
ities notified the Commission of a plan to grant aid to the
steel company ProfilARBED (ARBED)
in connection
with investment undertaken by the company in environ-
mental protection.

By letter dated 14 June 1994 (2),
the Commission
informed the Luxembourg Government of its decision,
taken on 1 June 1994, to initiate proceedings in respect
of the aid in question under Article 6(4) of Decision No
3855/91/ECSC (3) (hereinafter ‘the Steel Aid Code', since
replaced by Decision No 2496/96/ECSC).

On 9 August 1993 ARBED had requested State aid
covering 25 % of the LUF 613 million it was committed
to spending on environmental protection in connection
with the development of the Esch-Schifflange steelworks,
which in the event entailed the construction of a new
electric steel plant. By letter of 19 December 1994, the
Luxembourg Government
it planned to
provide ARBED with a capital grant not exceeding 15 %
of the eligible investment, i.e. not exceeding LUF 91,95
million, which it
in accordance with the
Community guidelines on State aid for environmental
protection (4).

stated that

said was

(1) OJ L 338, 28. 12. 1996, p. 42.
(2) OJ C 212, 3. 8. 1994, p. 7.
(3) OJ L 362, 31. 12. 1991, p. 57.
(4) OJ C 72, 10. 3. 1994, p. 3.

In response to the decision initiating proceedings, the
Luxembourg authorities put forward the following argu-
ments:

(1) the steelworks as a whole had come into being in the
late 19th century and, in any case, the liquid phase at
Esch had been operating for more than two years by
the time that the new standards entered into force;

(2) it was technically impossible for the old LD-AC steel-
making plant to achieve the environmental protection
levels required by the new standards laid down in
February 1993;

(3) according to the second recital under Part II of the
preamble to the Steel Aid Code, the relevant reference
text was the Community guidelines on State aid for
environmental protection;

(4) lastly, the Esch electric steel plant satisfied all the
criteria set out therein. In this regard, it was pointed
out that:

— the new environmental protection standards had
entered into force in 1990 and had been tightened
in 1993. The liquid phase at Esch, however, had
been in place for more than two years before the
introduction of the new standards,

— the building of the electric steel plant was an
the liquid
adaptation of a production process:
phase based on the LD-AC process and con-
tinuous casting had been converted into a liquid
phase based on an electric process and continuous
casting,

— the aid requested related solely to that part of the
investment that was not economically viable, while
the expenditure connected with replacement and
productivity-enhancing schemes,
i.e. the part of
the investment with an economic objective, was
borne entirely by ARBED, in accordance with the
said Community guidelines.

The Luxembourg authorities also argued that, in view of
the heavy investment needed to bring the existing LD-AC
steel plants into line with the environmental standards,
and in order to avoid losing much of that investment

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Official Journal of the European Communities

19. 2. 1999

when the existing steel plants were replaced, ARBED had
decided to speed up the programme for replacing its steel
mills by facilities meeting the environmental require-
ments. The cost of ARBED’s investment
in environ-
mental protection for the new steel plant was LUF 613
million. If the existing facilities had been retained, the
estimated total investment cost to ARBED would have
been LUF 1,5 billion. That was why the Luxembourg
Government considered that the granting of aid was in
accordance with the spirit of Article 3 of the Steel Aid
Code.

II

In the light of the comments received from the Luxem-
bourg authorities, the Commission took the following
view of the matter:

(1) Article 3 of Decision No 3855/91/ECSC, i.e. the Steel
Aid Code in force when the decision was taken, had
provided that aid designed to facilitate the alignment
on the new statutory environmental standards of plant
two years
which had entered into service at
before the introduction of those standards could be
considered compatible with the common market;

least

(2) Part II of the recitals to the Steel Aid Code laid down
the principle that the steel industry and other indus-
tries had to have equal access to aid for environmental
protection. It followed that,
in principle, the same
provisions of Community legislation regarding aid for
environmental protection should be generally applic-
able to all firms, whether steel firms or not;

(3) the Community guidelines on State aid for environ-
mental protection, while stating at the outset that, in
keeping with the ‘polluter pays' principle, no aid
should normally be given to offset
the cost of
complying with mandatory standards in new plants,
expressly stipulated that
instead of
simply adapting existing plants more than two years
old, opted to replace them by new plants meeting the
new standards, could receive aid in respect of that part
of the investment costs that did not exceed the cost of
adapting the old plant.

firms which,

The Commission therefore
it was
possible, under Article 3(1) of the Steel Aid Code, to
regard as compatible with the common market aid not

considered that

exceeding 15 % gross granted to firms which, instead of
bringing into line with new environmental standards
plants which had entered into service at least two years
before the introduction of
the standards, decided to
replace them by new facilities meeting the new standards,
provided that the aid did not exceed that which would
have been granted for adapting the old steelworks.

It therefore concluded that, as the aid complied with
Article 3 of Decision No 3855/91/ECSC,
it could be
considered compatible with the common market.

Accordingly, it decided on 21 December 1994 to termi-
nate the proceedings initiated in respect of
the aid
granted to ProfilARBED for environmental protection (5)
without raising any objections.

III

That Commission decision was challenged before the
Court of First Instance of the European Communities by
the British Iron and Steel Producers Association (BISPA)
on the ground that the Steel Aid Code could not be
extended to include the provisions of the Community
guidelines on State aid for environmental protection
applicable to sectors covered by the EC Treaty.

In its judgment of 25 September 1997 in Case T-150/95
UK Steel Association, formerly BISPA v. Commission (6),
the Court annulled the Commission’s decision; it held
that the aid granted to ARBED could not be authorised,
because:

(a) it was clear that in this case the State aid was intended
for investments in new plants replacing the old facil-
ities;

(b) the Steel Aid Code, which derogated from the ban on
all aid to steel companies provided for in Article 4(c)
of the ECSC Treaty, had to be interpreted strictly,
with particular attention being paid to the wording;

environmental

(c) Article 3 of the Steel Aid Code stated that aid could
be authorised only for bringing into line with new
standards plants which
statutory
entered into service at least two years before the intro-
duction of the standards, and did not provide for aid
to firms which, rather than adapting existing plants,
decided to replace them with new facilities meeting
the new standards;

(d) consequently, the reasoning contained in the Decision
being contested before the Court, namely that Article
3 of the Steel Aid Code could be read in conjunction

(5) OJ C 400, 31. 12. 1994, p. 10.
(6)

[1997] ECR II-1433.

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with the Community guidelines on State aid for envir-
onmental protection, which allowed aid for new
plants, had to be rejected, since the rules of the guide-
lines ran counter to the clear wording of the Article.

IV

In view of the foregoing, and especially Section IIII of
this Decision, the Commission concludes, in accordance
with the above-mentioned judgment and contrary to its
final Decision of 21 December 1994 (7),
the
comments made by the Luxembourg authorities were not
such as to alter in substance the Commission’s initial
assessment of
the case when it decided to initiate
proceedings, namely that the aid was not covered by any
of the exemptions from the general ban on aid laid down
in Article 4(c) of the ECSC Treaty and, in particular, that
Article 3 of the Steel Aid Code could not be invoked in
order to authorise the aid in question.

that

Consequently, the aid received by ARBED, which totals
LUF 91,95 million, must be regarded as incompatible
with the common market, as it does not qualify for
exemption under the Steel Aid Code from the ban
contained in Article 4(c) of the ECSC Treaty; it must
therefore be recovered,

HAS ADOPTED THIS DECISION:

Article 1

The State aid totalling LUF 91,95 million granted to
incompatible with the
ARBED by Luxembourg is

common market for coal and steel under Article 4(c) of
the ECSC Treaty.

Article 2

Luxembourg shall recover the aid in question in accord-
ance with the provisions of national law applicable to the
recovery of amounts owed to the State. In order to offset
the effects of such aid, interest shall be added, calculated
from the day on which the aid was granted up until the
time of recovery. The interest rate applicable shall be that
used by the Commission to calculate the net grant
equivalent for regional aid in the period under considera-
tion.

Article 3

Luxembourg shall inform the Commission, within two
months of the date of notification of this Decision, of the
measures taken to comply therewith.

Article 4

This Decision is addressed to the Grand Duchy of
Luxembourg.

Done at Brussels, 17 June 1998.

For the Commission

Karel VAN MIERT

Member of the Commission

(7) See footnote 5.