2000/359/EC: Commission Decision of 2 February 2000 on the aid scheme implemented by Italy for cooperatives in Sicily (notified under document number C(2000) 384) (Text with EEA relevance) (Only the Italian text is authentic)
Date: 2000-02-02
Institutions: European Commission
Subjects: Sicily, State aid, agricultural cooperative, application of EU law, control of State aid, regional aid

30.5.2000

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Official Journal of the European Communities

L 129/21

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 2 February 2000

on the aid scheme implemented by Italy for cooperatives in Sicily

(notified under document number C(2000) 384)

(Only the Italian text is authentic)

(Text with EEA relevance)

(2000/359/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

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

Having regard to Council Regulation (EC) No 659/1999 laying
down detailed rules for the application of Article 93 of the EC
Treaty (1), and in particular Article 14 thereof,

Having called on interested parties to submit their comments
pursuant to the first subparagraph of Article 88(2) of the EC
Treaty (2), and having regard to their comments,

Whereas:

I. PROCEDURE

(1)

By letter dated 25 October 1993 the Italian authorities
belatedly notified the Commission under Article 88(3) of
the Treaty, of a law enacted by the Region of Sicily, Law
No 25 of 1 September 1993 on measures to promote
employment; as the Law had already been passed at that
time, the Commission entered it on the register of unno-
tified aid under NN 113/93. The Law introduces new aid
schemes and amends dozens of existing ones;
it
comprises 165 Articles. After an initial examination, the
Commission found it necessary to divide the case into
three parts:

— Articles 44 and 50 and Chapter VII (Articles 77 to
105) of Regional Law No 25/1993: measures to

(1) OJ L 83, 27.3.1999, p. 1.
(2) OJ C 382, 9.12.1998, p. 11.

promote agriculture and forestry (aid measure NN
113/B/93,

— Article 55 of Regional Law No 25/1993, as amended
by Article 5 of Regional Law No 6/1995: measures
to promote cooperatives (aid measure NN 79/96),

— the remainder of Regional Law No 25/1993 (aid

measure NN 113/A/93).

This Decision relates solely to the aid schemes set up
under Article 55 of Regional Law No 25/1993, as
amended by Article 5 of Regional Law No 6/1995, and
the cases in which it is applied.

On 25 March 1998 the Commission decided to initiate
the procedure laid down in Article 88(2) of the EC
Treaty in respect of the aid scheme set up under Article
55 of Sicilian Regional Law No 25/1993, as amended by
Article 5 of Law No 6 of 10 January 1995, and in
respect of the aid scheme provided for under Article 36
of Sicilian Regional Law No 23 of 9 May 1986, as
amended by Article 55 of Law No 25/1993.

By fax of 25 March 1998 (SG(98) D/32049) (3), the
Commission mistakenly informed the Italian authorities
that it did not raise any objections.

By letter dated 2 July 1998 (SG(98) D/5241),
the
Commission informed Italy that it had decided to initiate
the procedure laid down in Article 88(2) of the EC
Treaty in respect of the aid scheme set up under Article

(2)

(3)

(4)

(5)

(3) The text of the fax sent by the Commission to the Italian authori-
‘Please find below a list of the decisions taken by
ties is as follows:
the Commission on 25 March 1998: NN79/96 Measures
to
promote cooperatives — Sicily: decision not to raise any objections’.

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55 of Sicilian Regional Law No 25/1993, as amended by
Article 5 of Law No 6/1995, and in respect of the aid
scheme provided for under Article 36 of Sicilian
Regional Law No 23/1986, as amended by Article 55 of
Law No 25/1993;
it also formally required Italy to
provide it, within one month of receiving the letter, with
all documentation,
information and data which could
serve to enable it to assess the compatibility with Article
87 of the Treaty of the aid granted under the abovemen-
tioned schemes.

The Commission decision to initiate the procedure was
published in the Official Journal of the European Communi-
ties (4).

The Commission invited other Member States and inter-
ested parties to submit their observations on the meas-
ures at issue within one month of the date of publica-
tion of that decision in the Official Journal of the European
Communities.

The Italian authorities submitted their comments by
letter dated 26 March 1999. The Commission did not
receive other comments from interested parties. The
Italian authorities did not respond to the Commission's
formal requirement to provide information, but instead
stated that most of
the observations made in the
Commission's letter initiating the procedure related to
the scheme provided for under Article 36 of Regional
Law No 23/1986, which had already been approved by
the Commission, and that the scheme set up under
Article 55 of Regional Law No 25/1993 had never been
applied.

In view of the incorrect message transmitted on 25
March 1998, the Italian authorities were requested by
letter dated 1 July 1999 to confirm that Article 55 of
Regional Law No 25/1993 had not so far been applied
it; they were furthermore
and to undertake to repeal
informed that, should they fail
to reply within 15
working days of the date of the letter, the Commission
was entitled to adopt a final decision on the basis of the
information in its possession.

(6)

(7)

(8)

(9)

(12) Article 36 of Regional Law No 23/1986 provides for aid
to cooperatives in the form of soft loans granted by the
IRCAC (Istituto regionale di
cooperative), a
regional agency providing credit to cooperatives, at a
rate of 4 %. Such loans must be for a period of no more
than 20 years, may not exceed ITL 5 billion and are to
finance projects with the following aims:

credito alle

(a) to boost productivity and employment by expanding
the means of production and/or modernising the
means of production and/or
services
through innovations and improvements;

technical

(b) to increase returns on products,

in particular by

improving quality;

(c) to rationalise the system of distribution;

(d) to replace no more

liabilities
contracted in order to carry out the above projects;

than 50 % of

(e) to restructure or convert production plant.

Where the cooperatives have among their members
workers who were laid off under the cassa integrazione
income guarantee scheme and/or dismissed, the loans
may be granted under the above conditions to finance
projects:

(f) to build and acquire plant for production, distribu-

tion, tourism or services;

(g) to update or expand the projects referred to in

points (a) to (e) above.

(13) Article 55 of Regional Law No 25/1993 authorises the
Sicilian Regional Government to give an additional guar-
antee to the IRCAC so as to enable it to grant loans to
finance the acquisition of business assets by cooperatives
where the asset itself does not provide sufficient security.

(14)

Combination with aid under other schemes cannot be
ruled out, as the Law does not expressly prohibit it.

(10)

By letter dated 21 January 2000, registered on 26
the
January 2000,
scheme set up under Article 55 of Regional Law No
25/1993 had never been applied.

the Italian authorities stated that

III. COMMENTS FROM INTERESTED PARTIES

(15) No comments were received from interested parties
concerning the aid scheme in question in the course of
the procedure laid down in Article 88(3) of the Treaty.

II. DESCRIPTION

(11) Article 55 of Regional Law No 25/1993 inserts a para-
graph into Article 36 of Regional Law No 23/1986,
which sets up an aid scheme for cooperatives. According
to the Italian authorities, that Law was notified to the
Commission, and the Commission approved it, as was
allegedly shown by telex No 6891 of 25 October 1986,
in which the Italian Permanent Representative's Office
informed the Sicilian authorities that the Commission
had no particular observations to make on the scheme.

(4) See footnote 2.

IV. COMMENTS FROM ITALY

(16)

In their letter of 26 March 1999, the Italian authorities
deplored the delay and the inexplicable difference in
substance between the letter of 25 March 1998, which
did not raise any objections to the two aid schemes
referred to in Article 55 of Regional Law No 25/1993
and Article 36 of Regional Law No 23/1986, and the
letter of 2 July 1998 informing them that the Commis-
sion had decided to initiate the procedure laid down in
Article 88(3) of the Treaty in respect of the two aid
schemes in question.

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(17)

(18)

(19)

The Italian authorities also stated that most of the obser-
vations made by the Commission in its letter initiating
the procedure related to the scheme provided for under
Regional Law No 23/1986, which they claimed had
been approved by the Commission, as was shown by
telex No 6891 of 25 October 1986, in which the Italian
Permanent Representative's Office informed the Sicilian
authorities that the Commission had no particular obser-
vations to make on the scheme.

(23)

The Italian authorities fiuther indicated that, as of 26
March 1999, Article 55 of Regional Law No 25/1993,
as amended by Article 5 of Regional Law No 6/1995,
had not been applied.

the Italian
Lastly, by letter dated 21 January 2000,
authorities confirmed that
the scheme set up under
Article 55 of Regional Law No 25/1993, as amended by
Article 5 of Regional Law No 6/1995, had never been
applied.

V. ASSESSMENT OF THE AID

Classification of the measures provided for under
Article 55 of Regional Law No 25/1993, as amended
by Article 5 of Regional Law No 6/1995, as aid

(20)

In the light of the information supplied by the Italian
authorities and the results of investigations conducted in
the course of the procedure, the Commission notes that
the aid scheme provided for under Article 36 of
Regional Law No 23/1986 was approved on 8 October
1986. The scheme therefore constitutes existing aid
within the meaning of Article 88(1) of
the Treaty,
without prejudice to compliance with the appropriate
measures accepted by Italy in the context of regional aid.

(21) Article 55 of Regional Law No 25/1993, as amended by
Article 5 of Regional Law No 6/1995, introduces a new
scheme which does not modify the initial soft-loans
scheme set up under Article 36 of Regional Law No
23/1986. A soft loan may be granted in pursuance of
Article 36 of Regional Law No 23/1986 with or without
the guarantees provided for under Article 55 of Regional
Law No 25/1993. The two schemes are therefore sepa-
rate. This assessment of the aid involved in the measures
in question relates solely to the guarantee scheme
provided for under Article 55 of Regional Law No 25/
1993.

(22)

The guarantee scheme provided for under Article 55 of
Regional Law No 25/1993 should have been notified to
the Commission at the draft stage, as required by Article
88(3) of the Treaty. The Italian authorities failed to do
this and, since they notified the scheme only after the

the aid is illegal under
Regional Law was adopted,
Community law as the requirements of Article 88(3) of
the Treaty have not been complied with.

The guarantees covering loans granted to cooperatives
by the IRCAC constitute State aid within the meaning of
Article 87(1) of the Treaty since they enable those coop-
eratives to obtain loans on terms more advantageous
than those normally available on the financial markets.
Thanks to the public guarantee, the cooperatives are able
to obtain lower interest rates and/or offer a smaller
security. It is likely, furthermore, that without the public
guarantee some cooperatives would not be able to
obtain a loan on any terms. The guarantee can therefore
enable cooperatives to stay in business or even eliminate
competitors who do not enjoy similar advantages, or to
remain in business
instead of being eliminated or
restructured. The guarantee confers an advantage on
enterprises operating in certain areas of Italy.

(24)

The public guarantee distorts competition because it
increases the opportunities open to the recipient busi-
nesses in comparison with competitors who do not
enjoy the same advantages. If the same effect also occurs
in transactions between Member States, then the aid
affects intra-Community trade.

(25) More specifically, the aid provided for by way of the
guarantee scheme set up under Article 55 of Regional
Law No 25/1993 distorts competition and affects intra-
Community trade in cases where the recipient businesses
export part of their production to other Member States;
similarly, where those businesses do not export, their
domestic production is favoured in so far as businesses
based in other Member States have less chance of
exporting their products to the Italian market (5).

(26)

The guarantee therefore constitutes state aid within the
meaning of Article 87(1) of the Treaty which distorts
competition and is
trade between
Member States.

liable to affect

Compatibility of
Article 55 of Regional Law No 25/1993

the measures provided for by

(27) Having established that the measures provided for under
Article 55 of Regional Law No 25/1993 constitute State
aid within the meaning of Article 87(1) of the Treaty,
the Commission has to examine whether they may be
declared compatible with the common market in pursu-
ance of Article 87(2) or (3) of the Treaty.

(28) As regards the applicability of the exemptions provided
for by the Treaty, the Commission finds that, since the
aid is not of a social character (Article 87(2)(a)), nor is it
intended to make good damage caused by natural disas-
ters or exceptional occurrences (Article 87(2)(b)), nor
does it fall within the scope of Article 87(2)(c), it does
not qualify for any of the exemptions laid down in
Article 87(2).

(5) Judgment of the Court of Justice of the European Communities of
13 July 1988 in Case 102/87 France v Commission [1988] ECR
4067.

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(29)

(30)

The aid scheme provided for under Article 55 of
Regional Law No 25/1993 enables cooperatives to carry
on their activities, reducing the costs they incur in
making certain investments. The aid element involved in
the guarantee corresponds to the difference between the
interest rate which the borrower would have to pay on
the free market and the rate actually obtained thanks to
the guarantee, net of any premium paid for the guar-
antee. Where, in view of its financial situation, a cooper-
ative could not have obtained a loan without the state
guarantee, the amount of the aid involved corresponds
to the full amount of the loan.

If the guarantee were to relate to loans granted in order
to finance projects of the types listed in recital 12(b), (c),
(d) or (e) of this Decision, it would not have the effect of
stimulating initial investment within the meaning of the
rules on regional aid but rather that of reducing the
current expenses incurred by businesses in contracting
loans, which are furthermore already subsidised, with a
view to carrying out operations that do not have the
status of initial investments: in such cases, the aid can be
classed as operating aid.

(31) Operating aid, whose distorting effects are especially
strong, can be considered compatible with the common
market only by way of exception and only in the most
to a
disadvantaged regions. Even then it
number of restrictions, such as that of being limited in
time. Those restrictions have gradually been tightened,
and the new guidelines on national regional aid (6) stipu-
late that operating aid is normally prohibited but may
exceptionally be allowed on condition that it is limited
in time and progressively reduced.

is subject

(32)

Since the Commission does not have any information
enabling it to establish that the above conditions for the
application of the exemption provided for by the Treaty
are met, it concludes that they are indeed not fulfilled.

(33)

If the guarantee relates to loans granted in order to
finance projects of the type referred to in recital 12(a) of
this Decision,
it can constitute aid conditional on
carrying out an initial investment. However, since the
Commission does not have information enabling it to
calculate the aid intensity and to establish whether the
rules on the combination of aid and sensitive sectors are
complied with, it takes the view that the conditions for
the application of the regional exemption provided for
under the Treaty are not fulfilled. The aid scheme is
presented as having the effect of increasing employment,
but the Commission notes that in the case in point the
jobs are exclusively linked to the implementation of an

(34)

(35)

therefore be examined as
investment. The aid must
regional aid, and the Community guidelines on aid to
employment do not apply.

If the guarantee relates to loans granted in order to
finance projects of the type referred to in recital 12(g) of
this Decision,
it can be classed as aid conditional on
carrying out an initial investment. However, since the
Commission does not have information enabling it to
calculate the aid intensity and to check whether the rules
on the combination of aid and sensitive sectors are
complied with, it considers that the conditions for the
application of the regional exemption provided for by
the Treaty are not fulfilled.

to obtain loans for

If the State guarantee is necessary to cooperatives in
financing the operations
order
described in recital 12 of this Decision, the aid granted
to them constitutes aid to firms in difficulty within the
meaning of the Community guidelines on State aid for
rescuing and restructuring firms in difficulty (7) where
the projects concerned are essential in order to enable
the recipient firms to remain in business. The aid must
therefore be examined also in the light of those guide-
lines.

(36) As the Commission does not have any information
enabling it to establish that the rules laid down in the
Community guidelines on State aid for rescuing and
it
restructuring firms in difficulty are complied with,
concludes that the conditions for the application of the
sectoral exemption provided for by the Treaty are not
met.

(37)

(38)

(39)

In view of the foregoing, the aid provided for under
Article 55 of Regional Law No 25/1993 does not qualify
for the exemptions provided for under Article 87(3)(a)
those
or (c) of
provided for under Article 87(3)(b) or (d).
It conse-
quently remains subject to the prohibition laid down in
Article 87(1) of the Treaty.

for obvious reasons,

the Treaty or,

VI. CONCLUSIONS

The Commission finds that Italy adopted the aid scheme
under examination unlawfully, in breach of Article 88(3)
of the Treaty.

In the light of the analysis set out in Part V of this
Decision, the Commission finds that aid granted under
Article 55 of Regional Law No 25/1993, as amended by
Article 5 of Regional Law No 6/1995, is incompatible
with the common market.

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

(7) OJ C 368, 23.12.1994, p. 12 and

OJ C 288, 9.10.1999, p. 2.

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(40) Where aid granted unlawfully is found to be incompat-
ible with the common market, the Commission, acting
in accordance with Article 14 of Regulation (EC) No
659/1999, requires the Member State concerned to
recover it from the recipients in order to re-establish the
case,
previously existing situation.
although the Italian authorities have asserted that Article
55 of Regional Law No 25/1993, as amended by Article
5 of Regional Law No 6/1995, has never been applied,
any aid possibly granted under the scheme must be
recovered.

In the present

(41)

(42)

Repayment
is to be made in accordance with the
procedures of national law. The amounts to be repaid
are to bear interest from the date on which the aid was
made available to the recipients until the date on which
it is effectively repaid. The interest must be calculated on
the basis of the reference rate used to calculate the grant
equivalent of regional aid.

In view of the legitimate expectations created by the
letter mistakenly transmitted to the Italian authorities on
25 March 1998, the recovery should not concern any
aid granted between that date and 2 July 1998, when
the decision to initiate the procedure laid down in
Article 88(2) of the Treaty in respect of the scheme
concerned was notified to the Italian authorities,

HAS ADOPTED THIS DECISION:

Article 1

The aid scheme provided for by Article 55 of Regional Law No
25/1993, as amended by Article 5 of Regional Law No 6/1995,
and unlawfully adopted by Italy is incompatible with the
common market.

Article 2

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

Article 3

Italy shall take whatever steps are necessary to recover from the
recipients any aid referred to in Article 1 which has been
unlawfully awarded,
in particular any aid granted before 25
March 1998 or after 2 July 1998.

Repayment shall be made in accordance with the procedures of
national law. The amounts to be repaid shall bear interest from
the date on which the aid was made available to the recipients
until the date on which it is effectively repaid. The interest shall
be calculated on the basis of the reference rate used to calculate
the grant equivalent of regional aid.

Article 4

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

Article 5

This Decision is addressed to the Italian Republic.

Done at Brussels, 2 February 2000.

For the Commission

Mario MONTI

Member of the Commission