2000/237/EC: Commission Decision of 22 December 1999 concerning an aid scheme implemented by Spain in favour of horticultural products intended for industrial processing in Extremadura in the 1997/98 marketing year (notified under document number C(1999) 5207) (Only the Spanish text is authentic)
Date: 1999-12-22
Institutions: European Commission
Subjects: Extremadura, Spain, State aid, horticulture, infringement of EU law, processing industry

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 22 December 1999

concerning and aid scheme implemented by Spain in favour of horticultural products intended for
industrial processing in Extremadura in the 1997/98 marketing year

(notified under document number C(1999) 5207)

(Only the Spanish text is authentic)

(2000/237/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

February 1999 requesting confirmation of the existence
of the aid and the date of its introduction.

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 (EC) No 2200/96 of 28
October 1996 on the common organisation of the market in
fruit and vegetables (1), as last amended by Regulation (EC) No
1257/1999 (2),

The parties concerned having been given notice, in accordance
with the first subparagraph of Article 88(2) of the Treaty, to
submit their comments (3),

Whereas:

I. PROCEDURE

(1)

(2)

The Government of Extremadura Ministry of Agriculture
and Trade Order of 8 July 1998 lays down the aid for
horticultural products intended for industrial processing
the 1997/98 marketing year. The Order was
for
published in the Diario Oficial de Extremadura (4).

The Commission, not having received notification of the
State aid from the Spanish authorities in accordance
with Article 88(3) of the Treaty, sent a letter on 8

(1) OJ L 297, 21.11.1996, p. 1.
(2) OJ L 160, 26.6.1999, p. 80.
(3) OJ C 233, 14.8.1999, p. 37.
(4) Diario Oficial de Extremadura No 84, 23 July 1998, p. 5807.

(3)

(4)

(5)

(6)

(7)

By letter dated 26 February 1999, the Office of the
Spanish Permanent Representative to the European
Union sent
the Commission the information it had
requested in its letter dated 8 February 1999.

By letter dated 14 June 1999, the Commission informed
Spain of its decision to open the procedure provided for
in Article 88(2) of the Treaty with respect to the aid
scheme. In its letter, the Commission gave notice to
Spain to send its comments.

The Commission Decision to open the procedure was
published in the Official Journal of the European Communi-
ties (5). The Commission gave notice to the interested
parties to submit their comments on the aid scheme.

Spain submitted its comments by letter dated 19 July
1999.

The Commission received comments on the scheme
from the interested parties. It forwarded those comments
to Spain by letter dated 17 November 1999, giving
Spain the opportunity to make any observations on
them. The Commission received no such observations
from Spain.

(5) See footnote 3.

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(8)

(9)

(10)

II. DETAILED DESCRIPTION OF THE AID MEASURE

(13)

The Order of 8 July 1998 provides for aid for horticul-
tural products intended for industrial processing in the
1997/98 marketing year.

The beneficiaries of the aid are growers in Extremadura
who signed contracts with processors to supply horticul-
tural products in the 1997/98 marketing year. The
maximum aid per farmer is ESP 500 000.

(14)

Producer groups may sign contracts on behalf of their
members. In such cases, the group may receive an addi-
tional grant equal to 1 % of the value of its members'
production, up to a maximum of ESP 1 million per
group.

The Order of 8 July 1998 is based on Government of
Extremadura Decree 84/1993 of 6 July 1993 estab-
lishing a system of aid for horticultural products
intended for industrial processing (6). The Decree lays
down that the products eligible for aid, the amount of
the aid and the maximum quantity eligible for aid are to
be laid down for each marketing year by an Order.

the Commission
In its letter dated 14 June 1999,
informed Spain that the aid scheme for horticultural
products, in which the amount of aid depended on the
quantities produced and which could infringe Articles
28 and 29 of the Treaty, did not appear to fulfil the
conditions for any of the derogations provided for in
Article 87(3) of the Treaty.

In its letter, the Commission recommended that the
Spanish Government abolish the aid for potatoes.

(11)

The products for which the aid can be paid and the
amounts concerned are as follows:

— peppers for the production of ground red pepper

(designation of origin): ESP 5/kg

— peppers for the production of ground red pepper:

ESP 1,5/kg

— ground industrial peppers: ESP 1,5/kg

— industrial gherkins: ESP 5/kg

— cabbages for dehydration: ESP 1,5/kg

— onions for dehydration/freezing: ESP 1,5/kg

— broccoli for dehydration/freezing: ESP 1,5/kg

— cauliflower for dehydration/freezing: ESP 1,5/kg

— spinach for freezing: ESP 1,5/kg

— leeks for dehydration: ESP 1,5/kg

— broad beans for freezing: ESP 1,5/kg

— potatoes for freezing: ESP 1,5/kg.

(12)

The maximum quantities eligible for aid are as follows:

— 9 500 t of peppers for ground red pepper (designa-

tion of origin Pimentón de la Vera),

— 4 000 t of peppers for ground red pepper and

industrial peppers,

— 250 t of industrial gherkins and

— 15 000 t of the remaining products.

Where the total quantity exceeds those limits, a coeffi-
cient is applied to the production of each farmer eligible
for aid.

III. COMMENTS SUBMITTED BY THE INTERESTED

PARTIES

(15)

The European Union of the Potato Processing Industries
submitted comments on the aid scheme by letter dated 6
September 1999. It shares the Commission's opinion
that the Spanish Government should abolish the aid for
potatoes.

IV. COMMENTS SUBMITTED BY SPAIN

(16)

(17)

Spain said that establishing and maintaining the food
industry by means of a link between production and
processing, in the form of contractual relations, guaran-
teed a minimum price and the supply of quality raw
materials. The link helped maintain production and the
rural population in the areas concerned.

The development and cultivation of irrigated autumn
and winter vegetables in Extremadura provides a socio-
economic alternative which is very important for the
development of rural areas and has allowed a balance to
be maintained between products for the fresh market
and products for processing by means of maximum
guaranteed quantities which have effectively limited
production and marketing opportunities.

(18)

The aid has not conferred any advantage on those
concerned. In fact, it was intended solely to achieve a
particular structural objective and, as soon as that had
been accomplished, the aid scheme was suspended and
there are no plans to reintroduce it.

(6) Diario Oficial de Extremadura No 82, 13 July 1993, p. 2071.

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V. ASSESSMENT OF THE AID

Article 87(1) of the Treaty

(19) Article 43 of Regulation (EC) No 2200/96 lays down
that Articles 87 and 88 of the Treaty apply to the
production and marketing of the products referred to in
Article 1(2) of that Regulation.

(27)

(20) Under Article 87(1) of the Treaty, any aid granted by a
Member State or through State resources in any form
whatsoever which distorts or
to distort
competition by favouring certain undertakings or the
in so far as it affects
production of certain goods is,
trade between Member States,
incompatible with the
common market.

threatens

(21)

(22)

Spain produces 115 451 000 t of vegetables. There is a
significant volume of trade in those products between
Spain and the rest of the Community; for example, in
1998 Spain imported 28 782 000 t of vegetables from
the other Member States and exported 28 782 000 t to
them (7).

The measures concerned could therefore affect trade in
vegetables between the Member States, since that trade is
affected by aid which favours operators active in one
Member State over those in others. The measures have a
direct and immediate affect on the production costs of
undertakings producing and processing fruit and veget-
ables in Spain. They therefore confer an economic
advantage over undertakings which do not have access
to comparable aid in other Member States. They there-
fore distort or threaten to distort competition.

(23)

In the light of the above, the aid in question must be
considered to be State aid fulfilling the criteria laid down
in Article 87(1) of the Treaty.

Possible derogations under Article 87 of the Treaty

(24) Derogations may, however, be granted from the prin-
ciple of incompatibility laid down in Article 87(1) of the
Treaty.

(25)

(26)

In the case in question, the derogations provided for in
Article 87(2) clearly do not apply. Neither have they
been claimed by the Spanish authorities.

The derogations provided for in Article 87(3) of the
Treaty must be interpreted strictly when examining a
regional or
sectoral aid scheme or any individual
application of general aid schemes. In particular, they
can be granted only where the Commission concludes

(7) Source: Eurostat 1998.

that the aid is necessary to achieve one of the objectives
of the derogations. Allowing any other aid to benefit
from those derogations would permit damage to trade
between Member States and distortion of competition
without this being justified by the Community interest
and would allow operators in certain Member States to
obtain undue advantage.

nor

employment,

The Commission takes the view that the aid in question
was not granted as regional aid for new investment or to
create
horizontal
compensation for
in infrastructures
shortcomings
suffered by all the region's undertakings, but as oper-
ating aid for the agricultural sector. Consequently, it is
clearly sectoral aid which must be assessed in the light
of Article 87(3)(c).

provide

to

(28) Article 87(3)(c) provides that aid to facilitate the devel-
opment of certain economic activities or of certain
economic areas may be considered compatible with the
common market provided that
such aid does not
adversely affect trading conditions to an extent contrary
to the common interest.

(29)

The aid scheme must be assessed, in particular, in the
light of that provision.

(30)

(31)

(32)

Council Regulation No 26 applying certain rules of
competition to production of and trade in agricultural
products (8), amended by Regulation No 49 (9), applies
to the aid for potatoes, a product listed in Annex I to the
Treaty not subject to the common organisation of the
markets. The only provisions of the Treaty which apply
are Article 88(1) and the first sentence of Article 88(3),
and the Commission can therefore only formulate
comments. In its letter dated 14 June 1999, it recom-
mended that the Spanish Government abolish the aid
concerned.

In accordance with the Commission's constant practice
in applying Articles 87 to 89 of the Treaty, any aid
whose amount depends on the quantities produced must
be considered operating aid incompatible with the
common market (10).

Such aid has no lasting effect on the development of the
sector concerned, since its immediate effects disappear
with the measure itself. On the other hand, a direct
consequence of such aid is an improvement
in the
production and marketing opportunities of the opera-
tors concerned compared with other operators not
receiving comparable aid (both within the country and
in the other Member States). (See the judgment of the
Court of First Instance of the European Communities of
8 June 1995 in Case T-459/93, Siemens SA v Commis-
sion (11).

(8) OJ 30, 20.4.1962, p. 993/62.
(9) OJ 53, 1.7.1962, p. 1571/62.
(10) Precedents: aid N 51/92, N 741/94, N 623/92, N 214/91 and NN

24/93.

(11) [1995] ECR II-1675.

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(33)

(34)

(35)

(36)

In addition, account must be taken of the fact that this
aid (with the exception of that for potatoes) is for prod-
ucts subject to a common organisation of the market
and that the powers of the Member States to intervene
in the operation of those organisations are limited, they
being the exclusive responsibility of the Community.
The Court of
the
common organisations of the market must be consid-
ered comprehensive and exhaustive systems which
preclude the Member States from adopting derogations
or measures which conflict with them (see, inter alia, the
judgement of 26 June 1979 in Case 177/78, Pigs and
Bacon v McCarren (12).

Justice has consistently held that

Furthermore, the beneficiaries of the aid scheme are
Extremaduran growers of vegetables intended for indus-
trial processing,
to supply their
signing contracts
production to processors in the region.

This requirement constitutes a restriction on the free
circulation of goods between Member States and an
infringement of Article 29 of the Treaty, since, in order
their
to receive the aid, growers are obliged to sell
production to processors in the region. This requirement
constitutes a restriction on the despatch of those prod-
ucts to the other Member States.

Conclusion

In the light of the above and the applicable Community
rules, the Commission takes the view that, as regards the
derogations provided for in Article 87(3)(a) and (c) for
aid to promote or facilitate the economic development
of certain regions or the development of certain activi-
ties,
trading
conditions
to an extent contrary to the common
interest.

the aid examined could adversely affect

(40) Where aid is incompatible with the common market, the
Commission must make use of the possibility offered by
the judgment of the Court of Justice of 12 July 1973 in
Case 70/72, Commission v Germany (13), confirmed by the
judgments of 24 February 1987 in Case 310/85, Deufil v
Commission (14), and of 20 September 1990 in Case C-5/
89, Commission v Germany (15), and require the Member
State to recover from the recipients all the aid granted
illegally. The requirement to recover aid is also laid
down in Article 14(1) of Council Regulation (EC) No
659/1999 of 22 March 1999 laying down detailed rules
for the application of Article 93 of the EC Treaty (16)
(now Article 88). Recovery is necessary in order to
re-establish the previous situation by abolishing all the
financial advantages enjoyed unduly by the beneficiaries
since the aid was granted.

(41)

(42)

(43)

The aid granted (with the exception of that for potatoes)
must be repaid in full.

Repayment must be made in accordance with Spanish
law. The amounts to be repaid must include interest
from the date the aid was granted to its actual recovery.
The interest must be calculated on the basis of the
commercial rate, taking as a reference the rate used to
calculate the grant equivalent of regional aid (17).

This Decision does not prejudice the conclusions the
Commission may draw, if necessary, for the financing of
the common agriculture policy by the European Agricul-
tural Guidance and Guarantee Fund (EAGGF),

HAS ADOPTED THIS DECISION:

Article 1

(37)

The aid (with the exception of that for potatoes) must
consequently be considered as an infringement of
Community rules and therefore ineligible for any of the
derogations provided for in Article 87(3) of the Treaty.

The State aid scheme implemented by Spain by means of
Government of Extremadura Ministry of Agriculture and Trade
Order of 8 July 1998 laying down the aid for horticultural
products intended for industrial processing for the 1997/98
marketing year, with the exception of the aid for potatoes, is
incompatible with the common market.

VI. CONCLUSIONS

Article 2

(38)

(39)

Since the aid in question was not notified to the
Commission in accordance with Article 88(3) of the
Treaty, its granting was illegal, given that it was granted
before the Commission could decide on its compatibility
with the common market.

Furthermore, for the reasons set out above, the aid (with
the exception of that for potatoes) is incompatible with
the common market, since it is covered by Article 87(1)
of the Treaty but is not eligible for any of the deroga-
tions provided for in paragraphs 2 and 3 of that Article.

(12) [1979] ECR 2161.

Spain shall abolish the aid scheme referred to in Article 1.

Article 3

1.
Spain shall adopt all measures necessary to recover from
the beneficiaries all aid referred to in Article 1 which has been
granted illegally.

(13) [1973] ECR 813.
(14) [1987] ECR 901.
(15) [1990] ECR I-3437.
(16) OJ L 83, 27.3.1999, p. 1.
(17) OJ C 74, 10.3.1998, p. 9.

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Recovery shall be immediate and in accordance with the procedures laid down in Spanish law,
2.
provided that these permit the immediate and effective implementation of this Decision. The amounts to be
repaid must include interest from the date the aid was made available to the beneficiaries to its actual
recovery. The interest must be calculated on the basis of the reference rate used to calculate the grant
equivalent of regional aid.

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

Article 4

This Decision is addressed to the Kingdom of Spain.

Article 5

Done at Brussels, 22 December 1999.

For the Commission

Franz FISCHLER

Member of the Commission