1999/342/EC: Commission Decision of 30 September 1998 concerning aid which Austria plans to grant to Agrana Stärke GmbH to build and convert starch production facilities (notified under document number C(1998) 3023) (Only the German text is authentic)
Date: 1998-09-30
Institutions: European Commission
Subjects: Austria, State aid, aid to undertakings, industrial equipment, investment aid, starch

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Official Journal of the European Communities

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COMMISSION

COMMISSION DECISION

of 30 September 1998

concerning aid which Austria plans to grant to Agrana St(cid:132)rke GmbH to build
and convert starch production facilities

(notified under document number C(1998) 3023)

(Only the German text is authentic)

(1999/342/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,

two aid measures which are the subjects of this
procedure. The three remaining aid measures of
the project as originally notified were approved by
the Commission by letter SG(97) D/461 of 23
January 1997 (N 517/96).

Having regard to Council Regulation (EEC) No 1766/92
of 30 June 1992 on the common organisation of the
market in cereals (1), as last amended by Commission
Regulation (EC) No 923/96 (2),

(3)

invited interested parties

Having
their
comments in accordance with Article 93(2) of the EC
Treaty,

to submit

Having taken account of those comments,

Whereas:

I

(1)

Austria notified the Commission by letter dated 28
June 1996 (recorded as received on 2 August 1996)
in accordance with Article 93(3) of the EC Treaty
of an aid measure for Agrana St(cid:132)rke-GmbH,
Hollandstraße 2, 1020 Vienna (Agrana). Additional
information was submitted by letters dated 18
September and 14 November 1996, 29 January, 7
March and 11 June 1997 (recorded as received on
19 September and 18 November 1996, 31 January,
12 March and 16 June 1997 respectively).

(2)

Austria wrote to the Commission on 20 December
1996 (letter recorded as received on 23 December
1996) requesting the procedural separation of the

(1) OJ L 181, 1.7.1992, p. 21.
(2) OJ L 126, 24.5.1996, p. 37.

The measures in question relate to investments by
the company Agrana in the starch sector. The
measures involve aid for (a) converting a high-pres-
sure soaking facility for maize starch to standard
technology and increasing its capacity from [ . . . ] (*)
to [ . . . ] (*) and (b) investing in a [ . . . ] (*) with an
annual capacity of [ . . . ] (*) while closing down the
lower-capacity plant, both of
existing obsolete,
these measures being
the Aschach site.
According to Austria’s notification the aid amounts
to ATS 57,4 million (ECU 4,13 million), corre-
sponding to an aid intensity of 20 % of the invest-
ment costs [ . . . ] (*).

at

(4)

Agrana has already completed the investments. At
present Austria, in accordance with Article 93 of
the EC Treaty, has neither approved nor paid the
notified aid.

II

(5)

The Commission after an initial examination of the
notification decided to open the procedure under
Article 93(2) of the EC Treaty.

(*) Parts of this text have been edited to ensure that confidential
those parts are enclosed in

information is not disclosed;
square brackets and marked with an asterisk.

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(6)

(7)

(8)

(9)

That decision was communicated to the Austrian
Government by letter dated 18 August 1997 and
published in the Official Journal of the European
Communities (3). In the decision the Commission
invited the other Member States and interested
parties to submit their comments on the aid in
question.

In the decision the Commission expressed its
doubts concerning the compatibility of the aid with
the common market. The Commission noted that
under the current selection criteria for the grant of
State aid the investments in question were inel-
igible (4). In addition, the aid was not in conformity
with the Community Guidelines on State aid for
rescuing and restructuring firms in difficulty (5) in
that
it would aid the expansion of production
capacity in a sector displaying structural overca-
pacity in the relevant market in the Community.
Lastly, the Commission doubted whether the aid
was actually necessary since Agrana had already
completed the investments and the respective
plants had officially commenced operation in
spring 1997.

Austria informed the Commission of its position
on the initiation of proceedings by letter dated 18
September 1997.

The Italian and Spanish Governments submitted
their comments by letter dated 12 December 1997.
The Fachverband der St(cid:132)rkeindustrie e.V., the Asso-
ciation des amidonneries de c(cid:130)r(cid:130)ales de l’UE and
the Asociacion de Transformadores de Maiz por Via
H(cid:156)meda submitted their comments by letters dated
5, 9 and 12 December 1997 respectively. They
mainly
the
Community starch market was in overcapacity and
as a result aid for the expansion of capacity was
excluded by Community law. The aid measures
proposed would distort
trade conditions to the
detriment of Agrana’s competitors.

supported

argument

that

the

(10) Austria responded to those comments in a letter

dated 12 February 1998.

(3) OJ C 342, 12.11.1997, p. 4.
(4) See Commission Decision 94/173/EC of 22 March 1994 on
the selection criteria to be adopted for investments for impro-
ving the processing and marketing conditions for agricultural
and forestry products and repealing Decision 90/342BEC (OJ
L 79, 23.3.1994, p. 29).
(5) OJ C 283, 19.9.1997, p. 2.

III

(11) Austria argues that

the selection criteria under
Decision 94/173/EC and the Guidelines
for
restructuring aid should not be applied to the State
aid project in question.

(12)

The view that the selection criteria according to
Decision 94/173/EC do not permit investments in
cereal starch is, according to Austria, not correct as
regards the aid project in question. Article 16(5) of
Council Regulation (EEC) No 866/90 of 29 March
1990 on improving the processing and marketing
conditions for agricultural products (6) permits State
aid provided it is compatible with Articles 92, 93
and 94 of the EC Treaty. Point VII.D.1 of Annex
XV to the Act of Accession expressly states that
when applying Article 16(5) Regulation (EC) No
951/97 with respect to Austria and Finland, the
Commission will proceed in accordance with
Declaration No 31 on the processing industry in
Austria and Finland of the Final Act. That Declara-
tion states that flexibility will be used where tran-
sitional national aid schemes designed to facilitate
restructuring are concerned. The Commission,
when assessing this particular case, should not
therefore merely apply the aid rules which would
normally be applicable.

(13) With regard to the interpretation of the term ‘flex-
ible' and to the question whether it permits aid for
increasing
an investment having the effect of
production capacity, Austria refers to the opinion
of the Commission on the accession of Austria, in
which the difficult situation of the Austrian starch
industry is mentioned, and to point VII.D.1 of
Annex XV to the Act of Accession which, in its
original version assuming Norway to become a
Member State,
stipulated that when applying
Article 16(5) of Regulation (EEC) No 951/97 the
Commission could authorise Norway to grant
national aids on condition that
the production
capacity in the said sector was not increased. With
regard to Austria and Finland, the Commission
would implement those provisions in accordance
the Final Act. The
with Declaration No 31 of
conclusion e contrario would be that the general
condition for national restructuring aid in sectors
with overcapacity,
i.e. a reduction in capacity,
should not apply to Austria.

(6) OJ L 91, 6.4.1990, p. 1; recast by Council Regulation (EC) No
951/97 (OJ L 142, 2.6.1997, p. 22); in the following reference
is made only to Regulation (EC) No 951/97.

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(14)

(15)

(16)

The beneficiary’s need to adjust does not arise from
its poor performance but from the radically altered
economic conditions resulting from Austria’s acces-
sion. Before accession the Austrian starch industry
was prevented from being competitive because
exports of Community starch to Austria were
heavily subsidised while
exports by Austrian
companies to the Community were made practi-
cally impossible by prohibitive import levies. The
aid would therefore not worsen the economic situa-
tion of starch producers in other Member States in
comparison to the situation which existed before
Austria’s accession.

The above indicates
the only provisions
that
applicable to the present measure are Article
92(3)(c) of
the EC Treaty in conjunction with
Article 151(1) of the Act of Accession and point
VII.D.1 of Annex XV to the Act of Accession as
well as Declaration No 31 in conjunction with the
Commission’s opinion on the accession of Austria.
According to Article 92(3)(c) of the EC Treaty, the
Commission may approve aid to facilitate the
development of certain economic areas where such
aid does not adversely affect trading conditions to
an extent contrary to the public interest.

The aid should therefore be regarded as serving the
adjustment of a specific sector. Without that adjust-
ment the undertaking would not be competitive.
The trading conditions would not be adversely
affected to an extent contrary to the public interest:
starch producers in the Member States have bene-
fited from Austria’s accession and this positive
change in trading conditions would in no way be
diminished or even overcompensated for by the aid
project in question. A greater demand for starch
products on the Austrian market is to be antici-
pated (paper and fermentation sector) and the
planned production increase could therefore be
absorbed by the Austrian market.

would not also have been carried out without the
aid if Austria had actually already granted the aid.

(18)

is unjustified. Even if

The conclusion that because Agrana belongs to a
group of companies Austria could expect
that
group to invest unlimited funds in a particular
sector
the Commission
considered the status of Agrana with a view to the
group of companies it is part of, the notified invest-
ment project would not have been economically
viable without the aid and the more likely outcome
would have been the liquidation of the company.
The aid rate of 20 % is low and would enable the
company to expect profits at the earliest in seven
years.

(19) Moreover, the aid does not affect trading conditions
to an extent contrary to the public interest. In fact,
Austria’s accession to the European Union brought
benefits to starch producers in the other Member
the Community does not have to incur
States;
expenditure in refunds for starch exports to Austria
anymore. In addition, imports of starch products to
Austria after accession increased by a total of some
46 % in 1995 and 1996, and the share of Member
States accounted for around 96 % of that. That
situation would scarcely change, especially because
the aid rate would be low. The increase in produc-
tion volume, a mere 1 % of Community starch
production, can be absorbed by the increasing
demand from the paper and fermentation industry
in Austria.

IV

(20)

The investments in question are being undertaken
in the maize-to-starch processing area. Starch
obtained from maize as well as its saccharification-
products are products covered by Regulation (EEC)
No 1766/92. Article 19 of that Regulation stipu-
lates that Articles 92, 93 and 94 of the EC Treaty
apply to the products covered by it.

(17) Moreover,

the aid is necessary. The investment
decision was taken only after notification to the
Commission and in reliance on domestic political
commitments. The aid in question is subject of
negotiations between Austria and the Commission
for nearly three years. In view of the need for
structural adjustment, it would seem unreasonable
to expect a company fighting for its survival in the
common market to stand idly by waiting for a
decision while its economic existence is being seri-
ously threatened. The Commission would have
been in no doubt whether the investment project

(21) Article 92(1) of the EC Treaty prohibits any aid
which meets the criteria set out in it (State aid).
Therefore,
in a first step it must be examined
whether the notified aid measure constitutes State
aid within the meaning of Article 92(1) of the EC
Treaty.

(22)

The aid is to be granted in the form of a direct
subsidy by Austria and there is therefore no doubt
that the relevant criteria of Article 92(1) are satis-
fied. Also the aid benefits a particular company in

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the relevant
that Agrana is to receive 20 % of
investment costs. As results from the judgment of
the Court of Justice of the European Communities
of 17 September 1980 in Case C-730/79 (Philip
Morris v Commission) (7) the strengthening of the
economic position of an undertaking by means of
State
of
competition in relation to competing undertakings.

distortion

normally

indicates

aid

the fact

(23) As regards the criterion of adversely affecting trade
Austria has, as detailed above, disputed the conten-
tion that such would be the consequence of the aid.
The Commission cannot accept Austria’s argu-
ments. In assessing that criterion,
that
Austria’s accession to the European Community
had a positive impact on starch producers in the
Member States is irrelevant. According to Article 92
of the EC Treaty, the existence or otherwise of a
distortion of trade must be judged purely on the
basis of the circumstances of the aid in question.
According to the judgment of the Court of Justice
of 21 March 1990 in Case C-142/87 (Tubemeuse) (8)
even the relatively small aid rate or the slight
increase in production capacity does not exclude
the possibility of trade being affected. Indeed the
affectation of trade is, similar to the distortion of
competition, indicated since the aid envisaged by
Austria would strengthen Agrana’s position in rela-
tion to competitors in intra-Community trade (9).

(24)

There is a substantial volume of intra-Community
trade in starch. The following table shows that
Austria imports a major proportion of starch from
other Member States. Austria has
an annual
domestic production of some 180 000 tonnes and
has achieved a current degree of self-sufficiency of
55 %.

1995

1996

1997
(11 months)

Wheat starch

2 742

3 090

2 414

Maize starch

10 516

22 698

18 446

Potato starch

527

2 287

3 268

Modified starch and
dextrin

41 573

52 693

44 851

Total

55 358

80 768

68 979

[1980] ECR 2671, paragraphs 11 and 12.
[1990] ECR, I-959, paragraph 43.

(7)
(8)
(9) See footnote 7.

(25)

Since there is a structural production surplus of
20 % on the Community market there are no free
market
in the
segments and starch producers
Member States are therefore in a tense competition
situation. This situation exists not only on the
Community market but also on markets in third
countries to which the surpluses are exported with
the aid of export refunds.

(26) Under the scheme of the EC Treaty, the prohibi-
tion in Article 92(1) is followed by exemptions in
Article 92(2) and (3).

(27)

The exemptions listed in Article 92(2) of the EC
Treaty are inapplicable given the nature of the aid
measure in question and its objectives. Austria has
in fact not submitted that Article 92(2) is applic-
able.

(28) Article 92(3) specifies the circumstances under
which State aids which can be considered to be
common market. Their
compatible with the
compatibility with the common market must be
assessed from the point of view of the Community
and not that of an individual Member State. In the
interest of the functioning of the common market
and having regard to Article 3(g) of the EC Treaty,
the exemptions laid down in Article 92(3) from the
prohibition of State aid must be interpreted restric-
tively.

(29) With regard to Article 92(3)(a), it has to be noted
that the investment projects are not located in a
to the Guidelines on
region where pursuant
national regional aid (10) the economic situation is
extremely
the
Community as a whole (per capita gross domestic
product measured in purchasing power standards of
less than 75 % of the Community average).

unfavourable

relation

in

to

(30) With regard to Article 92(3)(b), it should be found
that the aid in question is not intended to promote
the execution of an important project of common
European interest or to remedy a serious distur-
bance in Austria’s economy.

(31)

The aid is, moreover, neither intended to achieve
nor suitable for achieving the objectives contained
in Article 92(3)(d).

(10) OJ C 74, 10.3.1998, p. 9.

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(32) Austria has not submitted that the above exemp-

tions are applicable.

Community Guidelines on State aid for
rescuing and restructuring firms in difficulty

In accordance with the Guidelines, restructuring
aid may, if it meets the conditions laid down in
them, be considered to contribute to the develop-
ment of certain economic sectors within the
the EC Treaty,
meaning of Article 92(3)(c) of
without adversely affecting trading conditions to an
extent contrary to the common interest.

It should be noted at this point that Austria does
not submit that the admissibility of the present aid
measure results from these Guidelines.

The Commission had already pointed out on the
occasion of the initiation of the procedure that if
restructuring aid is granted in a market character-
ised by structural overcapacity the Guidelines
in absence of
demand a reduction in capacity,
which the aid is contrary to the public interest (11).

The starch market is characterised by structural
overcapacity, which in consequence necessitates
the grant of export refunds and the sector’s exclu-
sion from eligibility for investment aids.

(33)

(34)

(35)

(36)

(37) While the investments subject to the present aid
measure are intended to achieve a restructuring of
the company concerned, which would, in accord-
ance with the Guidelines become competitive in
the long term, the grant award is not conditional
upon a reduction in production capacity but, on
the contrary, will contribute to a
substantial
increase in production capacity.

(38)

The above arguments demonstrate that the Guide-
lines do not constitute a legal basis for approving
the aid in question.

Regulation (EC) No 951/97

(39) Austria has, as explained above, disputed the
applicability of the selection criteria set out in the
Annex to Decision 94/173/EC. Pursuant to Article
16(5) of Regulation (EC) No 951/97 Member States
may grant investment aid for the processing and
marketing of products listed in Annex II to the EC

Treaty provided the aid is compatible with Articles
92, 93 and 94 of the EC Treaty. With regard to the
application of Articles 92, 93 and 94, the Commis-
sion has adopted the Guidelines for State aid in
connection with investments in the processing and
marketing of agricultural products (12) which refer
to the selection criteria set out in Decision 94/
173/EC. The first indent of point 2.1 of the Annex
to that Decision stipulates that investments in the
cereals sector in cereal starch facilities are excluded.

(40)

(41)

It follows that the said provisions not only do not
constitute a legal basis
for approving the aid
measure; as the aid relates to investments in the
production of starch from cereals it would be expli-
citly excluded from State aid and would be consid-
ered to be incompatible with the common market.

In this regard, Austria argues that the above legal
basis has been altered by point VII.D.1 of Annex
XV to the Act of Accession in conjunction with
the Final Act and the
Declaration No 31 of
Commission’s opinion on Austria’s
accession
application in so far that aid may be regarded as
compatible with the common market under Article
92(3)(c) of the EC Treaty even if its effect is to
expand production capacity.

(42) Article 151(1) of the Act of Accession stipulates
that the acts listed in Annex XV to the Final Act
apply in respect of the new Member States under
the conditions laid down in that Annex. Point
VII.D.1 of Annex XV to the Act of Accession
provides that Regulation (EEC) No 866/90 and
hence Regulation (EC) No 951/97 (13) shall be
applicable in the new Member States. With regard
to the application of Article 16(5) of the said Regu-
lation, which stipulates that Articles 92, 93 and 94
of the EC Treaty apply to the field of application of
the Regulation, it is laid down that the Commis-
sion is to implement those provisions with regard
to Austria and Finland in accordance with Declara-
tion No 31 of the Final Act. Declaration No 31
reads in this regard:

‘[The Contracting Parties
on the
following: . . .] flexibility on transitional national
aid schemes designed to facilitate restructuring.'

agree

(11) Points 3.2.2 (ii) and 3.2.5 (a) of the Guidelines.

(12) OJ C 29, 2.2.1996, p. 4.
(13) See footnote 6.

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(43)

the
The question arises whether application of
above provisions leads to the admissibility of aid
linked to an expansion of production capacity in
sectors excluded by Decision 94/173/EC.

(47) Austria claims that the original wording of point
VII.D.1 of Annex XV to the Act of Accession
(when Norway was still an applicant country) indi-
cates a contrario that,
to Norway,
capacity reductions were not a precondition for the
investment aid for Austria (and
admissibility of
Finland). Point D originally had a first indent and
read as follows:

in contrast

(44) As a preliminary the Commission notes that the
opinion Austria is referring to is not a legal docu-
ment but a political document and therefore of
restricted value for the examination of the case at
hand.

(45)

It should be noted furthermore that, as the Court of
Justice has held in Case C-730/79 (Philip
Morris) (14),
in considering the possibility of an
exemption from Article 92(1) under Article 92(3) of
the EC Treaty, the Commission is granted a certain
margin of discretion. That discretion the Commis-
sion is to use on the basis of a comprehensive
social and economic appraisal of the impact of the
aid on the Community. In doing so Declaration
No 31, which Austria has adduced to support its
arguments, must be taken into account and indeed
has led in three previous cases to the approval of
aid which would have been excluded pursuant to
the ‘normal' State aid regime (see: Austria N 445/B/
95 (15), Finland N 14/96 (16) and Austria N 517/96).
in Case N 517/96, accepted
The Commission,
three aid projects
in favour of Agrana which
involved investments in the potato starch sector. In
that decision the Commission relied on Declara-
tion No 31 in the Final Act but also on the fact
that the investments could not possibly entail an
increase in production capacity since the potato
starch sector is governed by a quota system by
virtue of Council Regulation (EC) No 1868/94 of
27 July 1994 establishing a quota system in rela-
tion to the production of potato starch (17). It is
therefore not correct that the Commission, despite
Declaration No 31, ‘simply applies the rules which
it otherwise applies to aid'.

(46)

The present aid measure differs from the above
cases in that it involves an expansion of production
capacity in a sector which is not regulated by a
quota system and is characterised by structural
overcapacity.

(14) See Philip Morris (footnote 7), paragraph 24.
(15) As regards the effectiveness of a provision (see for instance
judgment of the Court of Justice in Case C-34/62, Germany
v. Commission [1963] ECR 271.
(16) See fottnote 5, points 3.2.3 and 3.2.4.
(17) OJ L 197, 30.7.1994, p. 4.

‘[. . .] When applying Article 16(5) [of Regula-
tion (EEC) 866/90], the Commission:

(cid:190) may authorise Norway to grant,

for the
three years which follow its accession,
national aids to investments in any sector of
products falling within Annex II to the EC
Treaty and in need of being restructured, on
condition that the production capacity of
the said sector is not increased,

(cid:190) will

implement

these provisions with
respect to Austria and Finland in accord-
ance with Declaration No 31 set out in the
Final Act.'

(48)

The Austrian argumentation a contrario must be
rejected where ipso interpretatione the automatic
result appears to be the admissibility of expansions
in production capacity regardless of the merits of
each individual case. In fact, such a result would be
tantamount to divesting the flexibility referred to in
Declaration No 31 of its meaning. Also, it is noted
that the above provision which includes the refer-
ence to Norway has in this form not become part
of Community law.

(49)

examination

Rather, the Commission, in the framework of the
comprehensive
includes
which
is called upon to consider
Declaration No 31,
whether the aid is likely to promote the develop-
ment of an economic sector or area without
affecting trading conditions to an extent contrary to
the common interest.

(50) With regard to the development of the economic
sector, the Commission assumes that such would
be the effect of the aid. As a result of its expansion
of capacity, Agrana should succeed in significantly
reducing the ratio of
fixed costs to production
volume and thereby become competitive. The
Commission
previous
production capacity would not have been enough
to guarantee its long-term competitiveness.

that Agrana’s

accepts

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(51)

The Commission also took account of the fact that,
with the accession of Austria to the European
Community, Agrana no longer had the protective
economic conditions from which it had previously
benefited. Since Austria was not granted any tran-
sitional aid through the Act of Accession in the
starch sector the economically unfavourable cost
structure of Agrana had an immediate impact
following Austria’s accession.

(52) With regard to the impact of the aid on trading
it has already
conditions and common interest,
been shown that there is intra-Community trade in
starch. Starch producers in other Menber States
which export to Austria may find their competitive
position on the Austrian market affected by Agra-
na’s capacity, expansion or may be exposed to
intensified competition on other markets. In so far
as Austria puts forward the possibility of new
outlets for starch created by the Austrian paper and
citric acid industry, it is reasonable to assume that
starch producers from other Member States will be
interested to covering these new or growing market
segments without having aid to a competitor alter
competitive conditions to their disadvantage since
the Austrian starch market has already been pene-
trated.

(53) Also, an aid which is to provide a stimulus to
compensate for the positive impact of increasing
demand on the existing market disequilibrium by
increasing production capacity appears to be prob-
lematic. Such an aid would not be covered by
Declaration No 31 because it contorts its aim and
scope beyond what could still be considered
reasonable in terms of distortion of competition
with a view to the common organisation of market
in cereals (18). This result is also coherent with the
approach the Commission has adopted in the
Guidelines on State aid for rescuing and restruc-
turing which foresee flexibility as regards assisted
areas and small and medium-sized enterprises
(SMEs) (19). Whilst not as such applicable to the
present case the notion of flexibility as defined in
those Guidelines is of value in a systematic context.

(18) In this case investment aid was granted to restructure the
marketing sector and restrict capacity in the sugar sector,
which is excluded from investment aid.

(19) In this case capacity restrictions were made a condition for

investment aid to restructure the production sector.

In the Guidelines, flexibility is specified to mean a
latitude in determing the extent of the capacity
reduction but does on no account confer the power
allow for a capacity increase.

(54)

(55)

(56)

It is the Commission’s opinion that the aid affects
trading conditions to an extent contrary to the
common interrest by helping to increase supply in
a market marked by limited demand and thereby
distorts competition. It should be noted that the
problem of surpluses in the common agricultural
policy has been countered by the Guidance Section
of the European Agricultural Guidance and Guar-
antee Fund in that it has not made available any
part-financing for investments in the concerned
sector since July 1980.

In addition, the aid would indirectly contribute to
an aggravation of a situation in which Community
funds are used for exporting the surplus of over
demand in starch of about 20 % to third countries.

and notwithstanding the

flexibility
Therefore,
clause in Declaration No 31,
the Commission
considers the aid to be incompatible with the
common market pursuant to Article 92(3)(c) of EC
Treaty.

Necessity of the aid

(57) A further element which leads the Commission to
reject applicability of Article 92(3)(c) of the EC
Treaty is that Agrana has already completed the
investments and that respective facilities are opera-
tional.

(58)

(59)

Pursuant to Article 92(3)(c) and to the case-law of
the Court of Justice (20) aid can only be considered
to facilitate the development of a sector if, without
forces would not
it,
persuade potential beneficiaries to act so as to bring
about the development of the sector.

the free play of market

Setting aside that principle would mean permitting
aid in situations where competition itself ensures
the optimum allocation of resources and provides
for the development of the sector. Such aid would
mean granting to the companies concerned unjus-
tified trading advantages by improving their finan-
cial position without providing a stimulus to invest.
For that reason the Commission tends to regard
retroactive investment aid as operating aid and the
resultant effect on trade as contrary to the common
interest as embodied in Article 92(3)(c).

(20) See Philip Morris (footnote 7), point 17.

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Official Journal of the European Communities

27. 5. 1999

(60)

(61)

(62)

(63)

If the Article 93 procedure is not to be rendered
futile, a potential aid recipient cannot normally
entertain legitimate expectations of a positive
Commission decision before the aid examination
procedure is complete. That principle must partic-
ularly apply to aids for which the Commission has
a degree of discretion which is not circumscribed
through secondary legislation (guidelines,
frame-
works).

In particular, political commitments made by the
national government or the national authorities of a
Member State to the potential beneficiary (21)
cannot engage the Commission and neither can
they create legitimate expectations on the part of
the potential beneficiary.

In the light of the above arguments, Agrana can be
said to have acted ‘at its own risk' in carrying out
the investments. If the owners of Agrana could not
have had legitimate expectations as to a positive
decision about the notified aid, and if consequently
Agrana in accordance with the requirements of
good commercial practice, must be presumed to
have at least taken into consideration the opposite
outcome, namely a Commission decision not to
allow the aid then the completion of the invest-
ments is circumstantial evidence for the opinion of
Agrana’s owners that the investments would pay off
even without the aid.

the Commission has

By way of a subsidiary observation the Commission
considers the definition of an ‘undertaking' used by
Austria to be too narrow in this context. Theoreti-
cally,
substantiated that
conception in its decision to initiate proceedings
by referring to the ‘market economy investor prin-
ciple' (22) and has stated that a private holding
company or group of enterprises can be expected
to pursue a structural, global or sectoral policy
guided by a longer-term view of profitability and
therefore to make decisions at group level
in a
wider financial context and may therefore inject
new capital to ensure the survival of a company
experiencing temporary difficulty but which could
be expected to return to profit after restructuring.

(64)

In the course of the proceedings Austria has not
adduced any arguments which would persuade the
Commission to dismiss that conclusion.

(21) Austrian letter of 13 February 1998 and points 3 and 4.5 of

Austria’s letter of 14 November 1996.

(22) See in this

respect Commission Communication of 17
September 1984: Application of Articles 87 and 88 of the EC
Treaty to public authorities’ holdings (Bulletin EC 9-1984)
and Commission Communication to the Member States on
the application of Articles 87 and 88 of the EC Treaty and
Article 5 of Commission Directive 80/723/EEC to public
undertakings
(OJ C 307,
in the manufacturing sector
13.11.1993, p. 3).

(65) Austria’s argument to the effect that the owners of
Agrana cannot be expected to invest unlimited
funds in a specific sector is not convincing, and
neither does the economically isolated view of
accord with
advocated by Austria
Agrana
economic reality.

as

(66)

(67)

(68)

The Commission noted when initiating the
procedure that the economic data initially supplied
by the Austrian authorities related only to Agrana
and ignored its financial links with an international
holding company, Agrana Beteiligungs-AG. Agrana
is 98,75 %-owned by Agrana Beteiligungs-AG and
the latter is linked to another large group, Deutsche
S(cid:129)dzucker AG, by a capital holding. Deutsche
S(cid:129)dzucker AG has 50 % of the voting capital in
Agrana Beteiligungs-AG. Agrana Beteiligungs-AG’s
accounts for the 1995/96, 1996/97 and 1997/98
financial years showed increasing annual profits
after tax and it is pursuing an international strategy
which is reflected in holdings in eastern Europe.
Deutsche S(cid:129)dzucker AG is also internationally
active and had an appreciably increased consoli-
dated annual profit for the 1996/97 financial year.

Regardless of the organisational independence of
Agrana Beteiligungs-AG, Agrana and the other
subsidiaries and regardless of the absence of civil
law claims by Agrana on Agrana Beteiligungs-AG
to assume the former’s losses, it would be econom-
ically unreasonable for the owners of a company to
act without considering its economic options.

In view of
the resultant spectrum of economic
opportunities (particularly regarding the temporal
perspectives of the investment). which was broader
if regarded in
than the one the deficit Agrana,
isolation, would have disposed of,
it cannot be
doubted that
the owners of Agrana decided in
favour of the option which they regarded as finan-
cially appropriate under the given circumstances,
which included uncertainty as to the grant of the
aid. The hypothesis that it would have been more
probable that the company would have been liqui-
dated out of
financial considerations had there
been no aid proves to be inaccurate given the
actual decision taken.

(69)

In conclusion, the aid should be considered an
operating aid covered by the prohibition on State
aid under Article 92(1) of the EC Treaty which does
not qualify for one of the derogations set out in
Article 92(2) and (3) of the EC Treaty. The aid is
therefore incompatible with the common market,

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Official Journal of the European Communities

L 131/69

HAS ADOPTED THIS DECISION:

Article 1

The aid plan notified by Austria, according to which aid
is to be granted to Agrana St(cid:132)rke-GmbH, Hollandstraße 2,
1020 Wien, for the following investments in Aschach in
the starch production sector:

(a) converting a high-pressure soaking facility for maize
starch to standard technology and increasing its
capacity from [ . . . ] (*) tonnes to [ . . . ] (*) tonnes of
maize per day;

(b) investing in a saccharification line using maize starch
as the raw material with an annual capacity of [ . . . ] (*)
tonnes dry matter,

at an intensity of 20 % of the investment costs is
incompatible with the common market.

The aid plan does not qualify for any of the exemptions
from the prohibition of State aid as listed in Article 92(2)
and (3) of the EC Treaty. It may not therefore be imple-
mented.

Article 2

This Decision is addressed to the Republic of Austria.

Done at Brussels, 30 September 1998.

For the Commission

Franz FISCHLER

Member of the Commission