2000/336/EC: Commission Decision of 15 February 2000 on State aid implemented by Germany in favour of Kvaerner Warnow Werft GmbH (notified under document under C(2000) 516) (Only the German text is authentic) (Text with EEA relevance)
Date: 2000-02-15
Institutions: European Commission
Subjects: Germany, State aid, industrial restructuring, production capacity, restriction on competition, shipbuilding

L 120/12

EN

Official Journal of the European Communities

20.5.2000

COMMISSION DECISION

of 15 February 2000

on State aid implemented by Germany in favour of Kvaerner Warnow Werft GmbH

(notified under document number C(2000) 516)

(Only the German text is authentic)

(Text with EEA relevance)

(2000/336/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 the Agreement on the European Economic
Area, and in particular Article 62(1)(a) thereof,

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

to

regard

Council Directive

Having
of
21 December 1990 on aid to shipbuilding (2), as last amended
by Directive 94/73/EC (3), and Council Directive 92/68/EEC of
20 July 1992 amending Directive 90/684/EEC on aid to
shipbuilding (4),

90/684/EEC

Having called on interested parties to submit their comments
pursuant to the provisions cited above (5) and having regard to
their comments,

Whereas:

I. PROCEDURE

(1) Commission staff

conducted a monitoring visit

to
Kvaerner Warnow Werft GmbH (KWW) on 25 March
in order to verify the
1999 with an external expert
amount of excess production in 1998. It was concluded
during the visit
that production in 1997 had been
93 862 cgt, thereby exceeding the capacity limitation of

(1) OJ L 83, 27.3.1999, p. 1.
(2) OJ L 380, 31.12.1990, p. 27.
(3) OJ L 351, 31.12.1994, p. 10.
(4) OJ L 219, 4.8.1992, p. 54.
(5) OJ C 245, 28.8.1999, p. 24.

figure of

85 000 cgt by 8 862 cgt. This
excess
production in 1997 was based on the revised production
figures for 1998, which were confirmed by Germany in
its letter of 19 March 1999. Since Germany did not
provide a revised report as regards 1997 production, the
figure of 93 862 cgt was considered final.

(2) By letter dated 20 July 1999, the Commission informed
Germany that it had decided to initiate the procedure
provided for in Article 88(2) of the EC Treaty in respect
of this exceeding of the capacity limitation.

(3) The Commission decision to initiate the procedure
was published in the Official
the European
Communities (6). The Commission invited interested parties
to submit their comments on the measure.

Journal of

(4) The Commission received comments

from interested
parties. It forwarded them to Germany, which was given
the opportunity to react.

II. DETAILED DESCRIPTION OF THE AID

(5) By its decisions communicated to Germany by letters
of 3 March 1993 (N 692/D/91), 17 January 1994
(N 692/J/91), 20 February 1995 (N 1/95), 18 October
1995 (N 637/95) and 11 December 1995 (N 797/95),
the Commission approved restructuring aid for KWW in
accordance with Directive 90/684/EEC to allow the
comprehensive restructuring of the former East German
shipyard. The aid was approved subject to a capacity
restriction of 85 000 cgt per year, compliance with
which is monitored by the Commission.

(6) The Warnow Werft

situated in Rostock-
Warnem(cid:252)nde
Pomerania,
in Mecklenburg-Western
Germany, was sold by the Treuhandanstalt to Norwegian

shipyard,

(6) See footnote 4.

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L 120/13

industrial group Kvaerner in October 1992. Pursuant to
clause 27 of the sales contract, which Germany sent to
the Commission under cover of a letter dated 30 October
1992 for scrutiny and approval, Kvaerner undertook
until 31 December 2005, with regard to the Warnow
to exceed its annual building capacity of
yard, not
85 000 cgt unless the requirements based on the EC
Treaty became less restrictive.

(7) Directive

amended

90/684/EEC,

by Directive
as
92/68/EEC, contains a derogation from the rules on
operating aid applicable to other Community yards for
the shipyards in the new L(cid:228)nder
in order to create
to undergo urgent
the possibility for
become
to
comprehensive
and
competitive. After the privatisation of Warnow Werft the
Commission approved the restructuring aid for the yard
in four tranches in accordance with the provisions of the
abovementioned Directive. The total amount of aid
approved by several decisions was as follows:

restructuring

these yards

and

N 692/D/91 (cid:151) Commission letter of 3 March 1993
(SG (93) D/4052):

(cid:151) DEM 45,5 million operating aid,

(cid:151) DEM 82,4 million operating aid in the form of an

exemption from previous liabilities,

(cid:151) DEM 127,5 million investment aid,

(cid:151) DEM 27,0 million closure aid,

N 692/J/91 (cid:151) Commission letter of 17 January 1994
(SG (94) D/567)

(cid:151) DEM 617,1 million operating aid,

N 1/95 (cid:151) Commission letter of 20 February 1995
(SG (95) D/1818)

(cid:151) DEM 222,5 million investment aid,

N 637/95 (cid:151) Commission letter of 18 October 1995
(SG (95) D/12821)

(8) The aid was approved on condition that the yearly new
building capacity did not exceed 85 000 cgt. The
capacity limitation was included both in the notified sales
contract
(clause 27) concerning the privatisation of
Warnow Werft and in the abovementioned Commission
In the Commission
decisions
decisions communicated to Germany by the letters of
17 January 1994, 20 February 1995, 18 October 1995
and 11 December 1995 it was clearly stated that the
Commission would be obliged to demand the recovery of
the aid if the restriction of capacity was not complied
with.

authorising the

aid.

(9)

In initiating the procedure the Commission noted that
the main condition for the approval of the aid was an
annual capacity limitation of 85 000 cgt. Such a limit
was set in order to offset the distortive effect of the aid
on the shipbuilding industry. According to the findings
of the 25 March 1999 monitoring visit to KWW, the
yard exceeded its annual new building capacity limitation
of 85 000 cgt in 1997 by producing 93 862 cgt. This
information indicated that an essential condition under
which the aid was approved was not being complied
with.

(10) For this reason the Commission doubted whether the aid
approved by it to allow the restructuring and continued
operation of the former East German shipyard Warnow
Werft
(the relevant decisions being communicated to
Germany by the letters of 3 March 1993 (N 692/D/91),
17 January 1994 (N 692/J/91), 20 February 1995 (N
1/95), 18 October 1995 (N 637/95) and 11 December
1995 (N 797/95)) was compatible any longer with the
common market.

III. COMMENTS FROM INTERESTED PARTIES

(11) The Commission has received comments from KWW,
the Association
(Denmark)
Jernskibs- og

a Member
of Danish Shipbuilders
Maskinbyggerier i Danmark).

(Foreningen af

State

and

(cid:151) DEM 66,9 million investment aid,

A. KWW’s comments

N 797/95 (cid:151) Commission letter of 11 December 1995
(SG (95) D/15969)

(cid:151) DEM 58,0 million investment aid.

the total amount of aid concerned by
Consequently,
these decisions was EUR 372,5 million operating aid
(DEM 745 million), EUR 237,45 million investment aid
(DEM 474,9 million) and EUR 13,5 million closure aid
(DEM 27,0 million). This results in total aid of EUR
623,45 million (DEM 1 246,9 million).

(12) KWW’s comments concentrate on five main arguments.
KWW’s first argument is that an obligation to limit actual
production to a certain level was not imposed on it and
that such an obligation cannot be derived from the
Commission decisions either. The Commission decisions
approving the aid imposed, not a production limitation,
but a limitation of technical capacity.

(13) KWW explains in its comments that the Commission was
of the opinion that the capacity limitation was to be

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20.5.2000

achieved by technical measures and arrangements. The
only condition imposed on KWW when the aid was
approved was that the new yard to be built would allow
a possible production of 85 000 cgt and that certain
layout-related criteria (bottlenecks) of
the yard which
limit production should not be changed. This can be seen
from the Commission decisions, which lay down the
technical arrangements to be made in the yard in order
to limit capacity.

(14) According

on

to KWW,

information

actual
the
production which was communicated regularly to the
Commission in the production reports was meant only to
be additional information that was supposed to be used
in order to decide, in case there were deviations, whether
in fact the technical capacity limitation was breached or
evaded.

(15) KWW also explains in its comments that it has complied
with the limitation of technical capacity as required by
the Commission decisions approving the aid by carrying
out the measures relating to the layout and the facilities
of the yard and by keeping to them accordingly. No
changes were carried out
that had or would have
changed this technical capacity.

(16) Secondly, KWW argues that

the

it had not

limitations of

increased its
approved technical capacity but
rather was able to
achieve a higher actual production within the framework
capacity owing to
of
increased productivity and to a serial effect caused by
building series of similiar ships. KWW was obliged only
to adhere to the technical capacity restrictions but was
free to produce as much as
it could within those
parameters.

technical

cannot

(17) According to KWW, capacity limitation and production
limitations are different concepts that should not be
equated. Whereas capacity limitation in the sense of
installation is a static concept
limitation of a technical
that
is
characterised by fluctuations and can change over time
owing to increased productivity. Moreover, all yards
strive constantly for increased productivity. Yards that
develop better and more intelligent methods, being
competitive as a result, are in the interests of
the
Community.

production

changed,

actual

be

that

(18) The third point raised by KWW in its comments is that
not all the aid authorised by the Commission was in fact
paid to the company. KWW argues
the only
non-cash aid granted to it was DEM 82,4 million granted
in the form of release from previous liabilities. The yard
had not
received any other non-cash aid. Only the
amount of DEM 549,559 million had been received by
the yard in cash. Consequently,
the Commission
decided that
the yard hat not complied with the
Commission decisions approving the aid and therefore
considered part of
aid incompatible with the
common market, only the aid in fact paid to the yard

the

if

should be taken as the basis for calculating the amount
of aid to be repaid.

(19) KWW’s fourth comment is that the Commission must
respect the principle of equal treatment in cases where it
requires repayment of aid.
In the case of MTW and
Volkswerft (7), the Commission calculated the amount of
aid to be recovered because of
the
capacity limitation on the basis of the total amount of
operating aid alone without
the
investment aid. This manner of proceeding should be
in this case the
applied to KWW as well. In addition,
yard in question was allowed to reduce its
future
production.

taking into account

the exceeding of

(20) KWW also explains that, in the Commission decision on
the reallocation of capacity of Elbewerft Boizenburg (8),
the annual capacity of 22 000 cgt was valued at DEM
242 000 cgt. Since KWW’s actual production exceeded
the annual capacity limitation of 85 000 cgt by only
8 862 cgt in 1997, the value expressed in the decision
on reallocation of the capacity of Elbewerft Boizenburg
should apply to the present decision as well.

(21) The fifth point raised by KWW is that, if the Commission
were to consider part of the aid incompatible with the
common market,
rate applicable to the
repayment of the aid should be calculated from the time
when the alleged breach began, i. e. from the time when
the aid was subsequently rendered incompatible.

the interest

B. Denmark’s comments

(22) Denmark stresses in its comments the importance of
respecting the conditions and requirements linked to the
approval of aid. These conditions are often the only
protection against State aid being used merely to shift the
employment problem from one Member State to another.

(23) According

case

to Denmark,

in the present

the
conditions linked to the approval of aid are such that the
concrete assessment possibilities of the Commission are
limited to checking the observance of capacity limitation.
When the
yard has obviously produced amounts
exceeding the capacity limitation consistently over a
period of years,
this condition is undoubtedly not
respected. It should be ensured that the aid recipient will
not gain any economic benefit from the exceeding of the
capacity limitation when this whole period of time is
taken into account.

(7) OJ C 344, 14.11.1997, p. 2.
(8) State aid N 325/99, communicated to Germany by letter dated

5 August 1999 [SG(99) D/6192].

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L 120/15

C. Comments of the Association of Danish
Shipbuilders

IV. GERMANY’S COMMENTS

that

is important

(24) The Association of Danish Shipbuilders (Foreningen af
Jernskibs- og Maskinbyggerier i Danmark) explains in its
comments that KWW’s production has a direct impact
on a market
to the Danish yards.
According to the Association, account should be taken in
this connection of the fact that the yard has consistently
exceeded its capacity limitation from the outset, i.e. from
1995 onwards. Not only was the capacity limitation
exceeded year after year, but the amount of the excess
has also increased: in 1996 it was less than 1 %; in 1997
already more than 10 %; and in 1998 more than 44 % (9).

(25) The exceeding of the capacity limitation in 1997 is, in
the opinion of the Association of Danish Shipbuilders,
especially serious since the yard was supposed to reduce
its production that year following the slight excess in
1996. On the contrary, it exceeded its capacity limitation
and hid this excess production from the Commission,
which was constantly monitoring the yard’s production.
For this reason it was discovered only in March 1999
during an investigation into the exceeding of the capacity
limitation in 1998. Neither the German authorities nor
the yard reported the exceeding of capacity to the
Commission. This constant breaching of
the capacity
limitation should be taken into account in assessing the
case and steps must be taken to ensure that the yard
does not gain any economic
from the
situation.

advantage

(26) The Association of Danish Shipbuilders also refers to the
trend since 1992 which has led to the closure of many
yards and to considerable job losses in the sector. It is
therefore crucial for European yards that effective steps
be taken globally to reduce the negative effects of
overcapacity. Since this is not possible without the active
support of the Community, it is important that the latter
maintains its international credibility. An international
be
initiative
consistent with a
the
simultaneous
exceeding by a considerable margin of the Community’s
own capacity limitation, as is the case here.

overcapacities would not
accepting of

reduce

to

(28) Germany’s comments concentrate on the same points as

KWW’s.

(29) Firstly, Germany states

that

in its

comments

the
Commission decisions approving the aid imposed, not a
production limitation, but a limitation of
technical
capacity. The capacity limitation was to be achieved
by technical measures and arrangements. The only
condition imposed on KWW when the aid was approved
was that the new yard to be built would allow a possible
production of 85 000 cgt and that certain layout-related
criteria (bottlenecks) of the yard which limit production
should not be changed. The information on actual
production which was communicated regularly to the
Commission in the production reports was meant only to
be additional information that was supposed to be used
in order to decide, in case there were deviations, whether
in fact the technical capacity limitation was breached or
evaded. This was clear from the Commission decisions,
which laid down the technical arrangements to be taken
in the yard in order to limit capacity.

technical capacity as

(30) Germany explains that KWW had complied with the
required by the
limitations of
Commission decisions approving the aid. No changes
were carried out in the yard that had or would have
changed this technical capacity and therefore the yard
had exactly the layout and technical capacity required by
the Commission.

a higher

(31) Secondly, Germany argues that KWW had not increased
its approved technical capacity but was instead able
to achieve
actual production within the
framework of the limitations of technical capacity owing
to increased productivity and to the serial effect caused
by building a series of similar ships. In Germany’s view,
KWW was obliged only to adhere to the technical
capacity restrictions but was free to produce as much as
it could within those parameters.

(27) According to the Association of Danish Shipbuilders, the
capacity limitations of the former East German yards are,
among other factors, a basis for the investment and
production planning of other yards. Consequently, the
arrangements made by other yards are affected by the
exceeding of the capacity limitations. These limitations
were to remain in place for 10 years and a flexible
application of them was never planned.

(9) Commission Decision 1999/675/EC of 8 July 1999 on KWW’s
capacity limitation in 1998 (OJ L 274,

exceeding of
its
23.10.1999, p. 23).

either. The yards

(32) According to Germany, an obligation to limit actual
production to a certain level was never imposed on
KWW and such an obligation cannot be derived from the
Commission decisions
should be
allowed to take part in the general progress of improved
productivity. All Community yards should compete freely
with each other, and in doing so the east German yards
should not change their handicap, namely the restrictions
installations, but surely their productivity
on technical
can develop. Yards
that develop better and more
intelligent methods, being more competitive as a result,
are in the Community’s interest.

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20.5.2000

(33) Germany

in its

explains

comments
that
capacity
are different
limitation and production limitations
concepts that should not be equated. Whereas capacity
limitation in the sense of
limitation of a technical
installation is a static concept that cannot be changed,
actual production is characterised by fluctuations and can
change over time owing to increased productivity. The
improvement in KWW’s productivity is based, not on the
granting of aid, but on the technical know-how of the
Kvaerner group.

(34) The third point raised by Germany is that the actual
amount of aid paid to KWW is in fact much lower than
the DEM 1,2 billion approved by the Commission.
According to Germany, only the investment aid paid in
cash is directly linked to the present yard and the
capacity limitation imposed on it.

V. ASSESSMENT OF THE AID

(35) The Commission notes that

the aid approved on the
basis of Council Directive 90/684/EEC was considered
compatible with the common market as it complied with
Article 87(3)(e) of the EC Treaty. However, this applies
laid down in the
the conditions
only so long as
Commission decisions approving the aid in accordance
with the abovementioned Directive are respected. Should
the conditions for approving the aid not be complied
with, the aid falls under the general prohibition in Article
87(1) of the EC Treaty and may therefore be considered
incompatible with the common market, unless it can be
declared compatible for other reasons.

to Article

to
10a(2),

aid applicable

(36) Article 10a of Directive 90/684/EEC as amended by
Directive 92/68/EEC contains a derogation from the rules
on operating
to other Community
shipyards for the yards in the former GDR in order to
these yards to undergo urgent
make it possible for
become
and
and
restructuring
comprehensive
competitive. According
until
31 December 1993, operating aid for the shipbuilding
and ship conversion activities of the yards situated in the
former GDR may be considered compatible with the
common market under certain conditions relating to the
amount of aid and subject
reporting
obligation on the part of the German Government. One
the conditions laid down in this provision is the
of
agreement of
to carry out
the German Government
before 31 December 1995 a genuine and irreversible
reduction of 40 % of
shipbuilding capacity of
the
545 000 cgt existing on 1 July 1990.

to an annual

(37)

Investment aid is regulated in Article 6 of Directive
90/684/EEC and closure aid in Article 7. According to

the yard or unless it

in existing yards unless it

Article 6(1),
investment aid may not be granted for
is linked to a
investment
restructuring plan which does not involve any increase in
the shipbuilding capacity of
is
directly linked to a corresponding irreversible reduction
of capacity of other yards in the same Member State over
the same period. Article 6(3) provides that investment aid
may be deemed compatible with the common market
provided that the amount and intensity of such aid is
justified by the extent of
the restructuring involved.
According to Article 7, aid to defray the normal costs
resulting from the partial or total closure of shipbuilding
or ship-repair yards may be considered compatible with
the common market provided that the capacity reduction
resulting from such aid is of a genuine and irreversible
nature.

(38)

it
the

for Council Directive
In the Commission proposal
92/68/EEC amending the seventh Directive on aid to
shipbuilding (10),
taking into account
is stated that,
the
restructuring on conditions of
impact of
competition in the Community, a balance has to be
the former GDR
found between the restructuring of
shipbuilding industry, which is only possible with the
support of a substantial amount of State aid, and
the possible negative influence on the competition
conditions of other Community yards resulting from this
aid. The grant of any extra aid above the current ceilings
has
to be accompanied by appropriate restructuring
measures and capacity reductions.

the

compatibility of

the German Government

(39) One of the conditions laid down in Article 10a(2) of
Directive 90/684/EEC for
the
operating aid with the common market is the agreement
to carry out before
of
31 December 1995 a genuine and irreversible reduction
of 40 % of
the shipbuilding capacity of 545 000 cgt
existing on 1 July 1990. The corresponding maximum
overall capacity for the shipyards situated and operating
the former German Democratic
in the territories of
Republic amounts therefore to 327 000 cgt. Germany
distributed this total capacity among the five remaining
new building yards. In this contex the capacity for KWW
was set at 85 000 cgt (11).

(40)

In its letter of 27 November 1992 to the Commission on
the privatisation of Warnow Werft, Germany states that
Kvaerner had contractually committed itself not
to
exceed the capacity of 85 000 cgt set for KWW before
1 January 2006. It is noted that clause 27 of Warnow
Werft’s privatisation contract, entitled (cid:145)Limitation on
Future Building Capacities(cid:146), reads as follows:
(cid:145)Kvaerner
undertakes up until 31 December 2005 with regard to
Warnow yard not to exceed its annual building capacity

(10) OJ C 155, 20.6.1992, p. 20.
(11) The Commission would point out that the Court of First Instance
confirmed, on 22 October 1996 the importance of the allocation
of capacities to the individual yards for the legality of the aid
decision in Case T-266/94, Skibsvaerftsforeningen and Others v
Commission [1996] ECR II-1399, paragraphs 151 to 198.

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of 85 000 cgt unless the requirements based on the EEC
Treaty are less restrictive from time to time(cid:146).

(41) The Commission notes that the subsequently notified aid
programme for the restructuring of the Warnow Werft
yard was based on this annual capacity.

(42) The

total

amount of EUR 623,45 million (DEM
1 246,9 million) of restructuring aid was approved in
four tranches in five separate Commission decisions. The
first decision releasing the first
tranche of aid was
communicated to Germany by letter dated 3 March 1993
(N 692/D/91). In this decision it is stated that, although
the independent
study carried out on the
Commission’s instructions had established that the new
building capacity of Warnow Werft was unlikely to
exceed the 85 000 cgt set by the German Government as
the contribution of this yard to the maximum available
east German capacity of 327 000 cgt, future monitoring
was deemed necessary during the implementation of the
investment programme in order
the
reduction of the shipbuilding capacity was carried out.

to ensure that

technical

laid down, with the difference

(43) The second decision was communicated to Germany
by letter dated 17 January 1994 (N 692/J/91). In this
decision the same provision as the one mentioned above
was
further
monitoring was deemed necessary in order to ensure that
the restriction of shipbuilding capacity was complied
the German Government was
with.
reminded
capacity
non-compliance with
limitation would oblige the Commission to request
reimbursement of all aid.

In addiction,
that

that

the

(44)

In the third decision, communicated to Germany by
letter dated 20 February 1995 (N 1/95),
it was again
stated that further monitoring of compliance with the
capacity limitation was still needed. In addition,
it was
stated that
the German Government had given an
assurance that the yard would comply with its capacity
limitation. The German Government was again reminded
that non-compliance with the capacity limitation would
oblige the Commission to request reimbursement of all
aid.

(45) The fourth decision was communicated to Germany by
letter dated 18 October 1995 (N 637/95) and the fifth by
letter dated 11 December 1995 (N 797/95).
In both
decisions it was provided that further monitoring would
the actual and planned
be necessary to ensure that
production complied with the capacity limit. The same
remarks as above on Germany’s assurance that
the
capacity limitation would be complied with by the yard
and on the possibility of recovery of all aid in case of
non-compliance were repeated in the decisions.

(46) The Commission notes

capacity
limitation of 85 000 cgt was one of the main conditions

annual

that

the

limitation was

for the approval of the aid. The aid was approved on the
basis of the restructuring notified to the Commission.
This annual
incorporated in Warnow
Werft’s privatisation contract, which was approved by
the Commission as part of the restructuring programme.
In addition, the obligation to comply with the capacity
limitation of 85 000 cgt was expressly mentioned in all
other Commission decisions approving the aid except the
first one, dated 3 March 1993. In these decisions it was
also expressly stated that, in case of non-compliance with
the Commission would be
this capacity limitation,
obliged to request the reimbursement of all aid.

(47) During the monitoring visit to the yard on 25 March
1999 it was confirmed that KWW’s production was
93 862 cgt in 1997. This figure of excess production in
1997 was based on the revised production figures for
1998, which were confirmed by Germany in its letter of
19 March 1999. Since Germany did not provide a
revised report as regards 1997 production, the figures are
considered confirmed and uncontestable. This means that
KWW exceeded its
limitation of
annual
85 000 cgt by 8 862 cgt in 1997.

capacity

(48) The Commission notes that an essential condition for the
approval of aid, i.e. compliance with the annual capacity
limitation of 85 000 cgt as laid down in the Commission
decisions approving the aid in accordance with Directive
90/684/EEC as amended by Directive 92/68/EEC, was
not met in 1997.

(49) The objective of amending Directive 90/684/EEC by
Directive 92/68/EEC was
to allow the urgent and
comprehensive restructuring of the shipbuilding industry
in the former GDR in order for it to become competitive.
The Commission acknowledges that capacity limitations
were introduced in this context in order to offset the
distortive effect the State aid granted to the East German
It also
shipyards has on competition in this sector.
stresses
a
as
limitation,
compensating factor and as an essential condition for
approval of the aid and hence for the compatibility of
the aid with the common market, is not complied with,
rendered incompatible with the common
the aid is
market.

that, when this

capacity

(50)

In its decision concerning aid to MTW-Schiffswerft and
Volkswerft Stralsund (12) the Commission concluded that
MTW had slightly exceeded its capacity limitation in
1996. The compensation for this excess was determined
on the basis that MTW had to reduce its production
correspondingly the following year and the amount of
the operating aid to be granted to it the following year
was reduced by an amount
that corresponded to the
excess. the consequences of the excess were accordingly
determined on the basis of
the excess
financial
question, matching
in
production
consequences of this breach to the gravity of it, that is to
the amount of the excess.

the scale of
the

(12) See footnote 7.

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(51) The Commission notes that the purpose of the concept
the
of recovery of aid in case of non-fulfilment of
conditions laid down for the approval of aid in the
Commission decision is to remind the aid recipient of its
obligation to comply with these conditions and to make
the consequences of non-compliance clear. The aim and
actual effect of the recovery of aid is to seek to recreate
the status quo ante by annulling the negative effect on
competition caused by the illegal aid, the illegality of
which is
caused by the non-compliance with the
conditions set for the approval of the aid and hence for
its compatibility with the common market. In this case
limitation.
the
Consequently,
the
Commission
to MTW-
aid
Schiffswerft Stralsund (13)
the scale of exceeding the
capacity limitation indicates the scale of distortion of
competition in question.

and following the
concerning
decision

condition breached is

reasoning of

capacity

the

(52) Since the scale of exceeding the capacity limitation
indicates
the scale of distortion of competition in
question, the Commission considers that the amount of
aid which corresponds to the exceeding of the capacity
limitation is to be considered incompatible with the
common market.

(53) The Commission notes that aid which is incompatible

with the common market must be recovered.

(54) The

in

that

notes

Commission

decisions
communicated to Germany by letters of 17 January
1994, 20 February 1995, 18 October 1995 and
11 December 1995 it stated that the Commission will be
obliged to request the recovery of all aid if the restriction
of capacity is not complied with.

its

(55) Following the reasoning in the judgment of the Court of
First Instance of 15 September 1998 in Case T-140/95
Ryanair Limited v Commission (14) it should be examined
whether, by declaring only the amount of aid which
corresponds to the exceeding of the capacity limitation
incompatible with the common market and hence
subject to recovery, the Commission departs from the
scope of its previous decisions on granting the aid in
which it is stated that the Commission will be obliged to
request
the restriction of
capacity is not complied with.

the recovery of all aid if

(56) The aim and actual effect of the recovery of aid is to seek
to recreate the status quo ante by annulling the negative
effect on competition caused by the illegal aid. Following
the reasoning of the Commission decision concerning aid
to MTW-Schiffswerft and Volkswerft Stralsund (15),
the

(13) See footnote 7.
(14) [1998] ECR II-3327.
(15) See footote 7.

scale of exceeding the capacity limitation indicates the
scale of distortion of competition in question.

of

the

(57) Since the amount of aid which corresponds to the
declared
exceeding
capacity
incompatible, it is subject to recovery. The recovery seeks
to annul
the
capacity limitation on competition, whereby the purpose
and actual effect of the recovery are fulfilled.

the negative effects of the exceeding of

limitation

is

(58) The Commission therefore considers that, by declaring
the amount of aid which corresponds to the exceeding of
the capacity limitation incompatible with the common
market in this case, it does not depart from the scope of
the conditions of its previous decisions in a way that
would have an effect on the aim, purpose and effect of
the negative
those conditions, namely annulment of
effect on competition.

in

its

by

four

tranches

(59) The Commission therefore concludes that the part of the
aid of EUR 623,45 million (DEM 1 246,9 million)
granted to Kvaerner Warnow Werft and approved by the
Commission
decisions
communicated to Germany by its letters of 3 March
1993 (N 692/D/91), 17 January 1994 (N 692/J/91),
20 February 1995 (N 1/95), 18 October 1995 (N
637/95) and 11 December 1995 (N 797/95) which
the annual capacity
corresponds to the exceeding of
is no longer
limitation of 85 000 cgt by 8 862 cgt
compatible with Article 87(3)(e) of the EC Treaty and
is
therefore incompatible with the common market
pursuant to Article 87(1) of the EC Treaty.

(60)

In their comments, both Germany and KWW contest the
Commission’s observation that
capacity
limitation of 85 000 cgt was the main condition for
approval of the aid. They claim that the approval was
conditional only on the
approved and examined
production facilities being retained in accordance with
the restructuring programme and investment plans.

an annual

the

investment plan and monitor

(61) The Commission notes that compliance both with the
investment programme and with the capacity limitation
were conditions for approval of the aid. It is a constant
practice of the Commission in all restructuring aid cases
to approve
its
compliance. Nevertheless, this does not alter the fact that
another essential condition for the approval of the aid
was compliance with the annual capacity limitation. The
total amount of aid was approved in five separate
in four of which it is expressly
Commission decisions,
mentioned that monitoring is necessary in order
to
ensure that the restriction of the shipbuilding capacity is
these five decisions
respected.
Germany is reminded that,
in case of non-compliance
with the capacity limitation, the Commission would be
obliged to request reimbursement of the aid in question.
In three of
the
German Government had given an assurance that the

these decisions

In addition,

stated that

in four of

is

it

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Official Journal of the European Communities

L 120/19

comply with its
there is no doubt about

limitation.
yard would
the capacity
Consequently,
limitation of 85 000 cgt being a condition for
the
approval of the aid and for the compatibility of the aid
with the common market.

capacity

(62) The second argument raised by both KWW and Germany
is that the capacity gains due to productivity increases
should be conceded to the yards. Capacity limitation and
production limitation are different concepts and KWW
was bound, not by a production limitation, but by a
technical
capacity limitation based on a limitation of
its
yard to increase
capacity which allowed the
productivity within the technically fixed parameters.

exceeding of
capacity for 1997.

its capacity limitation in 1996 from its

(66) Considering the above, the Commission notes that there
is no doubt that KWW was fully aware of the nature and
meaning of
the capacity limitation of 85 000 cgt
imposed on it.

(67) The third argument advanced by both KWW and
Germany was that the aid in fact received by KWW was
less than the total amount of aid approved by the
Commission. Only the amount of aid actually received
should be taken as a basis for calculating the potential
recovery.

for

(63) The Commission notes that KWW titled its production
report
the first half of 1995, submitted to the
Commission by Germany under cover of a letter dated
(cid:145)Report on compliance with the
16 August 1995,
capacity limitation(cid:146).
for 1996,
submitted to the Commission by Germany under cover
of a letter dated 17 February 1997, (cid:145)Production limitation
by EU Commission(cid:146). Moreover, the Commission,
in its
letters of 18 and 19 November 1996 to Germany,
requested the latter to inform the yards to comply strictly
with their capacity limitations in 1996 and subsequent
years.

titled its

report

It

(64)

(65)

In its
letter of 3 March 1997 to Germany the
Commission points out that KWW exceeded its capacity
limitation slightly in 1996 and that
the planned
production for 1997 was also very close to the limit. It
asks Germany to take the necessary measures to correct
the situation. In its letter of 14 April 1997 to Germany
the Commission once again asks Germany to intervene
to see that the yard changes its production plan in order
not to exceed its capacity limit.

the Bundesanstalt

In its letter to the Commission of 1 April 1997, Germany
f(cid:252)r vereinigungsbedingte
states that
Sonderaufgaben (BvS) had asked KWW to respect
its
capacity limitation of 85 000 cgt when planning its
production for 1997. As a result, KWW would submit a
new plan for 1997 in which the capacity limit was
respected. Further,
in its letter of 6 June 1997 to the
Commission, Germany explains that KWW’s capacity in
1997 will be reduced by the amount of the slight excess
in 1996, i.e. 92 cgt, so that in 1997 it would have a
reduced capacity limit. Germany stressed that this was a
non-recurring situation and,
in general, division of
capacity between different years to compensate for excess
was not possible. This had been clearly explained to the
yard as well. Germany also states that it had explained to
the yard that even a slight exceeding of capacity
limitations could not be accepted in the future and that
to deducting the 92 cgt
KWW had committed itself

(68) The Commission notes

that,

in the

case of

the
restructuring of KWW, the major part of the operating
aid for loss compensation was non-cash aid transferred to
the yard as assets at the time of privatisation and that
KWW had indeed received these assets. The Commission
continuously monitored the restructuring of the yard and
twice a year until the end of 1995 (end of restructuring)
received an auditor’s
report on the restructuring of
KWW, the so-called (cid:145)spill-over report(cid:146) (16). The auditor’s
report of December 1995 (17) sets out in detail the aid
received up to 31 December 1995.
It shows that by
31 December 1995 the yard had received all other aid
instead of
approved by the Commission, except
the
of
approved
that date only received
(cid:145)Wettbewerbshilfe(cid:146),
DEM 62,5 million,
is DEM 10,5 million less
(cid:145)Wettbewerbshilfe(cid:146) than approved by the Commission.

of DEM 73 million

it had at
that

amount

that,

(69) The auditor’s report on the actual use made of

the
restructuring aid as per end of 1996, which was
submitted by Germany at the Commission’s request on
30 June 1999, confirms the final
losses relating to the
restructuring. According to this report, the final amount
of
(cid:145)Wettbewerbshilfe(cid:146) paid for loss compensation was
indeed DEM 62,5 million.

(70) Consequently,

the Commission notes that KWW has
received DEM 10,5 million less (cid:145)Wettbewerbshilfe(cid:146) as
operating aid approved for
loss compensation than
authorised by the Commission. The total amount of aid
received by KWW is accordingly EUR 367,25 million

(16) This obligation to submit

the (cid:145)spill-over(cid:146) reports is based on
Article 10a(2)(d) of Directive 90/684/EEC. The
report
submitted to the Commission covered the period until the end of
1995, that is until the restructuring of the yard was completed.
(17) Arthur Andersen Wirtschaftspr(cid:252)fungsgesellschaft Steuerberatungs-
gesellschaft mbH: Stellungnahme zu den Angaben der Kvaerner
Warnow Werft GmbH in Zusammenhang mit bis zum 31.
Dezember 1995 erhaltenen Beihilfen.

last

L 120/20

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Official Journal of the European Communities

20.5.2000

(DEM 734,5 million)
EUR
of
237,45 million (DEM 474,9 million) of investment aid
and EUR 13,5 million (DEM 27 million) of closure aid,
or EUR 618,2 million (DEM 1 236,5 million) all told.

operating

aid,

(71) KWW’s fourth argument is that the Commission must
respect the principle of equal treatment in cases where it
requires repayment of aid. It refers to the Commission
and
decisions
Elbewerft Boizenburg (19).

concerning MTW and Volkswerft (18)

the

case

aid. Consequently,

yards against payment of DEM 242 000 was to be
concerned
considered
assessing the compensation for allocation of capacities.
The present case, on the other hand, concerns calculation
of the amount of aid that needs to be reimbursed owing
to the exceeding of the capacity limitation. Consequently,
the criterion in the present case is not the value of the
capacity as in the case of reallocation, but
the total
amount of aid received. Since, moreover, in this case the
facts are not comparable,
the
principle of equal treatment.

there is no breach of

are

The

very

different.

(72) As regards the fact that in the case of MTW the aid
repayment was calculated on the basis of operating aid
alone, the Commission notes that the two yards MTW
and KWW are not directly comparable since their
situation and the factors relating to their restructuring
programmes
financing
programmes of the two yards were structured differently,
since in the case of MTW the new investments were
financed mainly by credits. For this reason, the distortion
the
of competition caused by the slight exceeding of
capacity limitation by 1 637 cgt
in 1996 could be
neutralised by the reduction of operating aid only. This is
not so in the case of
In
in the present case KWW has exceeded its
addition,
capacity limitation by some 10 % (= 8 862 cgt), which
corresponds to the production capacity of half of a
medium-sized container
ship. With this order of
magnitude,
the investment aid is also covered by the
excess so that in accordance with Article 6 of Directive
90/684/EEC, unlike in the case of MTW Schiffswerft
GmbH, it is necessary also to include the investment aid
in the aid calculation.

the restructuring of KWW.

(73) As

regards

the reduction of

future production,

the
Commission notes that in the case of MTW it allowed
the yard to compensate for its slight exceeding of its
capacity limitation in 1996 the following year due to the
exceptional circumstances that had caused this excess.
The exceeding of the capacity limitation by 1 637 cgt in
1996 was caused by the fact that the size of the ship
changed following a change in the ship’s design required
by the customer. This situation is of a very different
nature from that in the present case, where KWW has
in the Commission’s opinion deliberately exceeded its
capacity limitation by a very considerable amount.

(74) As regards the value given to the cgts in the case of the
the former Elbewerft
reallocation of
the capacity of
Boizenburg yard, the Commission notes that here too the
situation and the facts of the two cases are not directly
comparable.
the
capacity of the closed Elbewerft yard to the other east
German yards, the question was to establish whether the
allocation of these capacities to the other east German

the reallocation of

In the case of

(18) See footnote 7.
(19) See footnote 8.

(75) The fifth point raised by KWW is that, if the Commission
were to consider part of the aid incompatible with the
common market,
rate applicable to the
repayment of aid should be calculated from the time the
alleged breach began,
from the time the aid was
subsequently rendered incompatible.

the interest

i.e.

(76) Pursuant

the

(EC) No

659/1999

to Regulation

the
Commission is
recovery of
required to order
incompatible, unlawful aid. The Commission notes that,
according to Article 14(2) of Regulation (EC) No
interest is to be payable from the date on
659/1999,
the
which the unlawful aid was at
beneficiary. It is the opinion of the Commission that the
breach of an essential condition for the approval of the
aid leads automatically to the incompatibility of the aid
with the common market throughout the period during
which the aid recipient was bound by this condition (cid:150) in
this case the capacity limitation.

the disposal of

(77) The Commission stresses

of

the

that

four

five
Commission decisions approving the aid explicitly state
that, if the capacity limitation is not complied with, all
aid is to be paid back. In the Commission’s opinion, this
implies that a breach of an obligation to comply with the
capacity limitation abolishes retroactively the legal basis
for the granting of the aid. For this reason this case is to
be considered similar to a case where the unlawfulness of
the aid exists from the beginning and therefore it is to be
dealt with accordingly.

(78) For the reasons stated in points 35 to 77 above, the
Commission concludes that the part of the aid of EUR
618,2 million (DEM 1 236,4 million) granted to Kvaerner
Warnow Werft and approved by the Commission in four
tranches by its decisions communicated to Germany by
letters of 3 March 1993 (N 692/D/91), 17 January 1994
(N 692/J/91), 20 February 1995 (N 1/95), 18 October
1995 (N 637/95) and 11 December 1995 (N 797/95)
which corresponds
the annual
capacity limitation of 85 000 cgt by 8 862 cgt is no
longer compatible with Article 87(3)(e) of the EC Treaty.
As no other basis of compatibility exists or has indeed
been invoked by Germany or KWW, this part of the aid
is incompatible with the common market pursuant to
Article 87(1) of the EC Treaty.

to the exceeding of

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L 120/21

(79) The Commission has considered various options

in
determining the amount of the incompatible aid and has
come to the following conclusion.

(80) The Commission notes that

the duration of KWW’s
annual capacity limitation of 85 000 cgt is 10 years. It
has calculated the amount to be recovered by using the
proportional approach. Consequently,
the Commission
has calculated the proportion of the excess of 85 862 cgt
in relation to the total of the capacity limitation during
the 10-year period (85 000 cgt), which gives
the
proportion of 1,04 % as the amount of unlawful aid.

(81) Consequently,

of

the

aid of

amount

incompatible

aid
corresponds to the proportion of the excess in relation
to the total capacity limitation calculated on the basis
EUR 367,25 million (DEM
of operating
734,5 million) and investment aid of EUR 237,45 million
(DEM 474,9 million),
i.e. EUR 604,7 million (DEM
1 209,4 million) in total, paid to KWW. Consequently,
the amount of aid which is considered incompatible with
the common market on the basis of KWW’s exceeding of
its capacity limitation in 1997 is EUR 6,3 million (DEM
12,6 million). This aid must be recovered.

(82) The Commission notes that in its decision to initiate the
procedure in this case (20) it stated that the closure aid of
EUR 13,5 million (DEM 27 million), approved by the
Commision in its decision communicated to Germany by
its letter of 3 March 1993, has been paid to finance the
redundancy pay and other social measures in favour of
former workers. As the yard has passed on these monies
to its former employees, the Commission will not seek
the recovery of this amount. For this reason the closure
aid is not included in the above calculation.

(83) The Commission stresses that the sums to be recovered
must bear interest from the date on which they were
made available to the recipient until their actual recovery.
The recovery must be effected in accordance with the
law and the interest must be
procedures of national
calculated on the basis of the reference rate used for
calculating the grant equivalent of regional aid.

VI. CONCLUSIONS

(84) The Commission concludes that in 1997 KWW exceeded
its annual capacity limitation of 85 000 cgt by 8 862 cgt.
This
the
Commission in its decisions communicated to Germany
by letters of 3 March 1993, 17 January 1994, 20
February 1995, 18 October 1995 and 11 December

limitation was

capacity

annual

set

by

1995 as an essential condition for approval of a total of
EUR 623,45 million (DEM 1 246,9 million) of aid in
accordance with Directive 90/684/EEC, as amended by
Directive 92/68/EEC, and hence for the compatibility of
the aid with the common market pursuant to Article
87(3)(e) of the EC Treaty.

(85) Since it is the opinion of the Commission that the scale
of the exceeding of the capacity limitation determines the
scale of distortion of competition in question,
the
Commission considers that
the amount of aid which
corresponds to the exceeding of the capacity limitation of
85 000 cgt by 8 862 cgt in 1997 no longer fulfils the
conditions of Article 87(3)(e) of the EC Treaty and is
therefore
common market
pursuant to Article 87(1) of the EC Treaty.

incompatible with the

(86) The aid amount of EUR 6,3 million (DEM 12,6 million)
is therefore incompatible with the common market and
must be recovered. The sum to be recovered must bear
interest from the date on which it was made available to
the recipient until its actual recovery,

HAS ADOPTED THIS DECISION:

Article 1

Aid which Germany has implemented in favour of Kvaerner
Warnow Werft GmbH amounting to EUR 6,3 million (DEM
12,6 million)
incompatible with the common market
pursuant to Article 87(1) of the EC Treaty.

is

Article 2

1.
Germany shall take the necessary measures to recover
from the recipient the aid amounting to EUR 6,3 million (DEM
12,6 million).

Recovery

shall be

effected without delay

2.
and in
accordance with the procedures of German law, provided that
they allow the immediate and effective execution of
the
Commission’s decision. To this end and in the event of
proceedings before the German courts, Germany shall take all
necessary steps which are available under its law,
including
provisional measures, without prejudice to Community law.

(20) See footnote 4.

3.
The sum to be recovered shall bear interest from the date
on which it was made available to the recipient until its actual

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Official Journal of the European Communities

20.5.2000

Interest shall be calculated on the basis of

recovery.
the
reference rate used for calculating the grant equivalent of
regional aid.

Article 4

This Decision is addressed to the Federal Republic of Germany.

Article 3

Done at Brussels, 15 February 2000.

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

For the Commission

Mario MONTI

Member of the Commission