1999/365/EC: Commission Decision of 14 October 1998 on a proposal by Austria to grant aid to LiftgmbH (notified under document number C(1998) 3212) (Text with EEA relevance) (Only the German text is authentic)
Date: 1998-10-14
Institutions: European Commission
Subjects: Austria, State aid, control of State aid, hoisting equipment, interest rate subsidy

L 142/32

EN

Official Journal of the European Communities

5. 6. 1999

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 14 October 1998

on a proposal by Austria to grant aid to LiftgmbH

(notified under document number C(1998) 3212)

(Only the German text is authentic)

(Text with EEA relevance)

(1999/365/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 notice in accordance with Article 93 of the
EC Treaty to the parties concerned to submit
their
comments,

Whereas:

I

LiftgmbH is a subsidiary of the Austrian group of compa-
nies Doppelmayr-Seilbahnvertriebsgesellschaft mbH. The
group’s main activities focus on the manufacture and
installation of surface and aerial cableways, funicular rail-
ways, urban transit
elevators, mechanical
systems,
garaging systems and stacker cranes for high-rise ware-
houses. According to the Austrian authorities, the group’s
turnover amounts to ATS 2,5 billion (ECU 180,5 million)
and its balance sheet total comes to ATS 1,6 billion (ECU
115,5 million). The group employs 950 people.

The ropeways business area is the group’s most important
one in terms of number of employees and turnover.
LiftgmbH is part of this business area. It has set up a
SanHe Doppelmayr Transport
Chinese
Systems Co. Ltd, and invested ATS 54,1 million (ECU 3,9
million)
in SanHe,
Hebei Region.

in a small-scale production plant

subsidiary,

The subsidiary produces
the
Chinese market. In 1997 it made three lifts with 20
employees. In the medium term it plans to make 15 lifts
a year with 50 employees.

fixed-grip chairlifts

for

Austria proposes to grant LiftgmbH a soft loan of ATS 25
million (ECU 1,8 million), the grant equivalent of which
is ATS 1,8 million (ECU 130 500) (1). The loan’s duration
is eight years, a two-year grace period being followed by a
the loan
six-year-long half yearly repayment scheme;
bears an interest rate of 3,5 % for the first two years, 4 %
for the next three years and 6,25 % for the last three
years. The aid intensity of this amount is 3,2 % gross. The
aid is to be disbursed under the ERP internationalisation
scheme. In its Decision 97/240/EC (2) the Commission
approved the scheme subject to aid being granted only for
direct foreign investment by SMEs and to any aid for
large enterprises being notified individually.

(1) In determining the grant equivalent of

Commission applied the reference interest
applicable to Austria of 5,96 %.

(2) OJ L 96, 11.4.1997, p. 15.

the soft

the
loan,
rate currently

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L 142/33

II

Since, according to the independence criterion set out in
Commission Recommendation 96/280/EC concerning
the definition of small and medium-sized enterprises (1),
LiftgmbH is a large enterprise, Austria notified the aid
proposal to the Commission by letter dated 23 January
1997. The Commission requested additional information
by letter dated 24 February 1997, and this was furnished
by Austria by letters received on 12 and 18 June 1997.
The Commission requested yet more information by
letter dated 28 July 1997. Following a reminder dated 30
September 1997, Austria sent the information by letter
received on 10 October 1997.

in this case, and Austria was

On 2 December 1997 the Commission decided to initiate
informed
proceedings
accordingly by letter dated 16 December 1997. Austria
submitted its comments by letter dated 8 May 1998. The
notice informing the Austrian Government of
the
Commission’s decision and inviting interested parties to
submit observations on the measure in question was
published in the Official Journal of
the European
Communities (2). No observations from third parties were
forthcoming.

III

likely to affect trading conditions in the Community.
Such is the view expressed by the Court of Justice of the
European Communities in its judgment in Case 142/87
Tubemeuse (3). The effect on trading conditions is particu-
larly strong in this case since in terms of sales volume the
EEA market is the largest regional market and two of
Doppelmayr’s main competitors are established in the
EEA.

There is evidence to suggest that these competitors of
Doppelmayr are trying to increase their market shares in
China and are considering investing in Chinese produc-
tion facilities. The State aid may therefore strengthen
Doppelmayr’s position in the EEA market compared with
its competitors in that market, who have received no aid
for direct foreign investment.

Austria has indirectly acknowledged the granting of aid in
this case by saying that,
in its view, the soft loan to
LiftgmbH would improve the strategic position of the
Doppelmayr group and have a favourable impact on the
Austrian economy.

Aid within the meaning of Article 92(1) of the EC Treaty
and Article 61(1) of the EEA Agreement is in principle
incompatible with the common market. Paragraphs 2 and
3 of those Articles set out the circumstances, however, in
which such aid may be considered compatible with the
common market.

The key factor in deciding to initiate proceedings in this
case was the conclusion that the ATS 25 million (ECU 1,8
million) soft loan from the ERP Fund for a direct foreign
investment by LiftgmbH in China constituted State aid
within the meaning of Article 92(1) of the EC Treaty and
Article 61(1) of the EEA Agreement.

The exceptions laid down in Article 92(2) of the EC
Treaty are not applicable in this case. No aid having a
social character, granted to individual consumers, and no
aid to make good the damage caused by natural disasters
is involved.

Doppelmayr, which is headquartered in Wolfurth, Vorarl-
berg, is a global player in the ropeways market with a
market share in Europe of approximately 20 %. Its main
competitors are the Swiss firm Garaventa AG, the Italian
firm Leitner and the French firm Pomagalski SA. These
four firms together hold a market share in the European
market of almost 90 %. They also dominate the world
market. In terms of volume of sales, however, the Euro-
pean market remains the largest regional market.

The aid planned by Austria is of such a character as to
strengthen the financial and strategic position of the reci-
pient enterprise as a whole. The Austrian authorities
stated inter alia that Doppelmayr could increase the
return on its investment in R&D and that the strength-
ening of the earnings of the Austrian parent company
would be reflected in dividends. It
is obvious that a
strengthening of the financial and strategic position of a
European enterprise which does business in the EEA is

Since Wolfurth, where LiftgmbH is located, is not in an
assisted area, the exceptions laid down in Article 92(3)(a)
of the EC Treaty and the regional aspects of the excep-
tions in Article 92(3)(c) are likewise not applicable. The
Commission is of the opinion that these exceptions do
not apply to investments in a non-Community country (4).

As regards the exceptions laid down in Article 92(3)(b) of
the EC Treaty, the Commission finds that the project
does not satisfy the criteria normally required of a ‘project
of common European interest' and that the aid is not
intended to remedy a serious disturbance in the economy
of a Member State.

The exceptions laid down in Article 92(3)(d) do not apply
either, as the aid is not intended to promote culture and
heritage conservation.

(1) OJ L 107, 30.4.1996, p. 4.
(2) OJ C 109, 8.4.1998, p. 8.

[1990] ECR, I-959, paragraph 35.

(3)
(4) OJ L 96, 11.4.1997, p. 15.

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Official Journal of the European Communities

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Nor has Austria sought to justify the grant of the aid on
the basis of the above exceptions.

Only the first alternative in the first sentence of Article
92(3)(c) of the EC Treaty may be applicable in so far as
the aid helps to facilitate the development of certain
economic activities  in this case the internationalisation
of the Doppelmayr group through its expansion into the
Chinese market  without
trading conditions being
adversely affected to an extent contrary to the common
interest (1).

This is the first time that aid for a direct foreign invest-
ment by a large enterprise has been notified by Austria.
The Commission has in the past not authorised State aid
for direct foreign investments by large enterprises.

In its decision initiating the proceedings, the Commis-
sion set forth the criteria according to which aid for direct
foreign investments by large enterprises must be assessed.
The Commission must in particular:

1. ensure that the aid does not contain any disguised

export elements,

2. take into account the effects on employment in both

the source country and the host country,

3. consider the risks of subsidiaries or production plants
to non-

being relocated out of Member States
Community countries,

4. consider any local content requirements, and

5. examine the necessity of the aid, including the envis-
aged aid intensity, in the light of the international
competitiveness of European industry and/or of the
risks
in certain non-
member countries.

run by investment projects

The Commission’s concerns about the fulfilment of the
criterion in point 5 were decisive when it came to
initiating proceedings. The Commission accordingly
sought proof from the Austrian Government that the aid
was intended to reduce or offset the negative effects of
market deficiencies, such as the usual difficulties facing a
small or medium-sized enterprise, economic risks and
political risks. It also sought proof that the aid was essen-
tial to LiftgmbH pursuing its internationalisation objec-
tives. It queried, lastly, whether the allegedly insufficient
level of internationalisation on the part of the Doppel-
mayr group was sufficient grounds for granting aid to
LiftgmbH.

The Austrian Government replied that the Doppelmayr
group had to be enabled to internationalise its business
and strengthen its competitiveness in the world market.

(1) OJ L 96, 11.4.1997, p. 15.

In view of the political and economic risks connected
with the investment, the group would not carry out the
project without the soft loan. The economic risks were
especially high during the first five years of operation.
They included lengthy approval procedures, delays in
starting up, no or inadequate infrastructure, the training
of staff, the procurement of inputs, the achievement of
the necessary product quality and wide exchange rate
variations. According to the Austrian Government, the
economic risks had already caused additional costs of ATS
1 million (ECU 72 000) and might cause further costs of
ATS 5 million (ECU 361 000) over the next two years.
With regard to the political risks, reference was made to
the crisis in Asia and to as yet unforeseeable political
setbacks.

The Commission notes that the plan to start production
in China is based on a strategic decision by the Doppel-
mayr group. According to the Austrian Government,
LiftgmbH was set up solely with a view to carrying out
this investment in China. It therefore has to be proved
that economic and/or political risks have prevented the
Doppelmayr group from producing goods in China and
that the investment would not be undertaken unaided.

The Commission takes into account the fact that the risks
foreign investment depend on the
inherent
enterprise’s size, its experience in the area concerned and
its position in the market.

in direct

is

a profitable

Doppelmayr
enterprise with sound
finances. The cost of the investment project is equivalent
to 2,2 % of group turnover and 3,4 % of its balance sheet
total. In the Commission’s opinion, compared with the
group’s turnover and net asset value the investment is a
minor undertaking for Doppelmayr.

Doppelmayr has a worldwide presence in the ropeways
business and has been active internationally for decades.
The group exports its products to more than 45 countries
and has built up an extensive international network of
subsidiaries and joint ventures in 25 countries. The
Doppelmayr group thus has a foothold in, for example,
the United States of America, Canada, Australia, New
Zealand, Turkey, Russia, Chile, Japan, Korea and China.
It is already present in countries where there is a fairly
high-risk economic environment, and as
the
Commission is aware it did not receive any State aid to
open up these markets. It can be concluded from this that
the Doppelmayr group is familiar with international prac-
tices and has considerable experience of
setting up
production facilities abroad.

far as

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L 142/35

For
ropeway manufacturers, China is a strategically
important and promising market. In order to be able to
enter the Chinese market effectively and satisfy the local
content requirements, the building of production facilities
in China is essential. A ropeway manufacturer with subsi-
diaries or joint ventures in this market undoubtedly has a
competitive advantage over rivals with no Chinese plants.
From a strategic point of view, it is crucial to enter this
market early so as to be sure of being in a strong position
in future. This is especially true of a global market leader
like Doppelmayr.

Austria announced by letter dated 8 May 1998 that
LiftgmbH had already started production in rented prem-
ises. In order to enter the Chinese market, it is therefore
immaterial whether a ropeway manufacturer uses rented
or its own premises. Austria’s objective of encouraging the
Doppelmayr group to expand into the Chinese market
has manifestly already been attained without State aid.

Against this background, the Austrian authorities have
not proved that, for a globally active enterprise with a
turnover of ATS 2,5 billion (ECU 180,5 million), aid of
ATS 1,8 million (ECU 0,13 million) is the decisive factor
when it comes to setting up a plant in China; this invest-
ment is, rather, part of a strategic plan to enter a prom-
ising market worth ATS 200 million (ECU 27 million).
Nor has the aid been shown to be essential to encour-
aging the Doppelmayr group to expand into the Chinese
market (1).

Lastly, the Commission takes into account with regard to
the international competitiveness of the relevant Euro-
pean industry the fact that the enterprises which domi-
nate the world market are European. There is therefore no
plausible evidence to suggest that favouring one of the
European competitors in respect of an investment project
in a non-Community country may help to improve the
competitiveness of European industry.

The Commission has accordingly reached the conclusion
that the proposed aid for direct foreign investment by
LiftgmbH in China does not contribute to the develop-
ment of certain economic activities within the meaning of
Article 92(3)(c) of the EC Treaty and hence is incompat-
ible with the common market.

The granting by Austria to LiftgmbH of aid in the form
of a soft loan of ATS 25 million (ECU 1,8 million) can
therefore not be authorised.

The Commission does not intend to use this Decision to
lay down its future policy on direct foreign investment.
This Decision does not rule out the possibility that direct
foreign investment by large enterprises, in particular in
the countries of Central and Eastern Europe, may be
considered eligible for assistance where it can be proved
that a project is in the interests of European industry and
that competition in the EEA will not be restricted as a
result,

HAS ADOPTED THIS DECISION:

Article 1

The proposal by Austria to grant aid in the form of an
ATS 25 million (ECU 1,8 million) soft loan from the ERP
Fund for direct foreign investment by LiftgmbH, Wohl-
furth, in China is incompatible, pursuant to Article 92(1)
of the EC Treaty, with the common market and, pursuant
to Article 61(1) of the EEA Agreement, with the func-
tioning of that Agreement.

The aid may accordingly not be granted.

Article 2

Austria shall inform the Commission within two months
of the date of notification of this Decision of the meas-
ures taken to comply therewith.

Article 3

This Decision is addressed to the Republic of Austria.

Done at Brussels, 14 October 1998.

For the Commission

Karel VAN MIERT

Member of the Commission

(1) See the judgment of

the Court of Justice in Case 730/79

Philip Morris [1980] ECR, p. 2671, paragraph 17.