Information from the Commission - Community Guidelines for State aid in the agriculture sector
Date: 2000-02-01
Institutions: European Commission
Subjects: State aid, aid to agriculture, application of EU law

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COMMUNITY GUIDELINES FOR STATE AID IN THE AGRICULTURE SECTOR

(2000/C 28/02)

1.

1.1.

1.2.

1.3.

1.4.

1.5.

INTRODUCTION

the basic principles of

The maintenance of a system of free and undistorted
competition is one of
the
European Community. Community policy in respect
of State aids seeks to ensure free competition, an
efficient allocation of resources and the unity of the
Community market, whilst
inter-
national commitments. Accodingly, the Commission
has always shown particular vigilance in this field.

respecting our

In working out

Article 33 of the Treaty defines the objectives of the
common agricultural policy.
the
common agricultural policy and the special methods
for its application, account has to be taken of the
particular nature of
activity, which
results from the special structure of agriculture and
from structural and natural disparities between the
various agricultural regions,
the
appropriate adjustments by degrees and the fact that
agriculture constitutes a sector closely linked with the
economy as a whole.

the need to effect

agricultural

It
follows that recourse to State aid can only be
justified if it respects the objectives of this policy. In
addition, State aids must have regard to the Commu-
nity’s international obligations, which in the case of
agriculture are specified in particular in the WTO
In accordance with that
Agreement on Agriculture.
agreement, such aids are subject to notification and
to classification according to the status of the aid in
terms of its potential to distort trade.

including

regulations,

instruments,

Hitherto, the control of State aid to the agricultural
sector has been undertaken on the basis of a variety of
different
and
decisions
Commission
specific State aid frameworks covering certain types
of aid and a large body of Commission practice
which has from time to time been set out in various
Commission working documents but which has not
been published officially.

Council
or

directives

Following the adoption of the (cid:145)Agenda 2000(cid:146) package,
the Council has defined a new policy for rural devel-
opment which seeks to establish a coherent and
the future of Europe’s
sustainable framework for
reforms
the
rural

complement

areas (1).

It will

traditional

progressively introduced into the market sectors by
promoting a competitive, multi-functional agricultural
sector in the context of a comprehensive, integrated
strategy for rural development. Rural development
will, in effect, become the second pillar of the CAP.
The new policy explicitly recognises that farming plays
a number of roles including the preservation of the
environment,
landscapes and the wider
rural heritage, while emphasising the creation of alter-
native sources of income as an integral part of rural
this process of
development policy. As a result of
reform,
replaced a number of
the Council has
existing instruments
that govern the granting of
financial support in the agricultural sector, whether
by the Community or by Member States alone, by a
single Rural Development Regulation. Articles 51 and
52 of the Regulation contain specific provisions in
respect of State aid, while Article 37 provides that
support for rural development may be granted only
consistent with other Community
for measures
policies and measures implemented thereunder.

1.6.

Because the economic effects of an aid do not change
depending on whether it is partly financed by the
Community, or is financed by a Member State alone,
the Commission considers that it is essential to ensure
that there is consistency and coherence between its
policy in respect of the control of State aid, and the
support which is granted under the Community’s own
common agricultural and rural development policy.
The Commission therefore considers it necessary to
review its general policy with respect to State aid for
the agricultural sector to take account of the most
legislative developments. This review should
recent
also result
the current rules
and greater transparency, thus facilitating the task of
the competent authorities when preparing notifi-
cations of State aid schemes to the Commission, and
enabling the Commission to approve those schemes
more quickly and efficiently.

in a simplification of

1.7.

In order to provide a stable regulatory framework for
the preparation and implementation of rural devel-
to
opment programmes,
the Commission intends
apply the guidelines set out below throughout
the
next programming period that covers 2000 to 2006.
It will
to these
therefore only propose changes
guidelines where these are clearly necessary to take
account of unforeseen developments or changes in
economic circumstances.

(1) Council Regulation (EC) No 1257/1999 of 17 May 1999 on support
for rural development from the European Agricultural Guidance
and Guarantee Fund (EAGGF) and amending and repealing certain
Regulations (OJ L 160, 26.6.1999, p. 80), hereinafter referred to as
(cid:145)the Rural Development Regulation(cid:146).

1.8.

The Working Group on conditions of competition in
agriculture was consulted on these guidelines at its
meetings of 7 and 8 September 1999 and 26 and
27 October 1999.

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2.

SCOPE

2.1.

financed by parafiscal

These guidelines apply to all State aids, including aid
measures
taxes, granted in
connection with activities related to the production,
processing and marketing of agricultural products
falling within the scope of Annex I of
the Treaty.
These guidelines do not apply to:

(cid:151) State

aids

in the

fisheries

and aquaculture

sector (2),

(cid:151) aids for the forestry sector, including aids for the
afforestation of agricultural land, which will be the
subject of separate guidelines.

2.2.

2.3.

3.

3.1.

the purpose of

these guidelines,

For
(cid:145)agricultural
product(cid:146) means the products listed in Annex I of the
Treaty, products falling under CN codes 4502, 4503
and 4504 (cork products) and products intended to
substitute milk and milk products (3),
imitate or
excluding those products covered by Council Regu-
lation (EEC) No 3759/92 of 17 December 1992 on
the market in fishery
the common organisation of
and aquaculture products (4).

3.2.

the product

For the purpose of these guidelines, the processing of
an agricultural product means an operation on an
resulting
agricultural product where
such a product,
from the operation remains
for
example the extraction of
juice from fruit or the
slaughter of animals for meat. The processing of
into non-Annex I
Annex I agricultural products
products therefore falls outside the scope of
these
guidelines.

GENERAL PRINCIPLES

Article 36 of the EC Treaty provides that the Treaty
rules on competition are to apply to production of

3.3.

(2) State aids in the fisheries and aquaculture sector are examined
within the framework of the Guidelines for the examination of
State aids in the sector of fisheries and aquaculture (OJ C 100,
27.3.1997, p. 12) and Council Regulation (EC) No 2468/98 of 3
November 1998 laying down the criteria and arrangements
regarding Community structural assistance in the fisheries and
aquaculture sector and the processing and marketing of
its
products (OJ L 312, 20.11.1998, p. 19).

(3) For

the purpose of

these provisions, products

to imitate or
substitute for milk and/or milk products means products which
could be confused with milk and/or milk products but whose
composition differs from such products in that they contain fat
and/or protein of non-milk origin with or without protein
derived from milk ((cid:145)Products other than milk products(cid:146) as referred
to in Article 3(2) of Council Regulation (EEC) No 1898/87 of 2 July
1987 on the protection of designations used in the marketing of
milk and milk products (OJ L 182, 3.7.1987, p. 36)).

subject

and trade in agricultural products only to the extent
determined by the Council.
to other
In contrast
sectors,
the Commission’s authority to
therefore,
control and supervise State aids in the agricultural
sector does not derive directly from the Treaty, but
from legislation adopted by the Council under
Article 37 of
to any
the Treaty and is
restrictions which may have been laid down by the
Council. In practice however, all the regulations estab-
the market
lishing the common organisations of
provide for the application of the State aid rules of
Articles 87, 88 and 89 EC to the products concerned.
Furthermore, Article 51 of
the Rural Development
Regulation expressly provides that Articles 87, 88
and 89 are to apply to aid granted by Member
States
follows
therefore that subject to any specific limitations or
derogations which may have been laid down in the
regulations concerned, the provisions of the Treaty are
fully applicable to State aid granted in the agricultural
sector, with the exception of those aids which are
specifically aimed at the limited number of products
which are not covered by common organisations of
the market (see point 3.8 below).

rural development.

to support

It

In other words

their application nevertheless

Although Articles 87, 88 and 89 are fully applicable to
the sectors covered by the common organisations of
the market,
remains
subordinate to the provisions established by the regu-
recourse by a
lations concerned.
Member State to the provisions of Articles 87, 88
and 89 cannot receive priority over the provisions
of the regulation on the organisation of that sector
of the market (5).
It follows that under no circum-
stances can the Commission approve an aid which is
incompatible with
a
common organisation of the market or which would
interfere with the proper functioning of the common
organisation.

provisions

governing

the

The present guidelines apply to any aid measure, in
whatever form, which falls within the definition of
State aid laid down in Article 87(1) of
the EC
Treaty. In this context it should be emphasised that
the Commission has consistently taken the view that
because of the existence of the common agricultural
policy, any aid in the agricultural sector, however
small,
the
production of certain goods, must be considered to
have the potential to threaten to distort competition
trade between Member States. For this
and affect
rule (6) does not
reason,
apply to aid towards expenditure in connection with
agriculture.

in favour of certain undertakings or

the so-called de minimis

(4) OJ L 388, 31.12.1992, p. 1.

6.3.1996, p. 6).

(5) Judgment of the Court of Justice of the European Communities in
Case 177/78 Pigs and Bacon Commission v. McCarren [1979] ECR
2161.

(6) Commission Notice on the de minimis rule for State aid (OJ C 68,

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3.4.

3.5.

3.6.

3.7.

3.8.

3.9.

guidelines

specific
These
derogations which may be set out in the Treaties or
in Community legislation.

to any

subject

apply

The Commission will assess any aid measures which
are not covered by the present guidelines on a case-
by-case basis, taking into account the principles set
out in Articles 87, 88 and 89 of the Treaty and the
Community’s common agricultural and rural devel-
opment policies.

In order
to be considered compatible with the
common market, any aid measure must contain
some incentive element or require some counterpart
on the part of the beneficiary. Unless exceptions are
expressly provided for in Community legislation or in
these guidelines, unilateral State aid measures which
are simply intended to improve the financial situation
of producers but which in no way contribute to the
development of
the sector, and in particular aids
which are granted solely on the basis of price,
quantity, unit of production or unit of the means of
production are considered to constitute operating aids
which are incompatible with the common market.
Furthermore, by their very nature, such aids are also
likely to interfere with the mechanisms of
the
common organisations of the market.

For the same reason, aid which is granted retrospec-
tively in respect of activities which have already been
undertaken by the beneficiary cannot be considered to
contain the necessary incentive element, and must be
considered to constitute operating aid which is simply
intended to relieve the beneficiary of a financial
burden. Except in the case of aid schemes which are
compensatory in nature, all aid schemes
should
therefore provide that no aid may be granted in
respect of work begun or
activities undertaken
before an application for aid has been properly
submitted to the competent authority concerned.

Because the very specific conditions of agricultural
production must be taken into account during the
assessment of aid which is intended to favour the
less-favoured regions, the Commission’s guidelines on
national regional aid (7) do not apply to the agri-
cultural sector. Where they are relevant for the agri-
cultural sector, regional policy considerations have
been incorporated into the present guidelines. Simi-
larly, because of the particular structure of agricultural
enterprises, the Community framework on State aid
for small and medium sized enterprises (8)
is not
applicable in the agricultural sector.

3.10.

the market,

As noted at point 3.1, certain types of Annex I agri-
cultural products are not yet subject to a common
organisation of
in particular potatoes
other than starch potatoes, horsemeat, honey, coffee,
alcohol of agriculural orign and vinegars derived from
alcohol and cork. In the absence of a common organi-
sation of the market, the provisions of Article 4 of
Council Regulation No 26 (9) of 4 April 1962 applying
certain rules of competition to production of and
trade in agricultural products remain applicable to
State aids which are specifically targeted at
these
products. Article 4 provides that only the provisions
of Article 88(1) and the first sentence of Article 88(3)
apply to these aids. Therefore, the Member States are
required to inform the Commission, in sufficient time
to enable it to submit its comments, of any plans to
grant or alter aid. For its part, the Commission cannot
oppose the granting of such aids, although it may
the
submit
the absence of
Commission will
at
common organistations of
the
Community level. Thus, provided that
the national
aid schemes have comparable effects to measures
to support producers’
applied at Community level
incomes in other sectors, and provided that
they
pursue similar objectives to the common organisations
of
formulate
observations, even if the measures concerned consist
of operating aids which would normally be prohibited.

the Commission will not

In assessing such aids

take into account

its comments.

the market

the market,

Article 6 of the EC Treaty provides that (cid:145)environmental
protection requirements must be integrated into the
the Community
definition and implementation of
policies and activities referred to in Article 3,
in
particular with a view to promoting sustainable devel-
opment(cid:146). The activities referred to in Article 3 cover
both agricultural and competition policy. Particular
attention therefore needs to be given to environmental
issues in future State aid notifications, even in cases
where the aid schemes are not specifically concerned
with environmental issues. For example, in the case of
an aid scheme for investments which are intended to
increase production, and which involve an increased
use of scarce resources or an increase in pollution, it
will be necessary to show that the scheme will not
result
in an infringement of Community environ-
mental protection legislation, or otherwise cause
environmental damage. All State aid notifications
the
should in future
expected environmental impact of the activity aided.
In many cases, this will involve no more than a confir-
mation that
there is no expected environmental
impact.

contain an assessment of

Unless otherwise indicated, all aid rates
in these
total
guidelines
the
amount of support expressed as a percentage of the
volume of eligible expenses (gross subsidy equivalents).

expressed in terms of

are

(7) OJ C 74, 10.3.1998, p. 9.
(8) OJ C 213, 23.7.1996, p. 4.

(9) OJ 30, 20.4.1962, p. 993/62.

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4.

AIDS FOR INVESTMENTS

4.1.

AIDS FOR INVESTMENT IN AGRICULTURAL HOLDINGS

4.1.1.

GENERAL PRINCIPLES

4.1.1.1.

and

incomes

costs,
improve
to
to increase quality,

In order to facilitate the general development of the
agricultural sector, aids for investments in agricultural
holdings should contribute to the improvement of
agricultural
living, working or
and of
production conditions. The investment should pursue
one or more of the following objectives: to reduce
re-deploy
production
production,
to preserve and
improve the natural environment, hygiene conditions
and animal welfare standards or to promote the diver-
investments
sification of
which do not pursue any of
in
particular aids for simple replacement
investments
which in no way improve the conditions of agri-
cultural production, cannot be considered to facilitate
the development of the sector and do not therefore fall
within the scope of the derogation provided for by
Article 87(3)(c) of the Treaty.

farm activities. Aids

these objectives,

for

4.1.1.2. Subject to the exceptions provided for in point 4.1.2
below, the maximum rate of public support, expressed
is limited to a
as a volume of eligible investment
maximum of 40 %, or 50 % in the less-favoured
areas, as defined in Article 17 of the Rural Devel-
opment Regulation (10). However,
in the case of
investments made by young farmers within five
the maximum rate of aid is
years after setting-up,
increased to 45 %, or 55 % in the less-favoured areas.

4.1.1.3. Aid for investments may only be granted to agri-
cultural holdings the economic viability of which
can be demonstrated by an assessment of
the
the holding (11) and where the farmer
prospects of
processes adequate occupational skill and competence.
The holding must comply with minimum Community
standards regarding the environment, hygiene and
animal welfare. However, where
are
to comply with newly introduced
made in order

investments

(10) Rural Development Regulation, Article 51(2).
(11) Aid for agricultural holdings in financal difficulty may not be
granted unless that aid meets the conditions set out
in the
Community guidelines on State aid for rescue and restructuring
firms in difficulty (OJ C 283, 19.9.1997, p. 2).

environment,
minimum standards
hygiene and animal welfare, aid may be granted in
order to reach these new standards (12).

regarding

the

should be assessed at

4.1.1.4. No aid may be granted for investments having as their
objective increased production for which normal
market outlets cannot be found. The existence of
normal market outlets
the
appropriate level, in terms of the products concerned,
the types of investments and existing and expected
capacities. Any restrictions on production or limi-
tations of Community support under the common
market organisations must be taken into account.
common market organisation,
Where, under
restrictions
of
Community support exist at the level of individual
farmers, holdings or processing plants, no aid may
be granted for
investments which would increase
production beyond these restrictions or limitations.

production

limitations

on

or

a

4.1.1.5. The eligible expenses may include:

(cid:151) the construction, acquisition or improvement of

immovable property,

(cid:151) new machinery and equipment (13),

including

computer software,

(cid:151) general costs, such as architects, engineers and
consultation fees, feasibility studies, the acquisition
of patents and licences, up to 12 % of the expen-
diture referred to above,

(12) In this case any time period which has been provided for in
accordance with the second paragraph of Article 2 of Commission
Regulation (EC) No 1750/1999 of 23 July 1999 laying down
detailed rules for the application of Council Regulation (EC) No
1257/1999 on support for rural development from the European
Agricultural Guidance and Guarantee Fund (EAGGF) (OJ L 214,
13.8.1999, p. 31, hereinafter referred to as (cid:145)the Implementing
Regulation(cid:146)) shall be taken into consideration.

(13) The purchase of second-hand equipment may be regarded as
eligible expenditure in duly substantiated cases when the four
following conditions are met simultaneously: a declaration by the
seller of the equipment confirms its exact origin and that the
equipment has not already been the subject of national or
Community assistance; the purchase of the equipment represents
a particular advantage for the programme or project, or is made
(no new equipment
necessary by exceptional
the
available on time,
the
project); reduction of
amount of aid) as compared with the
same
equipment purchased new, while maintaining a good cost-benefit
ratio;
the
necessary technical and/or technological characteristics consistent
with the requirements of the project.

threatening proper execution of
the costs involved (and therefore of

second-hand equpiment

acquired must have

circumstances

cost of

thus

the

the

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(cid:151) land purchase, including legal fees, taxes and land

registration costs.

Commission therefore takes a favourable view of such
aid.

the purchase of
4.1.1.6. No aids may be granted for
in accordance with the
production rights except
specific provisions of
the common organisation of
the market concerned, and the principles set out in
Articles 87, 88 and 89 of the Treaty.

4.1.1.7. As regards the purchase of animals, only the first
purchase of
livestock and investments intended to
improve the genetic quality of the stock through the
purchase of high-quality breeding animals (male or
female) which are registered in herd books or their
equivalent are eligible for aid under this section (14).

4.1.1.8. The maximum expenses eligible for support may not
exceed the limit
investment eligible for
total
support set by the Member State in accordance with
Article 7 of the Rural Development Regulation.

for

4.1.1.9. The Commission will also apply the rules set out in
this section by analogy to investments in primary
agricultural production which are not made by
farmers, for example where equipment is purchased
for shared use by a group of producers.

4.1.2.

SPECIAL CASES

4.1.2.1.

In accordance with Article 51(2) of the Rural Devel-
opment Regulation, the maximum aid rates set out in
point 4.1.1.2 do not apply to aid for investments
relating to:

As regards investments or capital works intended for
the conservation of non-productive heritage features
located on agricultural holdings, such as archaeological
or historical features, the Commission will allow aid to
be granted up to 100 % of real costs incurred. These
costs may include reasonable compensation for the
work undertaken by the farmer himself, or his
workers.

such as

As regards investments or capital works intended to
conserve the heritage features of productive assets on
the
farms,
investment does not entail any increase
in the
the Commission
production capacity of
will allow aid up to a maximum of 60 % of
the
eligible expenses, or 75 % in the less-favoured areas.

farm buildings, provided that

the farm,

expenses

the request of

In cases where there is an increase in production
the
capacity, and in other cases at
Member State concerned, the Commission will apply
the normal aid rates set out in point 4.1.1.2 as regards
eligible
resulting from undertaking the
relevant work using normal contemporary materials.
the Commission will permit
In addition, however,
additional aid to be granted, at a rate of up to
100 % to cover the extra costs incurred by using tradi-
tional materials necessary to maintain the heritage
features of the building.

(cid:151) investments undertaken predominantly in the
public interest related to the conservation of tradi-
and
tional
forestry activities or relocation of farm buildings,

shaped by agricultural

landscapes

(cid:151) the

protection

and

improvement

of

the

environment,

(cid:151) improvement of

the hygiene

conditions

of

livestock enterprises and the welfare of animals.

In ssessing the compatibility of such aids with Articles
87, 88 and 89 of the Treaty, the Commission will
apply the following principles.

4.1.2.3. Relocation of farm buildings in the public interest

There are many reasons for which it may become
necessary to relocate farm buildings in the public
interest.

Where the need to relocate results from an expro-
priation which, in accordance with the legislation of
the Member State concerned gives rise to a right to
compensation, the payment of such compensation will
not normally be considered as State aid within the
meaning of Article 87(1) of the Treaty.

4.1.2.2. Conservation of traditional landscapes

Aid to promote heritage conservation is expressly
referred to in Article 87(3)(d) of the EC Treaty. The

(14) Aid for the purchase of replacement stock following outbreaks of

animal disease is covered by section 11.4.

In other cases, where relocation simply consists of the
dismantling, removal and re-erection of existing facil-
ities, the farmer derives little direct benefit from the
operation, and the Commission therefore considers
that aid of up to 100 % of the actual costs incurred
may be accepted without any risk of a distortion of
the conditions of competition.

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In other cases, however, relocation may result in the
farmer benefiting from more modern facilities. In such
cases the aid rate should be adjusted so that
the
contribution from the farmer is at least equivalent to
60 % (50 % in the case of the less-favoured areas) of
the increase in the value of the facilities concerned
after
relocation, or 55 % or 45 % respectively in
cases where the beneficiary is a young farmer.

may be paid to support
undertaken as a part of regional aid schemes (15).

investments which are

4.2.2.

In order to maintain this parallelism, it is necessary to
amend the guidelines governing this type of State aid
to take account of the changes to the Community
regulations brought about by the adoption of
the
Agenda 2000 proposals.

Where relocation results in an increase in production
capacity, the contribution from the beneficiary must
be at least equal to 60 %, or 50 % in the less-favoured
the
areas, of
expenses, or 55 % or 45 % respectively in cases
where the beneficiary is a young farmer.

corresponding proportion of

the

4.1.2.4. Investments

relating
of

improvement
improvement of
livestock enterprises and the welfare of animals

to the protection and
the
environment,
the
conditions of

the hygiene

Where investments result in extra costs relating to the
protection and improvement of the environment, the
improvement of hygiene conditions of livestock enter-
prises or the welfare of farm animals, the maximum
aid rates of 40 % and 50 % referred to in point 4.1.1.2
may be increased by 20 or 25 percentage points
respectively.

go

beyond

This increase may only be granted for investments
the minimum Community
which
requirements in force.
It may also be granted for
investments made to comply with newly introduced
minimum standards, subject
to the conditions laid
down in Article 2 of the Implementing Regulation
1750/1999. The increase must be strictly confined to
the extra eligible costs necessary to meet the objective
referred to and does not apply in the case of
investments which result in an increase in production
capacity.

AIDS FOR INVESTMENTS IN CONNECTION WITH THE
PROCESSING AND MARKETING OF AGRICULTURAL
PRODUCTS

In the field of aids for investments in connection with
the processing and marketing of agricultural products,
it has been consistent Commission policy to ensure a
coherent approach to the application of the common
of
agricultural
parallel
competition
approach both as regards the aid rates payable for
investments and the range of eligible investments. At
the same time, in order to take account of regional
policy considerations, the Commission has allowed a
degree of flexibility in respect of the rates of aid which

and
by maintaining

application
a

policy
policy

the

to

4.2.

4.2.1.

4.2.3. As a general rule aid granted to support investments
in connection with the processing and marketing of
agricultural products may only be granted to enter-
prises which can be demonstrated to be economically
viable, based on an assessment of the prospects of the
enterprise (16), and which comply with minimum
regarding the environment, hygiene and
standards
are
animal welfare. However, where
to comply with newly introduced
made in order
minimum standards
environment,
hygiene and animal welfare, aid may be granted in
order to reach these new standards. The aid rate
in
may not exceed 50 % of eligible investments
Objective 1 regions and 40 % in the other regions.
For this purpose, the eligible expenses may include:

investments

regarding

the

(cid:151) the construction, acquisition or improvement of

immovable property,

(cid:151) new machinery

and

equipment,

including

computer software,

(cid:151) general costs, such as architects, engineers and
consultation fees, feasibility studies, the acquisition
of patents and licences, up to 12 % of the expen-
diture referred to above.

4.2.4. However, in the case of State aids for investments in
connection with the processing and marketing of agri-
cultural products which are granted within the
framework of a regional aid scheme which has
previously been approved by the Commission in
accordance with the Community
guidelines on
national regional aid (17), aid may be granted up to
the intensity of
the State aid approved under that
scheme. In such cases the eligible expenses are to be
those specified in the Guidelines on National Regional
Aid, and may include aid for intangible investments
and aids for job creation linked to the carrying out of
an initial investment project in accordance with those
guidelines.

(15) Guidelines for State aid in connection with the processing and
marketing of agricultural products (OJ C 29, 2.2.1996, p. 4)
which are replaced by the present guidelines.

(16) Aid for enterprises in financial difficulty may not be granted unless
that aid meets the conditions set out in the Community guidelines
on State aid for rescue and restructuring firms in difficulty (OJ C
283, 19.9.1997, p. 2).
(17) OJ C 74, 10.3.1998, p. 9.

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4.2.5. No aid may be granted under points 4.2.3 or 4.2.4
unless sufficient evidence can be produced that normal
market outlets for the products concerned can be
found. This must be assessed at the appropriate level
in relation to the products concerned, the types of
investments, and existing and expected capacities. To
this end, any restrictions on production or limitations
of Community support under the common market
organisations must be taken into account. In particular
no aid may be granted in contravention of any prohib-
itions or restrictions laid down in the common organi-
sations of the market (18).

No aid may be granted which concerns the manu-
facture and marketing of products which imitate or
substitute for milk and milk products.

4.2.6. Aids for investments with eligible expenses in excess
of EUR 25 million, or where the actual amount of aid
will
specifically
notfied to the Commission in accordance with
Article 88(3) of the Treaty.

exceed EUR 12 million must be

processing and marketing of Annex I agricultural
products, some questions have arisen in the past
concerning the correct basis for the assessment of
these aids. For example,
it has not been clear
whether aids for on-farm processing and marketing
activities should be evaluated as aids for investments
in agricultural holdings or as aids for investments in
connection with the processing and marketing of agri-
cultural products. In future, the Commission will take
the following approach to the assessment of such aids.

support

investment eligible for

In the case of aid for small-scale investments, where
the total eligible expenses do not exceed the limit for
set by the
total
Member State in accordance with Article 7 of
the
Rural Development Regulation, the Commission will
consider these measures as aids for investments in
agricultural holdings, and therefore assess them in
accordance with point 4.1. Aid for
larger-scale
investments will be assessed as aids for processing
and marketing activities in accordance with point 4.2.

AIDS FOR INVESTMENTS TO PROMOTE THE DIVERSIFI-
CATION OF FARM ACTIVITIES

5.

ENVIRONMENTAL AID

5.1.

GENERAL PRINCIPLES

4.3.

4.3.1.

The promotion of the diversification of farm activities
forms an important part of the Community’s rural
development policy. The Commission therefore takes
a favourable view of such aids which it considers likely
to favour the development of the rural economy as a
whole.

5.1.1.

4.3.2. Although they fall within the scope of

the Rural
Development Regulation, aids granted to promote
diversification into activities which are not connected
to the production, processing and marketing of Annex
the
I agricultural products,
such as agro-tourism,
development of craft
fall
industries or aquaculture,
the present guidelines. These
outside the scope of
aids will therefore be assessed in accordance with the
usual principles applied by the Commission for the
assessment of aids outside the agricultural sector,
in
particular the de minimis rule, the guidelines on aid
for small and medium-sized enterprises, the guidelines
on national regional aid and, in appropriate cases, the
guidelines on State aids in the sector of fisheries or
aquaculture.

4.3.3.

In the case of aids intended to promote diversification
into other activities connected with the production,

(18) In particular,

the Commission considers

to the
derogations specifically provided for in the relevant legal texts,
aids for investments in processing and marketing activities in the
sugar sector are in general implicitly prohibited by the provisions
of the common organisation of the market.

subject

that

In accordance with Article 174 of
the EC Treaty,
Community policy on the environment is to aim at
a high level of protection taking into account
the
diversity of situations in the various regions of the
Community. It is to be based on the precautionary
principle and on the principles that preventive action
should be taken, that environmental damage should as
a priority be rectified at source and that the polluter
should pay.

5.1.2.

The Rural Development Regulation recognises the very
close links which exist between agriculture and the
environment and contains specific provisions that the
beneficiaries of
the
aid which is
Community should respect minimum environmental
standards. The Commission will apply these provisions
by analogy when assessing State aid schemes.

financed by

should be

compatible with the

5.1.3. All environmental aid schemes in the agricultural
general
sector
objectives of Community environmental policy.
In
particular, aid schemes which fail to give sufficient
priority to the elimination of pollution at source, or
to the
the polluter pays
principle cannot be considered compatible with the
common interest, and therefore cannot be authorised
by the Commission.

correct application of

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5.2.

AID FOR ENVIRONMENTAL INVESTMENTS

from the commitment given and the need to provide
an incentive.

environmental

Since the guidelines on aids for investments set out
above take full account of the particular case of aids
is no longer
investments,
for
necessary to maintain any specific derogations for
this category of aid. These aids will
therefore be
evaluated in accordance with the general rules set
out in section 4.

it

5.3.

AID FOR AGRI-ENVIRONMENTAL COMMITMENTS

5.3.4.

5.3.1.

the

and

environment

Chapter VI of Title II of the Rural Development Regu-
lation sets out a framework for Community support
agricultural production methods designed to
for
protect
to maintain the
countryside. Community support is given in respect
of commitments voluntarily entered into by farmers
for a period of at least five years, and is subject to a
maximum payment of EUR 600 per hectare for
annual corps, EUR 900 per hectare for specialised
perennial crops and EUR 450 per hectare for other
land uses. The
the payment of
Community support are set out in Articles 22, 23
and 24 of the Regulation and in Articles 12 to 20
In accordance
of
with Article 51(4) of the Rural Development Regu-
lation, State aid to support farmers who give agri-en-
to satisfy the
vironmental commitments which fail
conditions laid down are prohibited.

the Implementing Regulation (19).

conditions

for

5.3.2. However, according to Article 51(4), additional State
aid exceeding the maximum amounts fixed according
to Article 24(2) of the Rural Development Regulation
may be granted if justified under paragraph 1 of that
Article. Moreover, in duly justified exceptional cases,
derogations may be permitted in respect of
the
minimum duration of these commitments.

costs

resulting from the

5.3.3. According to Article 24(1) of the Rural Development
in respect of an agri-environ-
Regulation, support
is to be granted annually and
mental commitment
income foregone,
be calculated on the basis of
additional
commitment
given and the need to provide an incentive. Therefore,
if a Member State wishes to grant additional aid
exceeding the maximum amounts fixed in accordance
with Article 24(2) it must provide supporting evidence
that the measure meets all the conditions laid down in
the
the
Implementing Regulation and a justification for the
detailed
additional
breakdown of the cost components involved on the
income foregone, additional costs resulting
basis of

Rural Development

Regulation

payments

including

and

aid

a

(19) See footnote 12.

The cost of any non-remunerative capital works
necessary for the fulfilment of the commitments may
also be taken into account in determining the level of
annual support. For this purpose, capital works are
they do
considered non-remunerative provided that
not normally lead to any significant net increase in
farm value or profitability.

that

In evaluating the compatibility of the additional State
aid payments, the Commission will apply the prin-
ciples set out in the Rural Development Regulation
and the Implementing Regulation. This means,
in
for calculating
the reference level
particular,
income foregone and additional costs resulting from
the commitment given must be the usual good
farming practice in the area to which the measure
applies. Where justified by the agronomic or environ-
mental circumstances, the economic consequences of
abandonment of
land, or cessation of certain farm
practices may be taken into account.

5.3.5.

The need to provide an incentive payment must be
determined by the Member State on the basis of
objective criteria. The incentive payment must not
exceed 20 % of the income foregone and additional
costs resulting from the commitment given, unless a
higher rate can be demonstrated to be indispensable
for the effective implementation of the measure.

5.3.6. Where, exceptionally, a Member State proposes to
grant State aid in respect of commitments of a
shorter duration than that prescribed in accordance
with the Rural Development Regulation,
it should
including a demon-
provide a detailed justification,
the
stration that
in the
measure
time
shorter
aid proposed should
proposed. The
reflect the shorter duration of the undertakings given.

the full environmental effects of

realised
amount of

can be

5.4.

AID FOR FARMERS IN AREAS SUBJECT TO ENVIRON-
MENTAL RESTRICTIONS UNDER COMMUNITY LEGIS-
LATION

5.4.1. Article 16 of the Rural Development Regulation estab-
lishes a new form of Community support for farmers
to compensate for costs incurred and income foregone
resulting from restrictions on agricultural use in areas
the
with environmental restrictions as a result of
limitations based on Community
implementation of
environmental protection rules,
if and in so far as
such payments are necessary to solve the specific
problems arising from those rules. Payments are to
be fixed at a level which avoids overcompensation.

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This is especially necessary in the case of payments in
less-favoured areas. The maximum amounts eligible for
Community support are fixed at EUR 200/ha.
In
accordance with Article 21 of the Rural Development
Regulation, the total surface of these areas, combined
with other areas which may be assimilated to less-fa-
voured areas by virtue of Article 20 of the Regulation,
may not exceed 10 % of
the
Member State.

the surface area of

mentally friendly inputs in comparison with conven-
tional production processes. The
aid component
should be limited to neutralising the effects of the
additional costs, and should be subject
to periodic
review at least every five years to take account of
changes in the relative costs of the different inputs
and the commercial benefits which may result from
the use of more environmentally friendly inputs.

5.5.4.

5.4.2.

The Commission will examine proposals to grant State
aid in favour of such areas on a case-by-case basis,
having regard to the principles set out above and
the principles which are established for granting
Community support within the framework of rural
development programming. During this assessment,
the Commission will take account of the nature of
the restrictions imposed on farmers. Aid will only
normally be permitted for obligations going beyond
good farming practice. Any aid which is granted in
breach of the polluter pays principle should be excep-
tional, temporary and degressive.

5.5.

OPERATING AID

5.5.1.

5.5.2.

policy,

long-standing

accordance with

the
In
Commission does not normally approve operating
aid which relieves
agricultural
firms,
producers, of costs resulting from the pollution or
nuisance they cause. The Commission will only make
exceptions to this principle in well-justified circum-
stances.

including

aid

The

level.

should

Temporary relief to offset the costs of new mandatory
national environmental requirements which go beyond
existing Community rules may be justified where
necessary to offset a loss of competitiveness at the
international
both
temporary and degressive, in principle over no more
than five years, and the initial amount of aid should
not exceed the amount necessary to compensate the
producer for the additional cost of compliance with
the relevant national provisions in comparison with
the cost of compliance with the relevant Community
the Commission will
provisions.
take
account of what
the beneficiaries have to do to
reduce their pollution.

In addition,

be

a

favourable view of

In order to internalise environmental costs, Member
States are increasingly having recourse to environ-
mental taxes or levies such as energy taxes or levies
on environmentally sensitive agricultural inputs such
as pesticides or herbicides. Sometimes,
in order to
ensure that the overall burden of taxation on the agri-
cultural sector is not increased, these taxes are wholly
or partially offset by reductions in other taxes, such as
labour taxes, property taxes or income taxes. Provided
that these tax reductions are applied on an objective
basis to the entire agricultural sector, the Commission
will generally take
these
measures,
if indeed they constitute State aid within
the meaning of Article 87(1) of the Treaty. However,
in certain cases specific exemptions from the whole or
part of these taxes may be granted in favour of specific
sectors of agricultural production, or in favour of
certain types of producer. The Commission has
certain reservations about these types of exemptions,
which by their very nature tend to be granted in
favour of more intensive production systems which
present
and
welfare difficulties. It can therefore only accept aids
to compensate producers for this type of aid on a
temporary and degressive basis, over a maximum of
five years, where aid can be shown to be necessary to
offset a loss of
international competitiveness and
where the aid scheme constitutes a real incentive to
reduce use of the inputs concerned.

environmental, hygiene

the greatest

5.6.

OTHER ENVIRONMENTAL AIDS

5.6.1. Aids for information activities, training and advisory
services to help agricultural producers and firms on
environmental matters will
in
accordance with sections 13 and 14 below.

authorised

be

5.5.3.

In duly justified cases, such as aids for the devel-
the Commission may also
opment of biofuels,
in cases where these can
approve operating aids
clearly be shown to be necessary to offset
the
additional costs arising from the use of environ-

5.6.2. Other environmental aids in the agricultural sector will
be assessed on a case-by-case basis, having regard to
the principles set out in the Treaty and the relevant
Community guidelines on State aid for environmental
purposes (20).

(20) Currently OJ C 72, 10.3.1994, p. 3.

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6.

6.1.

6.2.

7.

7.1.

7.2.

8.

8.1.

AID TO COMPENSATE FOR HANDICAPS IN THE LESS-
FAVOURED AREAS

Article 51(3) of
the Rural Development Regulation
prohibits the payment of State aid to farmers to
compensate for natural handicaps
in less-favoured
areas, unless the aid meets the conditions laid down
in Articles 14 and 15 of the Regulation.

Where State aid measures are combined with support
under the Rural Development Regulation,
the total
support granted to the farmer must not exceed the
amounts determined in accordance with Article 15
of the Regulation.

AID FOR THE SETTING UP OF YOUNG FARMERS

Support for the setting-up of young farmers tends to
encourage the development of the sector as a whole
and prevent the depopulation of rural areas. Articles 7
and 8 of the Rural Development Regulation therefore
provide for a Community regime to support
the
setting-up of young farmers.

State aid to support the setting-up of young farmers
may be granted under
the same conditions. The
combined total of support granted under the Rural
Development Regulation and support granted in the
form of State aids should normally not exceed the
maximum limits provided for in Article 8(2) of the
Rural Development Regulation. The Commission will
permit the granting of additional State aid exceeding
these limits up to a maximum of EUR 25 000 in
particular where this is justified by the very high
costs of setting-up in the region concerned.

AID FOR EARLY RETIREMENT OR FOR THE
CESSATION OF FARMING ACTIVITIES

to conditions

The Commission takes a favourable view of aid
schemes which are designed to encourage older
farmers to take early retirement. Provided they are
requiring a permanent and
subject
definitive cessation of commercial farming activities,
such aid schemes have only a limited effect on
competition, whilst contributing to the long-term
development of the sector as a whole. Therefore, in
addition to the Community support which is provided
for by Articles 10, 11 and 12 of the Rural Devel-
opment Regulation, the Commission will allow State
aid for this type of measure.

8.2.

In recent years, several Member States have notified
the Commission of aid schemes which are intended to
facilitate the withdrawal from the agricultural sector of

farmers
benefit

farmers who are forced to give up farming for
economic reasons. The Commission considers that
to
aid schemes which help non-viable
activities
withdraw from farming
the
the sector as a whole.
long-term development of
Moreover
such aid schemes may also have an
important social dimension, since they are intended
to facilitate
individuals
integration of
concerned into other areas of economic activity.
Provided they are subject to conditions requiring a
permanent and definitive cessation of commercial
farming activities,
therefore
allow State aid for this type of measure.

the Commission will

the

the

9.

9.1.

AID FOR CLOSING PRODUCTION, PROCESSING AND
MARKETING CAPACITY

In recent years, a number of aid schemes have been
notified to the Commission involving the payment of
State aid for the abandonment of capacity. In the past,
the Commission has taken a favourable view of such
aid schemes provided that they are coherent with any
Community
to reduce production
capacity, and provided that certain conditions are
met, namely:

arrangements

(cid:151) the aid must be in the general interest of the sector

concerned,

(cid:151) there must be a counterpart on the part of the

beneficiary,

(cid:151) the possibility of

the aid being for rescue and

restructuring must be excluded,

(cid:151) there must be no over-compensation of

loss of

capital value and of future income.

9.2.

If it is not to be considered as pure operating aid in
favour of the undertakings concerned, a pre-condition
for the payment of such aid is that it must be demon-
strated to be in the interest of the sector as a whole.
Where excess capacity does not exist and it is clear
that capacity is being closed for sanitary or environ-
mental reasons, this will be sufficient to show that this
condition is met.

In other cases, aid should only be granted for closing
production capacity in sectors where clear excess
capacity exists, either at regional or national level. In
such cases, it would appear reasonable to expect that
market forces will eventually result in the necessary
structural adjustments. Aid for capacity reduction
is part of a
can therefore only be accepted if

it

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programme for the restructuring of the sector which
has defined objectives and a specific timetable. In these
the Commission will no longer accept aid
cases,
experience
schemes of unlimited duration,
in postponing the
these may result
suggests that
necessary changes. The Commission reserves
the
right to attach conditions to the authorisation of the
aid and it will normally expect to receive an annual
report on the implementation of the scheme.

since

those economic operators who remain
benefit of
active in that sector, and in order to reduce any
potential risk of a distortion of
the conditions of
competition, and the dangers of overcompensation,
the Commission considers that at least half the costs
of these aids should be met by a contribution from the
sector, either through voluntary contributions or by
means of compulsory levies. This requirement does
not apply where capacity is closed for health or
environmental reasons.

9.3.

9.4.

9.5.

9.6.

No aid may be paid which would interfere with the
the
mechanisms of
market. Aid schemes applying to sectors which are
subject
to production limits or quota will be
evaluated on a case-by-case basis.

the common organistions of

involve either

There must be a sufficient counterpart from the bene-
the aid. This counterpart will normally
ficiary of
consist of a definitive and irrevocable decision to
scrap or irrevocably close the production capacity
concerned. This will
the complete
closure of capacity by the undertaking concerned or
the closure of a specific plant. Legally binding
commitments must be obtained from the beneficiary
that the closure is definitive and irreversible. These
commitments must also bind any future purchaser
in cases where
of
the production capacity has already closed definitively,
or where such closure appears inevitable, there is no
counterpart on the part of the beneficiary, and aid
may not be paid.

the facility concerned. However,

the

It must be possible to exclude the possibility that aid is
rescue and restructuring of
being paid for
companies in difficulty. Therefore where the bene-
ficiary of the aid is in financial difficulty, the aid will
be assessed in accordance with the Community
firms in
guidelines on rescue and restructuring of
difficulty.

The scheme should be accessible to all economic
operators
in the sector concerned on the same
conditions. The amount of aid should be strictly
limited to compensation for
the loss of value of
assets plus an incentive payment which may not
exceed 20 % of the value of the assets. However, aid
may also be paid to offset the obligatory social costs
resulting from the implementation of the scheme.

10.

AID FOR PRODUCER GROUPS

10.1.

10.2.

10.3.

the payment of

Because of
agricultural
the disparate nature of
production, the Commission has traditionally taken a
favourable view of
(cid:145)start-up(cid:146) aids
intended to provide an incentive for the constitution
of producer groups to promote the bringing together
of farmers with a view to concentrating their supply
and adapting their production to market requirements.
In the past, support for the establishment of producer
organisations in certain regions has been provided by
the Community in accordance with Council Regu-
lation (EC) No 952/97 on producer groups and associ-
ations thereof (21). However, when adopting the Rural
Development Regulation, the Council considered that
having regard to the existence of aids for producer
the
groups and associations thereof
it was no
common organisations of
longer necessary to provide specific support
for
these groups within the framework of rural devel-
opment. The Commission considers that this change
should not prevent the granting of State aid for the
establishment of producer organisations which help
farmers adapt production to demand, particularly in
those sectors where support is not available under the
common organisations of the market. Nevertheless, it
is necessary to review Commission policy towards this
type of aid in the light of recent developments.

in several of

the market,

the legislation of

This selection only concerns start-up aid granted to
producer groups or producer associations which are
entitled to assistance under
the
Member State concerned. A producer group is a
group which is set up for the purpose of
jointly
adapting the production and output of its members
to market requirements, in particular by concentrating
supply. A producer association consists of recognised
producer groups and pursues the same objectives on a
larger scale.

the producer group must provide an
The rules of
obligation on members
to market production in
accordance with the rules on supply and placing on
the market drawn up by the group. Those rules may
permit a proportion of the production to be marketed
directly by the producer. They must provide that
producers joining the group must remain members
least 12
for at

three years and must give at

least

9.7.

Since the objective of
is the
restructuring of the sector concerned, to the ultimate

these aid measures

(21) OJ L 142, 2.6.1997, p. 30.

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however,

months notice of withdrawal. In addition they must
provide common rules on production,
in particular
relating to product quality, or use of organic practices,
common rules for placing goods on the market and
rules on product information, with particular regard to
harvesting and availability. Subject to these require-
ments,
remain
responsible for managing their holdings. No aid may
be given under this section to production organi-
the
companies or
sations
objective of which is the management of one or
more agricultural holdings and which are therefore
in effect single producers. In all cases assurances will
be sought
the producer organisations respect
competition rules.

cooperatives

producers

such as

should

that

the

10.4. Where the common organisations provide for support
for producer groups or producer associations in the
sector
examine
the Commission will
for State aid on a case-by-case basis,
proposals
aid
having regard to the
measures with the objectives of the common organi-
sation.

compatibility of

concerned,

the

10.5.

the

rental of

suitable premises (22),

In other cases the Commission will continue to assess
proposals for State aid in accordance with the prin-
ciples it has previously applied. This means that aid
may be granted on a temporary and degressive basis
to cover administrative start-up costs of the group or
the eligible expenses
association. For this purpose,
the
include
including computer
acquisition of office equipment,
hardware and software, administrative staff costs,
overheads and legal and administrative fees. In prin-
ciple, the amount of aid may not exceed 100 % of
costs
reducing by 20
percentage points for each year of operation, so that
in the fifth year the amount of aid is limited to 20 %
of actual costs in that year. No aid may be paid in
respect of costs incurred after the fifth year, and no
aid may be paid following the seventh year after
recognition of the producer organisation.

incurred in the first year,

10.6.

In derogation from the previous paragraph,
the
Commission will permit a new start-up aid to be
granted in the case of a significant extension of the
association
the producer group or
activities of
concerned, for example the extension of the activities
of
the group to cover new products or new
sectors (23). The expenses eligible for the new aid

(22) If premises are purchased,
rental costs at market rates.

the eligible expenses are limited to

(23) The accession of new members to a group is not of

itself
considered a significant extension of the activities of the group,
unless it results in quantitative expansion of the activities of the
group of at least 30 %.

10.7.

10.8.

should be limited to those arising from the additional
tasks undertaken by the producer group or associ-
ation, and the other conditions
in this
section apply.

set out

services,

Aids granted to other agricultural associations, which
undertake tasks at the level of agricultural production,
such as mutual support and farm relief and farm
management
in the members’ holdings
without being involved in the joint adaptation of
supply to the market are not covered by this
section. However, the Commission will apply the prin-
ciples set out in this section to aids which are granted
to cover the start-up costs of associations of producers
which are responsible for the supervision of the use of
denominations of origin or quality marks.

Aids which are granted to producer groups or associ-
linked to
ations to cover expenses which are not
setting-up costs, such as investments or promotion
activities, will be assessed in accordance with the
In the case of aids for
rules governing such aids.
investments in primary production,
the maximum
limit for expenses eligible for support referred to in
point 4.1.1.8 will be determined by reference to the
individual members of the group.

10.9.

Aid schemes authorised under this section will be
subject to a condition requiring them to be adjusted
to take account of any change in the regulations
governing the common organisations of the market.

10.10. As an alternative to providing aid to producer groups
or associations thereof, aid may be granted directly to
producers to offset their contributions to the cost of
running the groups during the first years following the
formation of the group. The principles for calculating
the amount of aid set out in point 10.5 apply.

11.

AIDS TO COMPENSATE FOR DAMAGE TO AGRI-
CULTURAL PRODUCTION OR THE MEANS OF AGRI-
CULTURAL PRODUCTION

11.1.

GENERAL

11.1.1. State aids for agriculture include a group of measures
intended to safeguard farmers against damage to agri-
the means of production,
cultural production or
including
by
unforeseen occurrences
such as natural disasters,
adverse weather conditions or outbreaks of animal

plantations

buildings

caused

and

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or plant disease (24). The Treaty itself in Article 87(2)(b)
provides that aids to make good the damage caused by
are
natural disasters or
compatible with
The
its basis Article
Commission, however,
87(3)(c) of the Treaty has also accepted two further
groups of aids of this nature, namely:

exceptional occurrences
common market.

taking as

the

(cid:151) aid to encourage preventative measures against the
outbreak of plant and animal diseases,
including
compensation for damage arising as a result of
certain diseases, and

(cid:151) aid to encourage the conclusion of

contracts against the risks of
production or the means of production.

insurance
loss of agricultural

landslides and
accepted that earthquakes, avalanches,
floods may constitute natural disasters. Exceptional
occurrences which have hitherto been accepted by
the Commission include war, internal disturbances or
strikes, and with certain reservations and depending
on their extent, major nuclear or industrial accidents
and fires which result in widespread loss. On the other
hand the Commission did not accept that a fire at a
single processing plant which was covered by normal
insurance could be considered as an
commercial
general
exceptional occurrence. As
the
that outbreaks of
Commission does not
animal or plant diseases
considered to
constitute natural disasters or exceptional occurrences.
However, in one case the Commission did recognise
the very widespread outbreak of a completely new
animal disease as an exceptional occurrence. Because
of the inherent difficulties in foreseeing such events,
the Commission will continue to evaluate proposals to
grant aid in accordance with Article 87(2)(b) on a
case-by-case basis, having regard to its previous
practice in this field.

a
accept

can be

rule,

11.1.2.

the distortion of

the
In order to avoid a risk of
conditions of competition, the Commission considers
it important to ensure that, subject to administrative
and budgetary constraints, aid to compensate farmers
for damage caused to agricultural production is paid as
soon as possible after the occurrence of the adverse
event concerned. Where aid is paid only several years
after the occurrence of the event in question, there is a
real danger that the payment of such aid will produce
the same economic effects as operating aid. This is
particularly the case where aid is paid retrospectively
in respect of claims which were not properly docu-
mented at the time. Therefore in the absence of a
specific justification, resulting for example from the
the event, or the delayed or
nature and extent of
the Commission
the damage,
continuing nature of
will not
aid which are
for
submitted more than three years after the occurrence
of the event.

approve proposals

11.2.

AID TO MAKE GOOD THE DAMAGE CAUSED BY
NATURAL DISASTERS OR EXCEPTIONAL OCCURRENCES

11.2.1. Because they constitute exceptions from the general
principle of the incompatibility of State aid with the
common market laid down by Article 87(1) of the
Treaty,
the Commission has consistently held that
the notions of (cid:145)natural disaster(cid:146) and (cid:145)exceptional occur-
rence(cid:146) contained in Article 87(2)(b) must be inter-
preted restrictively. Hitherto the Commission has

(24) For the purposes of this section, plant diseases also include plant

pests.

been

occurrence

for material

demonstrated,

11.2.2. Once the existence of a natural disaster or an excep-
the
tional
has
Commission will permit aid of up to 100 % to
compensate
damage. Compensation
should normally be calculated at the level of the indi-
vidual beneficiary, and in order to avoid over-compen-
sation,
example under
insurance policies,
should be deducted from the
amount of aid. The Commission will also accept aid
to compensate farmers for loss of income resulting
the means of agricultural
from the destruction of
production, provided that there is no over-compen-
sation.

any payments

due,

for

11.3.

AID TO COMPENSATE FARMERS FOR LOSSES CAUSED BY
ADVERSE WEATHER CONDITIONS

agricultural production,

11.3.1. The Commission has consistenly held that adverse
weather conditions such as frost, hail,
ice, rain or
drought cannot of themselves be regarded as natural
disasters within the meaning of Article 87(2)(b).
However, because of
the damage that such events
may cause to agricultural production or the means
of
the Commission has
such events may be assimilated to
accepted that
natural disasters once the level of damage reaches a
certain threshold, which has been fixed at 20 % of
normal production in the less-favoured areas and
30 % in other areas. Because of the inherent variability
of agricultural production, the maintenance of such a
threshold also appears necessary to ensure
that
weather conditions may not be used as a pretext for
the payment of operating aid. In order to enable the
Commission to assess such aid schemes, notifications

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of aid measures to compensate for damage caused by
adverse weather conditions should include appropriate
supporting meteorological information.

losses to livestock caused by adverse weather

for
conditions.

a

three

11.3.2. Where damage occurs to annual crops the relevant
threshold of
loss of 20 % or 30 % should be
determined on the basis of the gross production of
the relevant crop in the year in question compared
with the gross annual production in a normal year.
In principle the gross production in a normal year
should be calculated by reference to the average
years,
gross production in the previous
in which compensation was
excluding any year
payable
adverse weather
result of other
as
conditions. The Commission will however accept alter-
native methods of calculation of normal production,
including regional
is
satisfied that these are representative and not based
on abnormally high yields. Once the volume of loss
of production has been determined, the amount of aid
payable should be calculated. In order to avoid over-
compensation, the amount of aid payable should not
exceed the average level of production during the
normal period multiplied by the average price during
the same period minus actual production in the year
the event took place, multiplied by the average price
for that year. The amount of aid should also be
reduced by the amount of any direct aid payments.

reference values, provided it

11.3.3. As a general rule, the calculation of

loss should be
made at the level of the individual holding. This is
particularly the case where aid is paid to compensate
for damage caused by localised events. However, in the
case where the adverse weather conditions have
affected a wide area in the same way the Commission
will accept that aid payments are based on average
losses provided that these are representative and will
not
in significant overcompensation of any
result
beneficiary.

11.3.4.

In the case of damage to the means of production the
effects of which are felt over several years (for example
the partial destruction of tree crops by frost) for the
first harvest following the occurrence of the adverse
event the percentage real
loss in comparison with a
normal year, determined in accordance with the prin-
ciples set out in the previous paragraphs, must exceed
loss multiplied by the
10 % and the percentage real
number of years in which production is lost must
exceed 20 % in the less-favoured areas and 30 % in
other areas.

11.3.5. The Commission will apply the principles set out
above by analogy in the case of aids to compensate

11.3.6.

In order to avoid over-compensation, the amount of
aid paid should be reduced by any amount received
under insurance schemes. Furthermore, normal costs
not incurred by the farmer, for example because of the
non-harvesting of the crop, should also be taken into
account. However, where such costs are increased as a
result of the adverse weather conditions, additional aid
may be granted to cover these costs.

11.3.7. Aids to compensate farmers for damage to buildings
and equipment caused by adverse weather events (for
example damage to glasshouses caused by hail) will be
accepted up to 100 % of actual costs, without any
minimum threshold being applied.

11.3.8.

In principle, aid under this section may only be paid
for farmers or, alternatively, to a producer organisation
of which the farmer is a member, in which case the
loss
amount of aid should not exceed the actual
incurred by the farmer.

11.4.

AID FOR COMBATING ANIMAL AND PLANT DISEASES

11.4.1. Where a farmer loses livestock as a result of animal
disease, or where his crops are affected by plant
disease, this does not normally constitute a natural
disaster or an exceptional occurrence within the
meaning of the Treaty. In such cases aids to provide
compensation for the losses incurred, and aids to
prevent future losses may only be permitted by the
Commission on the basis of Article 87(3)(c) of the
Treaty, which provides that aids to facilitate the devel-
opment of
considered
certain activities may be
compatible with the common market provided that
it does not affect
trading conditions to an extent
contrary to the common interest.

11.4.2.

In accordance with these principles, the Commission
considers that
the payment of aid to farmers to
compensate for losses resulting from animal or plant
diseases may only be accepted as part of an appro-
priate programme at Community, national or regional
level for the prevention, control or eradication of the
disease concerned. Aids which simply compensate
farmers for losses incurred without taking any steps
to remedy the problem at source must be considered
as pure operating aids which are incompatible with
the common market. Therefore the Commission will
require that Community or national provisions exist,
whether laid down by law, regulation or administrative
action, to the effect that the competent national auth-

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orities should deal with the disease in question, either
by organising measures to eradicate it,
in particular
through binding measures giving rise to compen-
sation, or
initially by setting up an alert system
combined, where appropriate, with aid to encourage
individuals to take part in preventative measures on a
voluntary basis (25). Accordingly, only diseases which
are a matter of concern for the public authorities, and
not measures for which farmers must reasonably take
responsibility themselves may be the subject of aid
measures.

11.4.3. The objectives of the aid measures should be either:

(cid:151) preventative

they

involve

in that

screening
measures or analyses, the extermination of pests
which may transmit the disease, preventative vacci-
nations of animals or treatment of crops, and
preventative
or
destruction of crops, or

slaughtering

livestock

of

(cid:151) compensatory in that

the affected livestock is
slaughtered or crops are destroyed on the orders
or recommendation of the public authorities or die
as a result of vaccinations or other measures
recommended or ordered by the competent auth-
orities, or

identified,
diseases
together with a description of the measures concerned.

concerned should be

clearly

11.4.5. Subject

to compliance with the principles set out
above aid may be granted at up to 100 % of actual
costs incurred in respect of measures such as health
checks, tests and other screening measures, purchase
and administration of vaccines, medicines and plant
protection products,
slaughter costs and cost of
destruction of crops. However, no aid may be paid
in respect of preventative measures if Community
legislation specifies specific charges for certain types
of disease control measures. Similarly, no aid may be
provided where Community legislation provides that
the cost of the measures is to be borne by the agri-
cultural holding, unless the cost of such aid measures
is entirely offset by compulsory charges on producers.

Compensation may be granted up to the normal value
of crops destroyed or animals slaughtered.
It may
include reasonable compensation for loss of profit,
involved in
taking into account
restocking the herd or replanting and any quarantine
or waiting period imposed or recommended by the
competent authorities to allow the elimination of the
disease before the holding is restocked or replanted.

the difficulties

Where aid is provided under Community and/or
national and/or regional aid schemes, the Commission
will require evidence that there is no possibility of
overcompensation through the cumulation of
the
different schemes. Where Community aid has been
the relevant
approved,
Commission decision should be provided.

the date and references of

(cid:151) combined in that the compensatory aid scheme for
the losses resulting from the disease is subject to
the condition that the recipient undertakes to take
suitable future preventative measures as laid down
by the public authorities.

11.5.

AID TOWARDS THE PAYMENT OF INSURANCE PREMIUMS

11.4.4.

In the notification, the Member State should show that
aids for combating animal and plant diseases are
compatible with both the objectives and the specific
provisions laid down in Community veterinary and
animal or plant
phyto-sanitary

legislation. The

(25) In cases where animal or plant diseases have been shown to result
from adverse weather conditions, the Commission will evaluate the
aid measure in accordance with point 11.3 and these requirements
will not apply.

established aid schemes

11.5.1. As an alternative to the payment of ex post compen-
sation for losses caused by natural disasters, several
Member States have
to
encourage farmers to obtain insurance cover against
such events.
is consistent Commission policy to
It
insurance
allow aid of up to 80 % of
premiums to cover against losses caused by natural
disasters and exceptional occurrences,
falling within
the scope of point 11.2, and by adverse climatic
events which can be assimilated to natural disasters
in accordance with point 11.3. Where the insurance
also covers other losses caused by adverse climatic
events, or losses caused by animal or plant diseases,
the aid rate is reduced to 50 % of the cost of the
premium.

the cost of

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11.5.2. The Commission will examine other aid measures in
connection with insurance against natural disasters and
in
exceptional occurrences on a case-by-case basis,
particular
aid
measures to support producers in particularly high
risk zones.

reinsurance

schemes

other

and

11.5.3. Aids towards the payment of insurance premiums may
not constitute a barrier to the operation of the internal
market for insurance services. This would be the case,
for example if
the possibility to provide insurance
cover was limited to a single company or group of
companies or if a condition of the aid was that the
insurance contract had to be taken out with a
company established in the Member State concerned.

12.

AID FOR LAND REPARCELLING

The exchange of plots of agricultural land within the
framework of land reparcelling operations undertaken
in accordance with the procedures laid down by the
legislation of the Member State concerned facilitates
the establishment of economically viable holdings
and therefore contributes to the development of the
agricultural sector as a whole, while producing limited
effects on competition. The Commission therefore
allows aid to be granted to cover the legal and admin-
istrative costs, including survey costs, of reparcelling
up to 100 % of actual costs incurred. However, where
aid for investments is granted within the framework of
land
a
purchase, the maximum rates of aid set out in point
4.1 applies to those investments.

reparcelling

including

scheme,

aids

for

13.

13.1.

AIDS TO ENCOURAGE THE PRODUCTION AND
MARKETING OF QUALITY AGRICULTURAL PROD-
UCTS

a

has

taken

generally

Aid measures intended to provide an incentive to
improve the quality of agricultural products tend to
add to the value of agricultural production, and help
the sector as a whole to adjust to consumer demand,
which places increasing emphasis on quality. The
Commission
favourable
position in respect of such aids. However, experience
has shown that such aid measures may present a risk
of a distortion of the conditions of competition, and
may affect trade between Member States in a manner
contrary to the common interest. This is particularly
the case where large amounts of aid are granted, or
where the payment of aid continues after the aid has
ceased to have any incentive effect, and therefore takes
on the nature of operating aid. For this reason, the
Commission has decided to review its policy in respect
of these aids.

13.2.

The Commission will allow aids for consultancy and
similar support, including technical studies, feasibility
and design studies and markt research, to be given for
activities related to the development of quality agri-
cultural products, including;

(cid:151) market research activities, product conception and
design (26),
including aids granted for the prep-
aration of applications for recognition of denomi-
specific
nations of origin or
character
relevant
in
Community regulations,

certificates of
the

accordance with

(cid:151) The introduction of quality assurance schemes
such as the ISO 9000 or 14000 series, systems
based on hazard analysis and critical control
points (HACCP) or environmental audit systems,

(cid:151) the costs of training personnel to apply quality

assurance and HACCP-type systems.

Aid may also be granted to cover the cost of the
charges levied by recognised certifying bodies for the
initial certification of quality assurance and similar
systems.

In order to prevent the possibility of large amounts of
aid being granted to large companies, the total amount
of aid which may be granted under this section should
not exceed EUR 100 000 per beneficiary over any
in the case of aid granted to
three-year period, or,
undertakings
the
Commission definition of small and medium-sized
enterprises (27), 50 % of the eligible costs, whichever
is greater. For the purpose of calculating the amount
of aid, the beneficiary is considered to be the recipient
of the services.

falling within

scope

the

of

Aid for investments which are necessary to upgrade
production facilities,
including investments necessary
to manage the documentation system and perform
process and product controls, may only be granted
in accordance with the rules set out in points 4.1
and 4.2, as appropriate.

13.3.

Previously the Commission has taken a favourable
view of aids to cover the cost of quality control
measures allowing aid of up to 100 % for the costs
of compulsory controls and 70 % for non-compulsory
controls. However, in view of the increasing emphasis

(26) Aid for promotion activities may only be granted in accordance

with the relevant framework.

(27) OJ L 107, 30.4.1996, p. 4.

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foodstuffs,

to ensure the hygiene of

on the safety and quality of agricultural products, and
the obligation to use HACCP type
in particular
systems
the
range of controls undertaken routinely during the
production process has increased substantially, and
the cost of such controls has become a normal part
of production costs. Because of the direct impact of
the costs of quality control on production costs, such
aids present a real risk of a distortion of competition,
particularly where they are paid selectively. Therefore
the Commission considers that no aid should be
granted in respect of
in-process quality
controls and routine product controls undertaken by
the manufacturer,
irrespective of whether they are
undertaken on a voluntary basis or on a compulsory
basis as a part of HACCP or similar systems. Aid
should only be granted in respect of
controls
undertaken by or on behalf of third parties, such as
the competent regulatory authorities, or bodies acting
on their behalf, or independent organisms responsible
for the control and supervision of the use of denomi-
nations of origin, organic labels, or quality labels.

routine

13.4.

the

costs

such controls

the competent authorities,

Because of the different policies of the Member States
as regards the passing on of the costs of compulsory
control measures which are undertaken pursuant to
legislation by or on behalf
Community or national
of
the Commission will
continue to permit aid to be paid up to a rate of
100 % of
unless
of
Community legislation has fixed the amounts to be
for control measures. Where
paid by producers
Community legislation provides
the cost of
that
control is to be met by producers, without specifying
actual level of charges, the Commission will only allow
aid to be paid as part of a system of aids financed by
parafiscal taxes which ensures that the full economic
is met by producers. The
cost of
Commission will
grant
temporary and degressive aid to provide time for
producers to adjust to such controls on a case-by-case
basis having regard to the legislative provisions
concerned.

the controls

proposals

examine

to

to be paid to cover the cost of the controls during the
first six years of following the establishment of the
control system. Existing aids to cover the cost of
such controls must be progressively reduced, so that
they are eliminated within six years of the entry into
force of these guidelines.

In view of the specific Community interest in ensuring
the development of organic production methods (30),
the Commission will continue to allow aid for controls
of organic production methods conducted within the
framework
(EEC) No
of
Regulation
2092/91 (31) at
the rate of up to 100 % of actual
costs incurred.

Council

The Commission will allow aid at an initial rate of up
to 100 % of the cost of controls carried out by other
bodies responsible for supervising the use of quality
marks and labels under recognised quality assurance
schemes. Such aids shall be reduced progressively, so
that by the seventh year following its establishment,
they are eliminated. Existing aids to cover the cost of
such bodies must be
controls
progressively reduced, so that
they are eliminated
within six years of the entry into force of these guide-
lines.

carried out by

PROVISION OF TECHNICAL SUPPORT IN THE AGRI-
CULTURAL SECTOR

The Commission takes a favourable view of aid
schemes which are intended to provide technical
support
in the agricultural sector. Such soft aids
improve the efficiency and professionalism of agri-
culture in the Community, and thus contribute to its
long-term viability while producing only very limited
effects on competition. Aid may therefore be granted
at a rate of up to 100 % of costs to cover activities
such as:

13.5.

14.

14.1.

In the specific case of aids paid to cover the cost of
control measures undertaken to ensure the auth-
enticity of denominations of origin, or certificates of
specific character in the framework of Council Regu-
lations (EEC) Nos 2081/92 (28) and 2082/92 (29), the
Commission will permit temporary and degressive aids

(cid:151) education and training;

the eligible costs may
include the actual cost of organising the training
and
programme,
expenses
travel
the provision of
together with the
cost of
replacement services during the absence of
the
farmer or the farm worker,

subsistence

(28) OJ L 208, 24.7.1992, p. 1.
(29) OJ L 208, 24.7.1992, p. 9.

(30) See recital 41 of the preamble to the Rural Development Regu-

lation.

(31) OJ L 198, 22.7.1991, p. 1.

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(cid:151) the provision of farm management services and

farm replacement services,

(cid:151) consultant’s fees,

(cid:151) the organisation of competitions, exhibitions and
fairs, including support for the costs incurred by
participating in such events, and

(cid:151) aid at a rate of up to 40 % of the eligible costs for
investments in animal reproduction centres and for
the introduction at farm level of innovatory animal
breeding techniques or practices,

(cid:151) aid at a rate of up to 30 % of the cost of keeping
individual male breeding animals of high genetic
quality registered in herd books.

(cid:151) other activities for the dissemination of knowledge
relating to nw techniques, such as reasonable small
scale pilot projects or demonstration projects.

Aids for the preservation of endangered species or
breeds will be assessed in accordance with the
provisions of Chapter VI of Title II of the Rural Devel-
opment Regulation.

14.2.

this

to avoid the creation of distortions of
In order
type of aid measure should in
competition,
principle be available to all those eligible in the area
concerned based on objectively defined conditions.
Aids which are restricted to identified groups
in
order to provide support only for their members
cannot be considered to facilitate the development of
the sector as a whole and must be considered as
operating aids. Thus, where the provision of such
services is undertaken by producer groups or other
the
support
agricultural mutual
the services
Commission will seek assurances that
concerned are available to all eligible farmers.
In
such cases any contribution towards the administrative
costs of the group or organisation concerned should
be limited to the costs of providing the service.

organisations,

14.3.

support granted under

The total amount of
this
section should not exceed EUR 100 000 per bene-
ficiary over any three-year period, or, in the case of
aid granted to undertakings falling within the scope of
the Commission definition of small and medium-sized
enterprises (32), 50 % of the eligible costs, whichever is
greater. For the purpose of calculating the amount of
aid, the beneficiary is considered to be the person
receiving the services.

15.

SUPPORT FOR THE LIVESTOCK SECTOR

15.1.

In addition to the aid measures described above, the
Commission will also permit the following aids to be
granted in the livestock sector in order to support the
maintenance and improvement of the genetic quality
of Community livestock:

(cid:151) aid at a rate of up to 100 % to cover the adminis-
trative costs of the establishment and maintenance
of herd books,

(cid:151) aid at a rate of up to 70 % for tests to determine

the genetic quality or yield of livestock,

16.

16.1.

16.2.

STATE AIDS FOR THE OUTERMOST REGIONS AND
THE AEGEAN ISLANDS

rules

in favour of

currently in force

Following the adoption of
the Rural Development
Regulation, the various derogations provided for by
the
the
outermost regions and the islands of
the Aegean
Sea, which in certain circumstances provide for
additional State aid, have been repealed. Nevertheless,
the Regulation is based on the principle that new
provisions providing the necessary flexibility for the
adjustments and derogations necessary to meet
the
specific needs of these regions are to be established
rural development
during
these regions. The Commission will
measures
therefore
aid
designed to meet the needs of
these regions on a
case-by-case basis, having regard to the compatibility
the measures concerned with the Rural Devel-
of
opment Programmes for the regions concerned, and
their effects on competition.

for
examine proposals

the programming of

to grant State

guidelines,

the Commission will

As regards the outermost regions, in derogation from
the general prohibition on operating aid set out in
these
examine
proposals to grant operating aid in the outermost
regions on a case-by-case basis, having regard to the
principles laid down in the Treaty and in particular the
potential effects of the measures on competition in the
regions
the
Community.

concerned and in other parts of

17.

AIDS FOR RESEARCH AND DEVELOPMENT

Aids for research and development will be examined
in accordance with the criteria set out
in the
applicable Community framework for State ais for
research and development (33). The increase in aid
rates of 10 % in favour of small and medium-sized
the
enterprises provided for by point 4.2.6 of

(32) OJ L 107, 30.4.1996, p. 4.

(33) OJ C 45, 17.2.1996, p. 5, as subsequently amended as regards its
application in the agricultural sector (OJ C 48, 13.2.1998, p. 2).

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Community framework for small and medium-sized
enterprises also applies in the agricultural sector (34).

involving the defraying of a proportion of
insurance premiums covering such risks (40),

the

18.

AIDS FOR PROMOTION AND ADVERTISING OF
AGRICULTURAL PRODUCTS

(cid:151) framework for national aids to producer organi-

sations (41),

Aids for the promotion and advertising of agricultural
products will be assessed in accordance with the
framework applicable to the advertising of agricultural
products and certain products not listed in Annex I of
the Treaty, excluding fisheries products (35).

19.

AIDS IN THE FORM OF SUBSIDISED SHORT-TERM
LOANS

Subsidised short-term loans (Credits de Gestion) for the
agricultural sector will be assessed in accordance with
the applicable guidelines on State aid:
subsidised
short-term loans in agriculture (36).

20.

AIDS FOR RESCUE AND RESTRUCTURING FIRMS IN
DIFFICULTY

Aids for rescuing and restructuring firms in difficulty
will be assessed in accordance with the applicable
Community guidelines on State aid for rescuing and
restructuring firms in difficulty (37).

(cid:151) guidelines

for State

aid in connection with
investments in the processing and marketing for
agricultural products (42).

these guidelines,
Following the entry into force of
subject to point 5.6.2, the Community guidelines on
State aid for environmental protection will no longer
apply to the agricultural sector (43).

23.

PROCEDURAL MATTERS

23.1.

NOTIFICATION

23.1.1. Subject to point 23.1.2 below, all new aid schemes and
all new individual aids must be notified to the
in
Commission before
accordance with Article 88(3) of the Treaty and the
provisions of Council Regulation (EC) No 659/1999 of
22 March 1999 laying down detailed rules for the
application of Article 88 of the Treaty (44).

they are put

into effect

21.

AIDS FOR EMPLOYMENT

23.1.2.

Aids for employment will be assessed in accordance
with the applicable Community guidelines on aid for
employment (38).

22.

CANCELLATION OF EXISTING TEXTS

In accordance with Article 52 of
the Rural Devel-
opment Regulation, a separate notification under
Article 88(3) of the Treaty is not required in respect
of State aid intended to provide additional financing
for rural development measures for which Community
support is granted provided that this aid has been
notified to and approved by the Commission in
accordance with the provisions of the Rural Devel-
opment Regulation as part of
the programming
referred to in Article 40 of that Regulation.

The following texts are hereby repealed and replaced
by these guidelines and appropriate measures:

(cid:151) proposal for appropriate measures concerning aids
granted by the Member States in the livestock and
livestock products sector (39),

(cid:151) rules governing the grant of national aids in the
event of damage to agricultural production or the
means of agricultural production, and national aids

of

the

In order to benefit from this exception, the measures
concerned and the amount of additional State aid
allocated to each of them must be clearly identified
in the rural development plan in accordance with the
Regulation.
provisions
Commission approval of
the plan will cover only
measures which have been identified in this way.
State aids granted for other measures, whether or
included in the plan, or measures which are
not
subject to different conditions from those set out in
the plan must be the subject of a separate notification
to the Commission in accordance with Article 88(3).

Implementing

(34) Currently OJ C 213, 23.7.1996, p. 4.
(35) Currently OJ C 302, 12.11.1987, p. 6.
(36) Currently OJ C 44, 16.2.1996, p. 2.
(37) Currently OJ C 288, 9.10.1999, p. 2.
(38) Currently OJ C 334, 12.12.1995, p. 4.
(39) Commission letter

to Member States

19.9.1975).

(SG(75) D/29416 of

(40) Working Paper VI/5934/86-Rev. 2.
(41) Working paper VI/503/88.
(42) OJ C 29, 2.2.1996, p. 4.
(43) OJ C 72, 10.3.1994, p. 3.
(44) OJ L 83, 27.3.1999, p. 1.

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Furthermore, Commission approval of the plan will
only cover the amount of aid set by the Member
State. Any increase of more than 25 % in the
amount of aid allocated to a particular measure in
the year concerned, or any increase of more than
5 % in relation to the overall amount foreseen must
be the subject of Commission approval (45).

The same rules apply by analogy to amendments to
rural development plans.

in particular

the
to take account of
guidelines,
experience acquired in the implementation of
the
monitoring and evaluation procedures laid down by
the Rural Development Regulation.

should be presented to the
(a) A single report
Commission,
time before 1 July
the first
for
2001, and thereafter no later than 30 June each
year, covering all aid schemes for the agricultural
sector in the Member State concerned. The report
should be provided in two parts, a general part,
and individual reports on all existing aid schemes.

23.2.

ANNUAL REPORTS

a

to

constituted

the Commission

23.2.1. During the meeting of the Council of 2 October 1974,
the Member States decided to
the Governments of
communicate
complete
Inventory of all State aids for agriculture existing in
1974. The Commission considered that these inven-
for
tories
ensuring a greater
aid
measures, for their assessment according to common
criteria and for ensuring the correct functioning of the
common agricultural market. Accordingly, by letter of
24 June 1974 (46),
the Commission requested all
Member States to provide an updated inventory of
national aid schemes no later than the end of May
each year.

instrument
an
transparency of national

essential

23.2.2. These arrangements have now been superseded by
Article 21 of Council Regulation (EC) No 659/1999
which provides that Member States are to submit to
the Commission annual reports on all existing aid
schemes with regard to which no specific reporting
obligations have been imposed in a conditional
decision.

23.2.3.

In the agricultural sector, the arrangements for the
provision of annual reports need to take account of
the monitoring and evaluation procedures for rural
the
development plans laid down in Chapter V of
Rural Development Regulation, and also of
the
various reporting systems laid down under the WTO
agreements and by the Organisation for Economic
Cooperation and Development. In so far as possible,
the arrangements for reporting should avoid dupli-
cation of effort, or multiple presentations of
the
same underlying information in different formats.

23.2.4. For the time being, the reports should be presented in
accordance with the following guidelines. However,
the Commission reserves the righ, after consultation
with the Member States, to propose changes to these

(b) The general part, about 5 to 10 pages in length,
should provide an overview of the evolution of
public policy in the Member State concerned
towards the support of the agricultural sector. It
should summarise important changes during the
year in question, including a brief description of
the reasons for introducing major new aid schemes
and should
or
describe major changes in the level of support
granted to existing aid schemes.

ending existing schemes,

for

Where responsibility for the implementation of
State aid policy in the agricultural
is
devolved to the regions, a Member State may, if
it considers it appropriate, provide separate general
the national and
reports covering activities at
regional levels.

sector

Annexed to the general part should be global
level of
financial data
public
agricultural
support
sector. This data should distinguish between:

indicating the overall

financial

the

for

to the financing of
(cid:151) national contributions
are
measures which
the
supported
Community under
the Rural Development
Regulation or other Community regulations,

by

(cid:151) support

for State aid measures which have
been approved by the Commission as part of
rural development programming pursuant
to
Article 52 of
the Rural Development Regu-
lation (see point 23.1.2),

(cid:151) other State aid measures,

This global financial data should as far as possible
be presented in the form of a single indicative
table (47).

(45) Article 35 of the Implementing Regulation.
(46) SG(76) D/6717.

(47) See points 8 and 16 of the Annex to the Implementing Regulation.

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accordance with Article 18 of Regulation (EC) No
659/1999.

23.2.7. Having regard to the annual reports provided by the
Member States, the Commission will take appropriate
steps to ensure an increase in the transparency of
information regarding State aid in the agricultural
sector.

23.3.

APPLICATION TO NEW AIDS

The Commission will apply these guidelines to new
State
from
Member States, with effect from 1 January 2000.

including pending notifications

aids,

23.4.

PROPOSALS FOR APPROPRIATE MEASURES

In accordance with Article 88(1) of the EC Treaty, the
Commission proposes that Member States amend their
existing aid schemes relating to aids for investments in
the production, processing and marketing of Annex I
agricultural products to conform with these guidelines
by 30 June 2000 at the latest and to amend other
existing aid schemes covered by these guidelines by
31 December 2000 at the latest.

The Member States are invited to confirm that they
accept
these proposals for appropriate measures in
writing by 1 March 2000 at the latest.

in writing

In the event that a Member State fails to confirm its
acceptance
the
Commission will assume that
the Member State
concerned has accepted these proposals, unless it
explicitly indicates its disagreement in writing.

before

date,

that

Should a Member State not accept the whole or part
of these proposals by that date, the Commission will
proceed in accordance with Article 19 of Regulation
(EC) No 659/1999.

(c) Individual reports should be provided in respect of
each existing aid scheme (48) which has not been
approved by the Commission as part of rural
development programming pursuant
to Article
52 of the Rural Development Regulation (49).

In the case of aid schemes concerning investments
in connection with the processing and marketing
of agricultural products, these reports should be
presented in accordance with the format set out
In addition,
in Section I of
the
the Annex.
the Commission to
information necessary for
assess the compliance of
the scheme with the
these
restrictions
guidelines should also be provided in accordance
with the conditions set out in the authorisation of
the aid scheme concerned.

in point 4.2.4 of

set out

In other cases the reports should be presented in
accordance with the simplified format set out in
Section II of the Annex. In the case of aid schemes
in primary agricultural
concerning investments
the
production,
the
Commission to assess
scheme with the restrictions set out
in points
4.1.1.3 and 4.1.1.4 of these guidelines should also
be provided in accordance with the conditions set
out
the aid scheme
concerned.

the information necessary for
the compliance of

in the authorisation of

In the case of aid schemes financed in whole or in
part by parafiscal taxes, the yield of the taxes, and
public expenditure on the scheme net of
the
contribution provided by the sector should also
be stated.

23.2.5. The Commission reserves the right to seek additional
information on existing aid schemes on a case-by-case
basis, where this is necessary to enable it to fulfil its
responsibilities under Article 88(1) of the Treaty.

23.2.6. Where annual reports ae not provided in accordance
with these guidelines, the Commission may proceed in

(48) Reports on individual aids which are granted outside of

the
framework of an aid scheme need only be submitted where this
is a condition of Commission approval of the aid.

(49) Reports on aid schemes which have been approved pursuant to
Article 52 of
the Rural Development Regulation should be
provided within the framework of the reports on the implemen-
tation of the rural development programmes.

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Information under Article 88(1) EC Treaty on the aid scheme, individual aid granted under the terms of a
scheme or individual aid granted outside an approved aid scheme

ANNEX

I. FORMAT OF DETAILED ANNUAL REPORT

1.

Name of scheme or individual aid in original language:

1(a)

Main and secondary objective

2.

3.

Date of most recent approval by the Commission and aid number:

Expenditure under the scheme

Separate figures should be provided for each aid instrument in the scheme (e.g. grant,
guarantees). Provide figures on expenditure or commitments, revenue losses and other financial
relevant to the granting of aid (e.g. period of
loan,
recovered, default payments on guarantees net of premium income and sums recovered).

low interest loans,
factors
interest subsidies, default rates on loans net of sums

These expenditure figures should be provided on the following basis:

3.1.

For year n (50), provide expenditure forecasts or estimated revenue losses due to tax expenditure.

3.2.

For year n-1, indicate:

3.2.1.

Expenditure committed, or estimated revenue losses due to tax expenditure, for new assisted projects and actual
payments for new and current projects (51).

3.2.2. Number of new recipients and number of new projects assisted.

3.2.3.

Regional breakdown of amounts at 3.2.1 by objective 1,2, LFR, other.

3.2.4.1. Sub-sectorial breakdown of 3.2.1 by recipients’ sub-sectors of activity (according to NACE three digit classifi-

cation (52) or equivalent national nomenclature, to be specified).

3.2.4.2. Complete only if schemes are covered by the framework for State aids for R&D:

(cid:151) breakdown of total expenditure by R&D stage (fundamental, basic industrial, applied, etc.);

(cid:151) specify the number of projects involving Community or international cooperation;

(cid:151) give breakdown of expenditure by enterprise, research centre and university.

3.2.5.

To be completed only for schemes not reserved exclusively for SMEs and not involving the automatic granting
of Aid. Aid is granted automatically where it is necessary only to satisfy all the eligibility conditions in order to
qualify for aid or where it is shown that a public authority is not exercising its statutory discretionary right to
select recipients.

Provide the following information for each of those recipients, starting with the one receiving the most aid,
which account for 30 % of total commitments in year n-1 (with the exception of budget appropriations
earmarked for fundamental research by universities and other scientific institutions not covered by Article
87 of the EC Treaty provided such research is not carried out under contract or in cooperation with the private
sector):

(cid:151) name,

(cid:151) address,

(50) Year n is the year in which the report is received.
(51) If the figures for actual tax expenditure are not yet available, estimates should be provided and the final figures sent with the next

report.

(52) Council Regulation (EEC) No 3037/90 of 9 October 1990 on the statistical classification of economic activities in the European
Community (OJ L 293, 24.10.1990, p. 1), as amended by Commission Regulation (EC) No 761/93 (OJ L 83, 3.4.1993, p. 1) and
Corrigendum (OJ L 159, 11.7.1995, p. 31).

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(cid:151) recipient’s sector of activity (following classification referred to in question 3.2.4.1),

(cid:151) amount of aid committed (or authorised where tax aid is involved),

(cid:151) eligible cost of project,

(cid:151) total cost of project.

The list must contain at least 10, but not more than 50 recipients. This rule takes precedence over the 30 %
rule. If there are fewer than 10 recipients in the report year, they must all be listed. If there are several assisted
projects per recipient, the information request should be broken down by project. The information is not
required in the case of aid subject to a ceiling where more than 50 recipients reach the ceiling. Only the level
of the ceiling and the number of recipients reaching it need be given.

4.

Changes (administrative or other) introduced during the year

II. FORMAT OF SIMPLIFIED ANNUAL REPORT TO BE SUBMITTED FOR ALL SCHEMES NOT REPORTED

UNDER 1

For new aid schemes covered by the accelerated clearance procedure or schemes with an annual budget of not
more than EUR 5 million, give only the information requested in points 1, 1(a), 2.1, 2.2.1 and 2.2.2 (very
simplified report).

1.

Name of scheme in original language and aid number

1(a)

Main and secondary objective

2.

Expenditure under scheme

Separate figures should be provided for each aid instrument in the scheme (e.g. grant,
low interest loans,
guarantees). Provide figures on expenditure or commitments, revenue losses and other financial factors relevant
to the granting of aid (e.g. period of loan, interest subsidies, default rates on loans net of sums recovered,
default payments on guarantees net of premium income and sums recovered).

These expenditure figures should be provided on the following basis:

2.1.

For year n, provide expenditure forecasts or estimated revenue losses due to tax expenditure.

2.2.

For year n-1, indicate:

2.2.1.

Expenditure committed, or estimated revenue losses due to tax expenditure, for new assisted projects and actual
payments for new and current projects (53).

2.2.2. Number of new recipients and number of new projects assisted, together with estimated number of jobs created

or maintained.

2.2.3.

Regional breakdown of amounts at 2.2.1 by objective 1,2, LFA, other.

2.2.4.

Sub-sectorial breakdown of 2.2.1 by recipients’ sub-sectors of activity (according to NACE three digit classifi-
cation or equivalent national nomenclature, to be specified).

3.

Changes (administrative or other) introduced during the year.

(53) If the figures for actual tax expenditure are not yet available, estimates should be provided and the final figures sent with the next

report.