Opinion of the Economic and Social Committee on the 'Proposal for a Council Regulation (EC) laying down detailed rules for the application of Article 93 of the EC Treaty'
Date: 1998-07-01
Institutions: European Economic and Social Committee
Subjects: European treaties, State aid, administrative transparency, control of State aid, restriction on competition

C 284/10

EN

Official Journal of the European Communities

14.9.98

with this complex subject reasonably soon. Such efforts
are made all the more arduous by lengthy and costly
procedures, which can only be modified if there is an
understanding of the basic problem: technologies and

their applications change much faster than regulations.
Procedural streamlining must be included in the review
which international and EU bodies should take on as
their primary duty to the community as a whole.

Brussels, 1 July 1998.

The President

of the Economic and Social Committee

Tom JENKINS

Opinion of the Economic and Social Committee on the ‘Proposal for a Council Regulation
(EC) laying down detailed rules for the application of Article 93 of the EC Treaty’ (1)

(98/C 284/04)

On 11 March 1998, the Council decided to consult the Economic and Social Committee, under
Article 198 of the Treaty establishing the European Community, on the above-mentioned
proposal.

The Section for Industry, Commerce, Crafts and Services, which was responsible for preparing
the Committee’s work on the subject, adopted its opinion on 3 June 1998. The rapporteur
was Mr Sepi.

At its 356th plenary session (meeting of 1 July 1998), the Economic and Social Committee
adopted the following opinion by 135 votes to one, with three abstentions.

1.

Introduction

1.1.
The Committee has several times acknowledged
the need to regulate competition in a thorough and
legally valid manner.

In its opinion (2) on the 22nd report on compe-
1.2.
tition policy, the Committee had already emphasized
how important and necessary it was for the Commission
to lay down regulations that would improve trans-
parency and give greater legal certainty to all interested
parties.

1.3.
The Committee wishes to highlight the greater
awareness that is developing in all EU countries on the
subject of competition, both among economic and legal
practitioners and, more generally, on the part of public
opinion. This is due to the good results obtained in price
restraint and in increased competitiveness.

It is precisely in this sphere that legislation is
1.4.
needed to make the Commission’s work more methodi-
cal and transparent.

1.5.
The proposal also follows the regulation on the
application of Articles 92 and 93 of the Treaty to certain
categories of horizontal state aid (3).

1.6.
The Committee urges the Commission to con-
tinue to extend its regulatory work, in order to build up
a corpus of measures which harmonize and clarify the
entire competition issue, also in view of enlargement.

1.7.
these
In some key sectors of EU industry,
measures will have to take account of the situation
regarding aid granted in competing countries.

1.8.
The proposal attempts to strike a balance
between efficiency and transparency. The Committee
believes that, broadly speaking, Community institutions
should pay greater attention to transparency and third
party rights.

2. The Commission’s document

2.1.
The proposed regulation is basically a procedural
proposal which on the one hand codifies a tried and

(1) OJ C 116, 16.4.1998, p. 13.
(2) OJ C 34, 2.2.1994.

(3) OJ C 129, 27.4.1998.

14.9.98

EN

Official Journal of the European Communities

C 284/11

tested procedure and on the other ‘clarifies certain
aspects and tightens up the rules’ in order to provide a
more effective control system.

2.10.
A system of cooperation with national ‘indepen-
dent’ competition authorities is also established for
particular cases (Article 21).

2.2.
The proposal confirms that the notification and
the ‘standstill’ right provided for in Article 93(3) of the
Treaty, form the cornerstone of the control system.
Furthermore, the Commission will continue to have the
sole decision-making authority on the matter (Articles 2
and 3).

2.3.
Article 4 outlines the procedure for the exami-
nation of the notification by the Commission and lays
down the deadlines for decisions. After such deadlines,
if a formal decision has not been taken, aid is deemed
to have been authorized.

Likewise, if the Member State does not supply
2.4.
the information requested by the Commission after a
preliminary examination (Article 5), the notification is
deemed to have been withdrawn.

2.5.
After the formal investigation, the Commission
may either (i) decide that the aid is compatible with the
Treaty, (ii) approve it subject to certain conditions, or
(iii) decide that it is incompatible with the Treaty
(Article 7 and Article 11).

2.5.1.
If the aid has been granted unlawfully and is
incompatible with the common market, the Commission
decides that the Member State must recover it from the
beneficiary (Article 14).

2.6.
Articles 10 and 11 cover the procedure for
suspending or provisionally recovering aid which is
considered unlawful on the basis of information ‘from
whatever source’.

2.7.
Recovery of aid comes under Article 14, which
provides for the use of the legal instruments available to
the state in question and lays down that ‘remedies under
national law shall not have suspensive effect’.

As well as unlawful aid,

‘misuse of aid’
2.8.
(Article 15) is also regulated, as are existing aid schemes
which are ‘no longer compatible with the common
market’.

2.9. Member States may be asked to adopt ‘appropri-
ate measures’ to ensure that aid is compatible. The
regulation also establishes two systems of control — the
examination of Member States’ annual reports and
on-site monitoring (Articles 19 and 20).

2.11.
The common provisions stipulate that Member
States alone are sent the decisions and that they are
published in the Official Journal in summary form,
although it is possible to obtain a copy of the full text
in the authentic language version (Article 25).

Finally, an advisory committee consisting of
2.12.
representatives of Member States is to be set up.
The committee will assist the Commission on the
implementing provisions but not on the decisions
(Article 27).

3. General comments

3.1.
The Committee highlights the importance of this
regulation, which integrates and rationalizes a series of
practices and principles expressed in the judgements of
the Court of Justice, giving them an organized structure.

3.2.
The Committee considers, however, that this
legislative streamlining of Community action in respect
of competition should be further strengthened in order
to have, in a few years, greater legal certainty on the
subject. The impetus that will stem from the completion
of the single market and EMU makes this particularly
important.

3.3.
The Committee believes that once the Fiscal
Code of Conduct has been introduced, the scope of this
regulation should cover tax provisions which distort
competition between Member States.

3.4.
A particular effort should be made to clarify the
legal concepts used and to ensure that the translations
into the various languages tally, so that they will be
interpreted in the same way by everyone. For example,
in the present regulation the difference between unlawful
aid and ‘misuse of aid’ should be more clearly defined,
bearing in mind that their legal consequences must be
the same.

3.5.
The Commission has the power both to lay down
regulations and to enforce competition rules. Although
the Committee has already expressed a favourable
opinion on this dual power, the appeal procedure should
be specified more precisely, and it should be made clear
whether the Commission is obliged to make a decision
at the request of any interested party. The vagueness of
Article 10(3) on the acquisition of information appears
to grant the Commission too many discretionary powers.
The Committee believes that interested third parties
should be guaranteed the right to appeal, and the
Commission should be obliged to give an answer in all
cases.

C 284/12

EN

Official Journal of the European Communities

14.9.98

3.6.
The introduction of formal rules, however, is
also a unique opportunity to create a new culture of
increased transparency which guarantees that third
parties are secured a right to information, have a right
to be heard and a right to comment before decisions are
made. Relevant input from third parties will improve
the quality of the Commission’s work, enhance control
and contribute to less distortion of competition in the
single market.

3.7. More transparency and better third party rights
will strengthen control of state aid. Competitors and
other affected parties could contribute to making the
investigation in important cases more comprehensive.
Information from competing companies would enable
the Commission to better assess the impact of a given
aid on the market. Enhancing third party rights might
therefore help to reduce the overall level of aid.

3.8.
The definition of state aid by the Court of Justice
and the Treaty also includes aid which does not
constitute a subsidy but which distorts competition.
The Commission should pay careful attention to the
application of the regulation to some of this aid, since
Member States do not always see fit to declare it; the
Commission should introduce legislation to bring such
cases out into the open.

3.9.
The Committee asks the Commission to assess
whether it would be useful to make Member States’
notifications on new aid available to the public, even in
summary form.

The Commission proposal touches on sensitive
3.10.
areas of national structural policy. In view of its
political significance, the regulation should contain clear
requirements to provide for better compliance with the
concepts of transparency and information, not least
with regard to the general public.

4. Specific comments

4.1.
According to the definition of the Court of
Justice, state aid also includes interventions which
‘without being subsidies in the strict meaning of the
word, are similar in character and have the same effect’.
The definition contained in Article 2 of the regulation
should be clarified.

4.2.
Article 4(6) provides for a de facto dual notifi-
cation, which renders the procedure unnecessarily com-
plicated.

4.3.
As to third party rights in general, the proposal
lacks a provision empowering the Commission to
publish the fact that individual aid has been notified
and basic information about the aid granted. Whereas
publication of every notification cannot be justified, a
flexible paragraph that allows publication of particularly

complex issues would be useful. The lack of such
provision harms transparency and inhibits third party
rights.

4.3.1.
The Committee thinks that any party who has
submitted an opinion should receive a copy of the final
decision. It should also be stipulated that any party can
notify the Commission of unlawful aid or of the unlawful
use of aid. If the Commission deems the information
provided to be insufficient, it should be obliged to
inform the party of this fact. It should also be obliged
to send the party the full text of its decision. This would
appear to be in line with several judgements passed by
the Court of Justice. (1)

4.4.
The problem of the recovery of unlawful aid is a
difficult one because Member States have different
judicial and administrative procedures. The Committee
therefore supports the Commission’s efforts to improve
the situation by including the injunction to suspend or
provisionally recover aid (Article 11) and stipulating that
‘remedies under national law shall not have suspensive
effect’ [Article 14(3)]. These two provisions make the
Commission’s action more effective.

4.5.
The regulation does not say what will happen if
national judicial procedures do not allow the immediate
and effective execution of the Commission’s decision.
Given the elementary principle that there should be a
level playing field, Member States should take steps to
make immediate recovery possible, and the Commission
should ensure that dilatory procedures are not intro-
duced.

The Committee considers that aid which has
4.6.
been misused should be recovered as soon as it becomes
incompatible with Community rules and therefore
becomes fundamentally unlawful.

4.7.
The Committee considers the on-site monitoring
provided for in Article 20 to be of great importance.
However, the same Article also envisages an agreement
with the Member State on the appointment of experts,
which could give rise to prevarication and delays. It
would therefore be useful to set a deadline and for the
Commission to always have the final say on the
appointment of experts.

4.8. On the basis of the Treaty definition, the Com-
mission, in Article 25 of the regulation, suggests an
exclusive relationship with national authorities. Since

(1) Sytraval judgement.

14.9.98

EN

Official Journal of the European Communities

C 284/13

in several Member States a great deal of aid is handled
by decentralized authorities, it should be possible to
interpret the Treaty in such a way as to allow these
Member States
to dialogue directly with local
authorities. This would shorten the administrative delays
that such an exclusive relationship entails. The same
goes for the concept of ‘state aid’ contained in the Treaty
is more broadly interpreted and
— this, however,
includes any type of public aid.

4.9.
The publication of ‘a summary notice’ of the
decision in the Official Journal expedites procedures
but makes them less transparent. However, in view of
translation problems that will progressively increase
over the next few years, the publication of a shortened
version is probably advisable. It is essential that the
notice be published as soon as possible in order for
decisions to be effective. Complete and reasonably rapid
publication in all languages will require a considerable
increase in the Commission’s technical resources.

The ESC therefore regrets that the proposal
4.10.
lacks time limits when the Commission deals with
second-phase, formal investigations. The starting date
for calculating the two-month period is also not clear.
Time limits would provide the parties engaged with

Brussels, 1 July 1998.

more legal certainty. Capacity constraints on the part
of the Commission do not justify the absence of time
limits. This is particularly true since the Commission
plans to apply block exemptions in the future.

4.10.1.
The proposal fails to clarify when the aid
notification is complete, and when the two-month
period for the preliminary examination therefore begins.
The Committee would welcome a provision to give legal
certainty on this point. A compulsory form, which the
Commission could provide for aid notification, would
be one answer. The Committee would also welcome
other ways of improving legal certainty.

4.10.2.
In the interests of legal certainty, the Com-
mittee also recommends that aid which was paid
unlawfully more than ten years previously should be
treated as de facto aid. After this period, neither
notification nor recovery would be necessary. Such a
provision is justifiable because after ten years there is
no danger of competition being distorted or competitors
suffering directly.

4.11.
The Commission will have to make sure that
procedures are rapid and transparent, and that legal
certainty and the normal operation of companies cannot
be jeopardized under any circumstances.

The President

of the Economic and Social Committee

Tom JENKINS