2000/200/EC: Commission Decision of 25 November 1999 concerning an aid scheme implemented by Portugal with a view to reducing the debt burden of intensive stock farms and assisting recovery in the pig-farming sector (notified under document number C(1999) 4861) (Only the Portuguese text is authentic)
Date: 1999-11-25
Institutions: European Commission
Subjects: Portugal, aid system, control of State aid, infringement of EU law, intensive livestock farming, swine

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COMMISSION DECISION

of 25 November 1999

concerning an aid scheme implemented by Portugal with a view to reducing the debt burden of
intensive stock farms and assisting recovery in the pig-farming sector

(notified under document number C(1999) 4861)

(Only the Portuguese text is authentic)

(2000/200/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Community, and in particular the first subparagraph of Article
88(2) thereof,

Having regard to Council Regulation (EEC) No 2759/75 of 29
October 1975 on the common organisation of the market in
pigmeat (1) and Council Regulation (EEC) No 2777/75 of 24
October 1975 on the common organisation in poultrymeat (2),
as last amended by Regulations (EC) No 3290/94 (3) and (EC)
No 2916/95 (4), and in particular Articles 21 and 19 thereof,

on

interested

parties

to

submit

their

Having
comments (5),

called

Whereas:

I

Procedure

(1) Decree-Law No 146/94 of 24 May 1994 includes,

in
Chapter I, a credit line for reducing the debt burden of
intensive stock farms and, in Chapter II, a credit line for
assisting recovery in the pig-farming sector. The
Decree-Law was published in the Portuguese Official
Gazette (6).

the credit

Commission sent Portugal a letter pursuant to Article
88(3) of the Treaty, asking it to confirm, within 15
working days, the existence of the aid,
its entry into
force, any budgetary implications it might have and
lines. By letter of 23
details of one of
gave
authorities
December 1996 the
confirmation of the existence of Decree-Law No 146/94
on State aid in the form of credit lines for reducing the
debt burden of
intensive stock farms and
assisting recovery in the pig-farming sector. The
measures were accordingly entered, under NN 65/97, in
the register of unnotified State aids.

Portuguese

firms of

(3)

(4)

(5)

By letter of 23 May 1997, recorded as received on 27
May 1997,
the Portuguese Permanent Representation
sent the Commission the information it had requested
in its letters of 26 November 1996 and 5 May 1997.

By letter of 10 October 1997 the Commission notified
its decision to initiate proceedings under
Portugal of
Article 88(2) of the Treaty against the aids in question.
In the letter,
the Commission also gave notice to
Portugal to submit its comments within one month of
the date of the letter.

in Article 88(2) of
Journal

The Commission’s Decision to initiate the proceedings
the Treaty was
provided for
published in the Official
the European
of
Communities (7). The Commission invited the other
Member States and other interested parties to submit
their comments on the aids in question within one
month of the publication of the Decision in the Official
Journal of the European Communities.

(2) On 26 November 1996, since it had received no notice
of the State aid from the Portuguese authorities, the

(6)

Portugal submitted its comments by letter dated 13
January 1998.

(1) OJ L 282, 1.11.1975, p. 1.
(2) OJ L 282, 1.11.1975, p. 77.
(3) OJ L 349, 31.12.1994, p. 105.
(4) OJ L 305, 19.12.1995, p. 49.
(5) OJ C 83, 18.3.1998, p. 5.
(6) DiÆrio da Repœblica, Series I-A, No 120 of 24 May 1994.

(7)

The Commission did not receive any comments from
other interested parties.

(7) See footnote 5.

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II

Credit line for assisting recovery in the pig-farming
sector

Description of the aids

(12)

The purpose of this credit line is to provide pig farms
inputs
with financial resources for the acquisition of
(intermediate consumption).

(8)

The purpose of Decree-Law No 146/94 of 24 May
1994 is
to overcome what are regarded as grave
structural difficulties in the pig and poultry sector, a
sector which does not qualify under operational
programmes
co-financed by the EAGGF Guidance
Section. The Decree-Law introduces two measures: a
credit line (available to pig-, poultry- and rabbit-farmers)
and a
in respect of
pig-breeding and fattening in closed circuit).

(available only

credit

line

Credit line for reducing the debt burden in the
intensive stock-farming sector

(13)

The aid was granted in the form of an interest-rate
subsidy for bank loans. The loans were for a period of
up to four years and were repayable annually. The
interest-rate subsidy, expressed as a percentage of the
interest rate applicable under the contract concerned,
varied from year to year and was degressive from the
first year onwards (first year 10 %, second year 8 %,
third year 6 % and fourth year 4 %).

(14)

There was a limit of PTE 7,632 billion on the overall
amount of the loans.

(9)

The objectives of the credit line for reducing the debt
burden in the intensive stock-farming sector were as
follows:

III

(cid:151) to

enable

to
debts

renegotiate
towards

beneficiaries
related

their
stock-farming
credit
institutions where there was proof that such debts
in modern
were
facilities,
environmental
protection that had taken place between 1 January
1985 and 31 December 1993,

connected with investments

animal

health

and

(cid:151) to make available to those beneficiaries resources for
the settlement of unpaid debts towards suppliers of
capital goods, debts which had fallen due between 1
January 1992 and 31 December 1993.

(10)

The aid was granted in the form of an interest-rate
subsidy for bank loans. The loans were for a period of
up to five years and were repayable annually from the
second year onwards. The interest-rate subsidy changes
annually and is degressive from the first year onwards
(first year 60 %, second year 45 %,
third year 30 %).
From the fourth year onwards the interest-rate subsidy
ceases to apply to the loans. The subsidy was calculated
in relation to the reference rate of 13 % specified in
Decree-Law No 359/89 of 18 November 1989 (8).

Reasons for initiating proceedings under Article 88(2)
of the Treaty

(15)

The reasons which prompted the Commission’s decision
to initiate proceedings under Article 88(2) of the Treaty
can be summed up as follows.

(16)

(17)

The Commission took the view that the credit line for
reducing the debt burden in the intensive stock-farming
sector did not, in the light of the Community guidelines
applicable at the time (9), satisfy the requirements for
being regarded as aid for rescuing or restructuring firms
in difficulty. By virtue of point 2.2 of
the said
guidelines, Member States may continue to apply special
types of aid in the
these
Commission rules
agricultural sector.

for

Complying with the special rules for the restructuring of
firms in the agricultural sector means fulfilling three
requirements: the aid must relate to investment already
carried out; the aid (possibly combined with earlier aid
in the case of these investments) must not exceed a
certain rate and the firms must offer certain guarantees
in terms of viability and be in danger of bankruptcy.

(11)

There was a limit of PTE 28 billion on the overall
amount of the loans.

(18)

The Commission took the view that
granted by
satisfied the
Portugal
requirements but not the other two.

the credit
first of

line
these

(8) The national reference rate is currently 8 %.

(9) OJ C 368, 23.12.1994, p. 12.

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(19)

recovery

that, since the credit

The Commission felt
line for
in the pig-farming sector was
assisting
intended for the acquisition of inputs, it concerned not
investments but short-term loans (crØdits de gestion). The
satisfy the principal
measure in question did not
of Community
requirement
practice, namely that
should have a maximum
duration of one year.

applicable

virtue

by

it

authorities stated that the meaning of (cid:145)the Commission
that since it was
took into consideration, however,
established a posteriori that the upper limits had been
exceeded,
those limits had not been complied with
when the aid was granted(cid:146) was not clear. According to
the Portuguese authorities, the Commission was raising
the precise moment when
the formal question of
non-compliance with the
as
opposed to the basic question of compliance with the
maximum amounts.

limits was

recorded,

IV

(23)

Arguments put forward by Portugal

(20)

letter

By
Portuguese
of 13 January 1998 the
Government submitted its comments on the measures
described under Section III.

the

limits

sectoral

The Commission concluded that the aid scheme did not
comply with
under Council
Regulation (EC) No 950/97 (10). According to the
Portuguese authorities, the Commission appeared to be
applying to the aid scheme for agricultural holdings the
sectoral
specified in that Regulation, on the
grounds that those limits were part of the agricultural
structures policy. This requirement was not, however,
part of the guidelines and, as the Portuguese authorities
saw it, was not applicable.

limits

(21)

Commenting generally, the Portuguese authorities stated
that the aids in question were Portugal’s only measure
in favour of intensive stock-farming, a sector which was
experiencing major difficulties as a consequence above
all of three factors:

(24) With regard to the viability of the firms, the Portuguese
authorities pointed out
the Commission criteria
that
referred to viability only, without specifying whether
this meant economic or financial viability. The said
authorities further took the view that it could not be
assumed that the banks’ scrutiny would be limited to an
examination of the financial situation of the firm.

(cid:151) the early opening up of agricultural frontiers, with
the
in prices brought

about by

sharp falls
unrelenting pressure of imports,

(cid:151) high interest

rates charged by banks, especially

where borrowers belonged to the farming sector,

(cid:151) high feed prices as a result of drought

(and,
consequently,
in 1993 and
a poor harvest)
Portugal’s geographical remoteness in relation to the
other Member States.

The Portuguese authorities added that,
in spite of the
aid, the market situation for intensive stock-farming had
failed to improve. From 1993 Portugal moved from
self-sufficiency to being a net importer of 20 % of its
domestic requirements in that sector.

Credit line for reducing the debt burden in the
intensive stock-farming sector

(22)

The Portuguese authorities underlined the fact that the
Commission recognised (cid:145)that the amount of the aid is
below the maximum rates normally allowed by the
the Portuguese
Commission ((cid:133))(cid:146).

In this

respect,

Credit line for assisting recovery in the pig-farming
sector

(25)

The Commission did not receive any comment from the
Portuguese authorities regarding this measure.

V

Assessment of the aids

Applicability of Article 87(1) of the Treaty

(26) Under Article 21 of Regulation (EEC) No 2759/75 and
Article 19 of Regulation (EEC) No 2777/75, Articles 92
to 94 (now Articles 87 to 89) of the Treaty apply to the
production of, and trade in, the products referred to in
Article 1(1) of those Regulations.

(10) OJ L 142, 2.6.1997, p. 1.

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(27) Under Article 87(1) any aid granted by a Member State
or through State resources in any form whatsoever
which distorts or threatens to distort competition by
favouring certain undertakings or the production of
certain goods is incompatible with the common market.

competition, without any justification as regards the
Community interest and, at the same time, to permit
undue advantage to operators in certain Member States.

(28)

(29)

The Community produces 22,31 million tonnes of meat
and other products derived from pigs, poultry and
rabbits (11). Portugal’s production is 0,54 million tonnes.
trade in these
There is an appreciable amount of
products between Portugal
the
Community: in 1997 Portugal’s imports and exports of
these products totalled 75 900 tonnes and 4 100 tonnes
respectively. In terms of value the exports were worth
EUR 6,0 million and the imports EUR 160,5 million.

and the

rest of

The measures in question are therefore likely to affect
trade in pig and poultry products between Member
States since the aid favours operators in one Member
State and not in the others. The measures have a direct
and immediate effect on the production costs of
intensive stock farms in Portugal. Consequently they
give these farms an economic advantage denied to farms
in other Member States which do not have access to
such aids. They accordingly distort, or
threaten to
distort, competition.

(30)

In the light of the above the measures must be regarded
as State aids covered by Article 87(1).

Possible derogations under Article 97 of the Treaty

(31)

(32)

(33)

is possible

It
incompatibility laid down in Article 87(1).

to derogate

from the principle of

The exceptions to that incompatibility, which are set
out in Article 87(2), are manifestly not applicable in this
case, however, and were not invoked by the Portuguese
authorities.

sectoral

The derogations provided for in Article 87(3) must be
aid
strictly interpreted when regional or
programmes or individual
instances of the application
of general aid schemes are examined. They can be
granted only where the Commission can establish that
the aid is necessary for the achievement of one of the
objectives concerned. To grant those derogations to aid
not
to permit
trade between Member States, and of
distortion of

condition would be

fulfilling that

(34)

By virtue of Article 87(3)(c), aid may be regarded as
compatible with the common market if it is intended to
facilitate the development of certain economic activities
or of certain economic areas and does not adversely
affect trading conditions to an extent contrary to the
common interest.

(35)

It is in the light of that provision that the aid must be
assessed.

Credit line for reducing the debt burden in the
intensive stock-farming sector

The Commission first of all examined whether the credit
line was in conformity with the Community guidelines
on State aid for rescuing and restructuring firms in
difficulty (12) which were in force when the aids were
granted and at the beginning of the procedure provided
for in Article 88(2). The guidelines were, however,
amended when new Community guidelines (13) came
into force on 1 January 1998. In the interests of legal
certainty the assessment of
for the
purposes of a final decision, based on the rules in force
when the procedure under Article 88(2) was initiated.

the measure is,

By virtue of Point 2.2 of the 1994 guidelines, Member
States may request that the special rules for this type of
aid be applied to the agricultural sector. Portugal did
not inform the Commission of the rules it wished to see
applied as regards scrutiny of the measures.

The Commission’s scrutiny must accordingly cover all
aspects of
rescue and
restructuring aid and the special rules applicable to the
agricultural sector.

the guidelines,

in particular

(36)

(37)

(38)

(39)

Rescue aid must:

(cid:151) consist of

guarantees or
interest rates,

liquidity help in the form of

loan
loans bearing normal commercial

(11) Source: Eurostat (1997).

(12) See footnote 9.
(13) OJ C 283, 19.9.1997, p. 2.

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(cid:151) be restricted to the amount needed to keep a firm in
business (for example, covering wage and salary
costs and routine supplies),

(cid:151) be paid only for the time needed (generally not
exceeding six months) to devise the necessary and
feasible recovery plan,

to viability in the long term. Similarly, although the
sector concerned suffers from structural overcapacity at
Community level, no measure appears to have been
adopted with a view to reducing capacity. Moreover, at
no stage
in the proceedings did the Portuguese
authorities request that the measures be scrutinised in
the light of
the general rules governing aid for the
restructuring of firms in difficulty.

(cid:151) be warranted on the grounds of

social
difficulties and have no undue adverse effects on the
industrial situation in other Member States.

serious

(45)

such aid in the

sector,
case of

The Commission then examined the aids in the light of
the special rules, set out at 2.2 of the 1994 guidelines,
applicable to the restructuring of firms in difficulty in
this being the Commission
the agricultural
practice
sector
in the
concerned (15). The purpose of the rules in question is
to ensure that the only agricultural holdings or firms
which receive aid for restructuring are those which, are
the
in principle viable but which, by virtue of
implementation of a measure intended to bring about a
permanent
structures
(investment), are facing financial difficulties as a result
of factors that are external to the firm.

in agricultural

improvement

(46)

The special rules are as follows:

(cid:151) the aid must concern loans taken out to finance

investments already made,

(cid:151) the aggregate grant equivalent of any aid awarded
when the loans were taken out, plus the new aid,
may not exceed the rates generally allowed by the
Commission, namely 35 % (75 % in the case of
less-favoured areas within the meaning of Article
21(2) of Regulation (EC) No 950/97) in the case of
investment in primary agricultural production, and
55 % (75 % in the case of Objective 1 areas)
for
investment
in the processing and marketing of
agricultural products complying with the sectoral
limits laid down by the Commission. At present the
sectoral
limits are those specified in the guidelines
for State aid in connection with investments in
the processing
agricultural
products (16),

and marketing of

in the cost of money,

(cid:151) the aid must be granted in response to adjustments
to the interest rates on new loans, made to take
the
account of changes
amount of the aid must be less than or equal to the
change in the rates or the new loans, or must
concern farms that offer viability guarantees,
in
particular
in cases where the financial burdens
resulting from existing borrowings are such that the
farms are at risk, possibly of bankruptcy.

(40)

The Commission is not in possession of the information
needed to verify compliance with the second and fourth
indents of recital 39. In its opinion, however, the aid
does not satisfy the remaining criteria.

(41)

In the case of the requirement set out in the first indent
the minimum subsidised interest rate (40 % x 13 % =
is well below the Community reference rate
5,2 %)
applicable to Portugal in 1994 (15,33 %, i.e. the interest
rate for regional aid (14). Moreover, the duration of the
aid (the subsidy is payable for three years) is well
in
excess of the normal six-month period applicable under
Community rules.

(42)

In the light of the above, the credit line in question does
not meet the Community requirements applicable to aid
for rescuing firms in difficulty.

(43)

of

The Commission is of the opinion that the general rules
governing aid for the restructuring of firms in difficulty
do not apply to the case at hand because they call for
the drawing up and implementation of a plan for the
The
restructuring
strict
the
requirements which the said plan must
feature as
regards restoring viability, in particular a reduction in
capacity in sectors where there is overcapacity, and
appreciable contribution on the part of the recipients of
the aid to the restructuring effort, and the elimination of
adverse effects on competitors, were not
taken into
account by the Portuguese authorities.

recipient

firms.

(44)

scrutinised
In no case do the legislative provisions
specify the drawing up, for each firm, of restructuring
plans, plans which must include measures likely to lead

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

(15) Precedents: N 904/95, N 21/96, N 864/96 and N 813/97.
(16) OJ C 29, 2.2.1996, p. 4.

(47)

(48)

(49)

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(52)

Regarding the requirement set out in the first indent of
recital 46, access to the credit line was restricted to
firms which had taken out loans in connection with
their economic activities and with investment
taking
place over a given period, in order to cover financial
costs deriving therefrom. The investment relates to the
modernisation
and
environmental health protection. The Commission
therefore takes the view that
this requirement was
satisfied.

facilities,

animal

health

of

the

representativeness

the analysis had been carried out,

Since the Portuguese authorities did not
indicate on
the
what basis
Commission does not have the information needed to
the
assess
infringement of
that
according to information provided by the Portuguese
authorities themselves,
the limits were not complied
with in 13 % of the cases involving farming areas other
than less-favoured farming areas.

of
It notes, however,

extent

rule.

that

and

the

that

combined

Turning now to the requirement set out in the second
indent of recital 46 the Member State must be able to
the
demonstrate
of
restructuring aid granted and any investment
aid
previously granted does not exceed the maximum rates
applicable (35 % normally and 75 % in the case of
less-favoured farming areas). Since the credit line was
restricted to agricultural production firms the maximum
rates for processing firms are not applicable.

effect

the

the

intensity of

Concerning
aid granted in
connection with this credit line it should be recalled
that the national aid is in the form of an interest-rate
subsidy. According to the method normally used by the
Commission the net grant equivalent of the interest-rate
subsidy available under Decree-Law No 146/94 is
21,8 %, based on the current value of the difference
between the interest rates actually applied and what is
regarded as the reference market
to
calculate the grant equivalent, the Commission took into
account not only the interest-rate subsidy in relation to
the reference rate of 13 % used by the Portuguese
authorities, but also the difference between this rate and
the Community reference rate (interest rate for regional
aid) applicable in Portugal when the aid was granted:
15,33 %.

In order

rate.

(50) When, at the beginning of the proceedings under Article
88(2), the Commission stated that the aid was less than
the maximum rates it normally allowed, it was referring
solely to the aid element of the credit line and not to
the aggregate of the aid element of the credit line and
any investment aid received earlier, which must be less
than 35 % of
(75 % in the case of
less-favoured farming areas).

the total cost

(51)

The Portuguese authorities pointed out that an analysis
had shown that all of the aid approved in the context of
the credit line complied with the maximum aggregate
grant equivalent of 75 % in less-favoured farming areas
and that 87 % of the aid approved in connection with
the credit line complied with the maximum aggregate
grant equivalent of 35 % in farming areas other than
less-favoured farming areas.

(53) Accordingly, as the Commission sees it,

if an ex post
analysis is needed to verify compliance with this limit it
must be concluded that the limit was not a criterion for
approving the
aid and, when the measure was
implemented, the limit was not complied with in 13 %
of
the approved cases in farming areas other than
less-favoured farming areas.

(54)

(55)

The Commission accepted, however, the argument put
forward by the Portuguese authorities to the effect that,
when they were in force, the special rules applicable to
the restructuring of
firms operating in the sector of
primary agricultural production did not normally take
limits on investment under
into account the sectoral
Regulation (EC) No 950/97.

In the light of the foregoing the Commission takes the
view that the requirement set out in the second indent
of recital 46 has not been satisfied in the cases where
the aggregate grant equivalent of
the investment aid
line exceeded the maximum
received and the credit
amount the recipients could legitimately have received
under the special rules applicable to the restructuring of
firms in difficulty in the agricultural sector.

(56)

In order to comply with the third indent of recital 46
the measure must be intended for agricultural holdings
which present guarantees of viability.

(57)

(58)

The Portuguese authorities initially stated that, since this
was a measure for the restructuring of bank loans, they
had taken the view that the guarantee of viability had
automatically already been verified by virtue of
the
analysis carried out by the banks prior to the granting
of the loans.

its

established

accordance with

In
the
Commission considers that, as a rule, scrutiny by a
financial
a
consolidating loan cannot replace scrutiny with a view
to verifying that a firm is economically viable within the

institution prior

granting of

practice

to the

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meaning of the abovementioned Community guidelines
or of special rules applicable to the agricultural sector.
The scrutiny carried out by the banks is aimed above all
at verifying whether the financial situation of the firm is
such as to suggest that the loan can be expected to be
repaid normally. While this is of course essential to the
economic viability of a firm, it is not sufficient for the
purposes of guaranteeing the viability of a firm within
the meaning of the Community guidelines or the special
rules applicable to the agricultural sector.

Credit line for assisting recovery in the pig-farming
sector

(64)

Since it is a measure aimed at helping producers to
acquire pig-farming inputs (in particular feedingstuffs
and other operating costs),
line must be
this credit
regarded as a short-term ((cid:145)seasonal(cid:146)) loan.

(59)

(60)

(61)

(62)

(63)

The Commission does, however, recognise the practical
difficulties
long-term
associated with assessing the
economic viability of agricultural holdings. Under the
circumstances, financial viability may constitute a good
indicator of
it may
reasonably be felt
that only a limited number of
financially viable holdings will not also be economically
viable.

viability. Similarly

economic

By virtue of this third criterion the Commission must,
in its scrutiny, also take into consideration the origins of
the financial difficulties faced by firms. Aid to firms
which, although viable, are in difficulty cannot be
regarded as compatible with the common market unless
their financial difficulties stem from factors that are
external to them and not from factors that are inherent
in their internal management.

the fact

the origin of

Information supplied by the Portuguese authorities
suggests that
the difficulties faced by
agricultural holdings relates mainly to external factors,
that customs barriers were
in particular:
abolished earlier
the Act of
Accession of Portugal; the high interest rates applicable
to the agricultural sector; and the high prices of raw
the 1993 drought. That
materials as a result of
information suggests that in most cases the economic
difficulties stem from factors that are external to the
firms.

than required under

The Commission is accordingly in a position to draw
the conclusion that
the measure under consideration
complies with the criterion, relating to the viability
of the recipient firms, set out in the third indent of
recital 46.

To conclude, the Commission takes the view that the
credit line for reducing the debt burden of
intensive
stock farms does not satisfy the special rules applicable
to the restructuring of
in difficulty in the
agricultural sector in cases where the aggregate grant
equivalent of the investment aid received and the credit
line
exceeded the maximum amounts which the
recipients could legitimately have received on the basis
of the special rules applicable to the restructuring of
firms in difficulty in the agricultural sector.

firms

sector

form of

subsidised short-term loans

(65) At the time of the granting of the aid the Commission’s
policy consisted in not objecting to State aid granted in
to the
the
agricultural
((cid:145)operating loans(cid:146)), provided their
duration did not exceed one year and, in addition, the
loan was not restricted to a single product or a single
operation. Within the limit of eligible expenditure the
practice does not impose limits on the intensity of the
aid, nor does it, at the level of individual recipients,
prevent the subsidised loan from being renewed on an
annual basis.

(66)

In 1996 the Commission adopted a communication on
State aids involving subsidised loans in the agriculture
sector (crØdits de gestion) (17). On 18 June 1997 the
Commission decided to suspend its application owing to
practical difficulties which had arisen in the course of its
implementation.

(67) A practical consequence of that suspension was the fact
that the Commission’s previous policy in that respect
had again become
applicable. Accordingly, on 2
October 1997, when proceedings were initiated under
Article 88(2), the rules in force were those described at
recital 65. By subsequent decision of the Commission
the Community guidelines were again applicable from
30 June 1998.

(68)

The aid granted via the credit line concerned, which
consists of an interest-rate subsidy for bank transactions
relating to subsidised short-term loans (with a net grant
equivalent of 3,1 %) does not,
in accordance with the
satisfy the
established policy of
requirements for being regarded as compatible with the
common market,
since the period covered by the
interest-rate subsidy (four years) is well in excess of the
maximum period authorised in such cases (one year).

the Commission,

(69)

In the absence of any other legal basis on which the
credit line might be authorised it must be regarded as
operating aid at odds with the Commission’s established
policy on State aids (Judgment of the Court of First

(17) OJ C 44, 16.2.1996, p. 2.

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Instance of 8 June 1995 in Case T-459/93 Siemens v
Commission (18)). Since this is a type of State aid which,
by its very nature, is not intended to promote durable
the
development of
direct
the
improvement of the conditions of production of the
products in question in relation to other operators in
the same sector in the European Union who do not
receive comparable aid.

the sector or region concerned,
is

consequence

a measure

such

of

Conclusion

(70) As regards the derogations under Article 87(3)(a) and (c)
the
case of aid to promote or
in the
development of certain economic activities or of certain
economic areas the Commission concludes, on the basis
of the abovementioned scrutiny and in the light of the
Community rules applicable, that the aid in question is
likely to have an adverse effect on trading conditions to
an extent contrary to the common interest.

facilitate

(71)

a

by

covered

concern

products

falling solely within the competence of

Consideration must also be given to the fact that the
aids
common
organisation of the market and that there are limits on
the powers of Member States
to intervene in the
operation of those market organisations, this being a
matter
the
Community. By virtue of a well-established precedent of
the Court of Justice of the European Communities (see
in particular the judgment of 26 June 1979 in Case
177/78 Pigs and Bacon (19)), common organisations of
the market must be regarded as comprehensive and
exhaustive systems which preclude any measures by
Member States which could derogate from them or
adversely affect them.

(74)

(75)

(76)

the Treaty,

Article 88(3) of
granted
in other words without waiting for the
unlawfully,
Commission to decide on their compatibility with the
common market.

they were

Furthermore,
for the reasons set out above, they are
incompatible with the common market in that they fall
within the scope of Article 87(1) of the Treaty and
cannot benefit from any of the derogations specified in
paragraphs 2 and 3 of that Article.

exercise

the Commission must

In the event of incompatibility of aid with the common
market,
its power
recognised in the judgment of the Court of Justice of 12
July 1973 in Case 70/72 Commission v Federal Republic of
Germany (20) and confirmed by the judgments of 24
February 1987 in Case 310/85 Deufil v Commission (21)
and of 20 September 1990 in case C-5/89 Commission v
Federal Republic of Germany (22) and order the Member
State
aid
unlawfully paid. Recovery is also mandatory under
Article 14(1) of Council Regulation (EC) No 659/1999
of 2 March 1999 laying down detailed rules for the
application of Article 93 of the EC Treaty (23). Recovery
is necessary to restore the previously existing situation,
and to eliminate the financial benefits the recipients of
the unlawfully paid aid were able to enjoy unduly from
the date on which the aid itself was paid.

from the beneficiaries

to recover

any

that

the fact

the credit

In the case of
line for reducing the debt
burden of firms in the intensive stock-farming sector,
the measure could
taking into account
perhaps have been regarded as compatible with the
common market if the limits pursuant to the special
rules for the restructuring of firms had been applied,
reimbursement must concern the 13 % of cases where
the limits were exceeded in farming areas other than
less-favoured farming areas.

(72)

The aids in question must
therefore be regarded as
infringing Community rules and do not qualify under
any of the derogations provided for in Article 87(3).

(77)

In the case of the credit line for assisting recovery in the
pig-farming sector the aid granted must be recovered in
its entirety.

VII

(78)

Conclusions

The aid must be repaid in accordance with the
to be
procedures of Portuguese law. The amount
recovered must
from the
granting of the aid until repayment actually takes place.
The interest must be calculated on the basis of
the
market
rate, with reference to the rate used for
calculating the grant equivalent for regional aid (24).

interest payable

include

(73)

Since the aids which are the subject of this Decision
were not notified to the Commission in accordance with

(18) [1995] ECR II-1675.
(19) [1979] ECR 2161.

(20) [1973] ECR 813.
(21) [1987] ECR 901.
(22) [1990] ECR I-3437.
(23) OJ L 83, 27.3.1999, p. 1.
(24) See footnote 14.

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(79)

This Decision is without prejudice to any consequences
the
which the Commission may draw as
financing of
the common agricultural policy by the
European Agricultural Guidance and Guarantee Fund
(EAGGF),

regards

HAS ADOPTED THIS DECISION:

Article 1

The credit line which, under Chapter I of Decree-Law No
1.
is available for reducing the debt
146/94 of 24 May 1994,
intensive stock farms is incompatible with the
burden of
common market
together with the
in the cases where,
investment aid received, the grant equivalent exceeds 35 % in
farming areas other than less-favoured farming areas.

The credit line which is provided for in Chapter II of
2.
Decree-Law No 146/94 of 24 May 1994 for assisting recovery
in the pig-farming sector is incompatible with the common
market.

Article 3

1.
Portugal shall take all the necessary measures to recover
from the recipients the aids referred to in Article 1 which have
already been granted unlawfully.

2.
Recovery shall be effected in accordance with the
procedures of national law. The amount to be recovered shall
include interest from the date on which the aid was made
available to the recipients until the date of its recovery. Interest
shall be calculated on the basis of the reference rate used for
calculating the grant equivalent of regional aid.

Article 4

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

Article 5

This Decision is addressed to the Portuguese Republic.

Done at Brussels, 25 November 1999.

Article 2

Portugal shall cancel the aid schemes referred to in Article 1.

For the Commission

Franz FISCHLER

Member of the Commission