2000/416/EC: Commission Decision of 29 March 2000 on state aid implemented by Germany in favour of Kvaerner Warnow Werft GmbH (1999) and amending Decision 1999/675/EC (notified under document number C(2000) 1008) (Text with EEA relevance) (Only the German text is authentic)
Date: 2000-03-29
Institutions: European Commission
Subjects: Germany, State aid, competition law, control of State aid, infringement of EU law, shipbuilding

29.6.2000

EN

Official Journal of the European Communities

L 156/39

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 29 March 2000

on state aid implemented by Germany in favour of Kvaerner Warnow Werft GmbH (1999) and
amending Decision 1999/675/EC

(notified under document number C(2000) 1008)

(Only the German text is authentic)

(Text with EEA relevance)

(2000/416/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 Directive 90/684/EEC of 21
December 1990 on aid to shipbuilding (1), as last amended by
Directive 94/73/EC (2), and Council Directive 92/68/EEC of 20
July 1992 (3) amending Directive 90/684/EEC on aid to ship-
building,

Having called on interested parties to submit their comments
pursuant to the provisions cited above (4) and having regard to
their comments,

Whereas:

I. Procedure

(1)

By receiving on 4 September 1998 the
regular
monitoring report of 30 June 1998 on the shipbuilding
capacity of Kvaerner Warnow Werft GmbH (hereinafter
referred to as KWW), the Commission was informed
that KWW would exceed its annual new-building
capacity limitation of 85 000 cgt in both 1998 and
1999. The forecast production indicated in the report

(1) OJ L 380, 31.12.1990, p. 27.
(2) OJ L 351, 31.12.1994, p. 10.
(3) OJ L 219, 4.8.1992, p. 54.
(4) OJ C 41, 16.2.1999, p. 23.

was 106 945 cgt for 1998 and 104 560 cgt for 1999.
The Commission services sent a letter to the German
authorities on 25 September 1998 requesting them to
take the necessary measures to make the undertaking
comply with the capacity limitation and to inform the
Commission of the contents and the result of these
measures. Germany replied with its letter dated 20
October 1998.

(2)

(3)

(4)

(5)

By letter dated 16 December 1998, the Commission
informed Germany of its decision to initiate the proce-
dure laid down in Article 88(2) of the EC Treaty in
respect of this exceeding of the capacity limitation.

The Commission decision to initiate the procedure was
published in the Official Journal of the European Communi-
ties (5). The Commission invited interested parties to
submit their comments on the matter.

The Commission received comments from interested
parties. It forwarded them to Germany, which was given
the opportunity to react. Germany submitted its
comments with a letter dated 18 February 1999.

Commission staff visited the shipyard with an external
expert on 15 October 1999. On this occasion, the ship-
yard presented its amended production plan, which took
account of the restriction of production to 91 000 cgt in
1999. The revised production figure for that year was
90 912 cgt.

(5) See footnote 4.

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(6)

(7)

(8)

(9)

Commission staff again visited the shipyard on 25
January 2000 with an external expert in order to verify
production. It was confirmed that the KWW's output in
1999 was 90 831 and that the capacity limitation of
91 000 cgt had therefore been complied with.

This Decision is concerned with whether the capacity
limitation was exceeded in 1999. The Commission
issued a negative Decision concerning the exceeding of
capacity in 1998 on 8 July 1999 (Decision 1999/
675/EC) (6). The procedure opened in respect of 1998
and 1999 has thus already been partly closed.

II. Detailed description of the aid

The Commission approved restructuring aid in accord-
ance with Directive 90/684/EEC to allow the compre-
hensive restructuring of the East German shipyard KWW
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
aid was approved subject to a capacity restriction of
85 000 cgt per year, compliance with which is moni-
tored by the Commission.

situated in Rostock-
The shipyard Warnow Werft,
in Mecklenburg — Vorpommern,
Warnemunde
to the
sold by the Treuhandanstalt
Germany, was
Norwegian Kvaerner group in October 1992. Under
paragraph 27 of the sales contract, sent by Germany to
the Commission for scrutiny and approval by letter
dated 30 October 1992, Kvaerner undertook until 31
December 2005, with regard to Warnow Werft, not to
exceed an annual new-building capacity of 85 000 cgt
unless the requirements based on the EC Treaty became
less restrictive.

(10) Directive 90/684/EEC, as amended by Directive 92/
68/EEC, contains a derogation from the rules on oper-
ating aid applicable to other Community yards for the
shipyards in the former German Democratic Republic in
order to create the possibility for these yards to undergo
urgent and comprehensive restructuring and to become
competitive. After the privatisation of Warnow Werft,
the Commission approved the restructuring aid for the
yard in four tranches in accordance with the said
Directive. The total amount of aid approved by several
Decisions was as follows:

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

(6) OJ L 274, 23.10.1999, p. 23.

— DEM 45,5 million in operating aid,

— DEM 82,4 million in operating aid in the form of an

exemption from previous liabilities,

— DEM 127,5 million in investment aid,

— DEM 27,0 million in closure aid;

N 692/Jl91 — Commission letter of 17 January 1994 (SG
(94) D/567)

— DEM 617,1 million in operating aid;

N 1/95 — Commission letter of 20 February 1995 (SG
(95) D/1818)

— DEM 222,5 million in investment aid;

N 637/95 — Commission letter of 18 October 1995 (SG
(95) D/12821)

— DEM 66,9 million in investment aid;

N 797/95 — Commission letter of 11 December 1995 (SG
(95) D/15969)

— DEM 58,0 million in investment aid.

(11)

(12)

Consequently, the total amount of aid concerned by
these Decisions was EUR 372,5 million in operating aid
(DEM 745 million) EUR 237,45 million in investment
aid (DEM 474,9 million) and EUR 113,5 million in
closure aid (DEM 27,0 million). This results in total aid
of EUR 623,45 million (DEM 1 246,9 million).

The aid was approved on the condition that the yearly
new-building capacity did not exceed 85 000 cgt. The
capacity limitation was included both in the notified
sales contract (paragraph 27) concerning the privatisa-
tion of Warnow Werft and in the above-mentioned
Commission Decisions authorising the aid. In the Deci-
sions communicated to Germany by the letters of 17
January 1994, 20 February 1995, 18 October 1995 and
11 December 1995,
the
Commission would be obliged to demand the recovery
of the aid if the capacity limitation were not complied
with.

it was clearly stated that

(13) When opening 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 regular
monitoring report of 30 June 1998 on KWW's ship-
building capacity, the yard would exceed its annual new-
building capacity limitation of 85 000 cgt in both 1998,
by producing 106 945 cgt, and 1999, by producing
104 560 cgt. This meant that an essential condition on
which the aid was approved was not being complied
with.

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(14)

For this reason the Commission doubted whether the aid
approved by the Commission to allow the restructuring
and the continued operation of the former East German
shipyard Warnow Werft 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) could still be deemed compatible with
the common market.

(15) On 21 July 1999, the Commission decided on the re-
allocation of the 22 000 cgt capacity of the closed Elbe-
werft Boizenburg. This capacity was distributed among
the four remaining shipyards in the former German
Democratic Republic, and the Commission approved
this reallocation in its Decision on State aid measure
N 352/99, of which it notified Germany by letter of 5
August 1999 (SG(99) D/6192). Under this Decision,
KWW was allocated an additional 6 000 cgt, which
from
increased its capacity limitation to 91 000 cgt
1999.

III. Comments from interested parties

(16)

(17)

The Commission has received comments from KWW, a
the Federation of Danish
Member State (Denmark),
Industry (Dansk Industri) and the Association of Danish
Shipbuilders (Foreningen of
Jernskibs- og Maskinbyg-
gerier i Danmark).

These comments relate solely to the exceeding of the
capacity limitation in 1998 and are presented in detail in
the relevant Commission Decision (7). They are therefore
not relevant to this Decision.

former German Democratic Republic may, until 31
December 1993, be considered compatible with the
common market under certain conditions relating to the
amount of aid and an annual reporting obligation on the
part of the German Government. One of the conditions
laid down in this provision is the German Government's
undertaking to carry out before 31 December 1995 a
genuine and irreversible reduction of 40 % of the ship-
building capacity of 545 000 cgt existing on 1 July
1990.

(21)

Investment aid is regulated in Article 6 and closure aid
in Article 7 of Directive 90/684/EEC. Under Article 6(1),
investment aid may not be granted for investment in
existing yards unless it is linked to a restructuring plan
which does not involve any increase in the shipbuilding
capacity of the yard or unless it 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. Under 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.

IV. Comments from Germany

(22)

(18) Germany's

comments, which relate

solely to the
the capacity limitation in 1998, are
relevant Commission
to this

exceeding of
presented in detail
Decision (7), and are therefore not
Decision.

relevant

in the

(19)

V. Assessment

The Commission notes that the aid approved in compli-
ance with the provisions of Council Directive 90/
684/EEC is considered compatible with the common
market as it complies with Article 87(3)(e) of the EC
Treaty. However, this applies only in so far as the condi-
tions laid down in the Commission decisions approving
the aid in accordance with the above Directives are met.
Should the conditions for approving the aid not be
complied with, the aid falls under the general prohibi-
tion of Article 87(1) of the EC Treaty and must therefore
be considered incompatible with the common market,
unless it can be declared compatible for other reasons.

(20) Article 10(a) of Directive 90/684/EEC,

inserted by
Directive 92/68/EEC contains a derogation from the
rules on operating aid applicable to other Community
yards for the shipyards in the former German Demo-
cratic Republic in order to create the possibility for these
yards to undergo urgent and comprehensive restruc-
turing and to become competitive. Under Article
10(a)(2) of Directive 90/684/EEC, as amended by
Directive 92/68/EEC, operating aid for the shipbuilding
and ship conversion activities of the yards situated in the

(7) See footnote 6.

the

is stated that

In the Commission proposal for Directive 92/68/EEC (8),
it
the impact of
taking into account
restructuring on conditions of competition in the
Community, a balance has to be struck between the
restructuring of
former German Democratic
Republic 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 possibility of giving extra aid above the
current ceilings has to be met by accompanying restruc-
turing and capacity reductions.

(23) One of the conditions laid down in Article 10(a)(2) of
Directive 90/684/EEC for the compatibility of the oper-
ating aid with the common market
is the German
Government's undertaking to carry out before 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 terntories of
Republic is therefore 327 000 cgt. Germany distributed
this total capacity among the five remaining new-
building yards. In this context, the capacity for KWW
was set at 85 000 cgt (9).

(8) OJ C 155, 20.6.1992, p. 20.
(9) It should be noted that the Court of First Instance confirmed the
importance of the allocation of capacities to the individual yards for
the legality of the aid decision in case T-266/94 Skibsvaerftsforen-
ingen and Others v Commission [1996] ECR II-1399 (paragraphs
151 to 198).

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(24)

(25)

The total of EUR 623,45 million (DEM 1246,9 million)
in 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 of 3 March 1993 (N 692/D/91), the
second by letter of 17 January 1994 (N 692/J/91), the
third by letter of 20 February 1995 (N 1/95), the fourth
by letter of 18 October 1995 (N 637/95), and the fifth
by letter of 11 December 1995 (N 797/95).

The Commission notes that the annual capacity limita-
tion of 85 000 cgt was one of the main conditions for
the approval of the aid. The aid was approved on the
basis of the restructuring plan notified to the Commis-
sion. This annual limitation was incorporated into the
privatisation contract for Warnow Werft, 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 the
event of non-compliance with this capacity limitation,
the Commission would be obliged to require the reim-
bursement of all aid.

(26) On 21 July 1999, the capacity of the closed Elbewerft
Boizenburg of 22 000 cgt was reallocated among the
four remaining shipyards in the former German Demo-
cratic Republic. The Commission approved this realloca-
tion by its Decision on State aid measure No N 325/99,
which was notified to Germany by letter of 5 August
1999 (SG(99) D/6192). KWW was allocated an addi-
tional 6 000 cgt, increasing its capacity limitation from
85 000 cgt to 91 000 cgt with effect from 1999.

(30) On 15 February 2000, the Commission issued a nega-
tive Decision on the exceeding of the capacity limitation
in 1997 (10). Both KWW and Germany had argued in
this case that the shipyard had not received all of the
restructuring aid approved by the Commission. On the
basis of the auditor's report concerning the actual use of
the restructuring aid up to the end of 1996, which
Germany transmitted to the Commission at the latter's
request on 30 June 1999, the Commission concluded
that KWW had received only DEM 62,5 million of the
approved DEM 73 million in Wettbewerbshilfe. It had
thus received DEM 10,5 million less than had been
approved by the Commission.

(31)

(32)

The Commission accordingly found in its Decision of 15
February 2000 that KWW had received DEM 10,5
million less in Wettbewerbshilfe as approved operating aid
for loss compensation than had been authorised by the
Commission. The amount of aid received by KWW was
thus EUR 367,25 million (DEM 734,5 million) in oper-
ating aid, EUR 37,45 million (DEM 474,9 million) in
investment aid and EUR 13,5 million (DEM 27 million)
in closure aid,
i.e. a total of EUR 618,2 million
(DEM 1 236,4 million). This amount was then taken as
a basis for calculating the amount of incompatible aid.

In the Decision of 8 July 1999 on the exceeding of the
capacity limitation in 1998, the amount of incompatible
aid was calculated on the basis of the amount of aid
authorised (11). Since the amount of aid received was less
than the amount authorised by the Commission, the
Commission is hereby amending its Decision of 8 July
1999 in such a way as to calculate the amount of
incompatible aid on the basis of the amount of aid
actually received by the shipyard.

(27)

The Commission notes that the comments contained in
recitals 16 to 25 apply even with the new capacity
limitation of 91 000 cgt.

(28) During a visit to the shipyard on 25 January 2000, it
was confirmed that KWW's output in 1999 had been
90 831 cgt. KW W had thus not exceeded the annual
capacity limitation of 91 000 cgt in 1999.

(29)

Consequently, one of the essential conditions for the
granting of aid, i.e. the capacity limitation laid down in
the Commission Decision approving the aid adopted on
the basis of Directive 90/684/EEC,
in the wording of
Directive 92/68/EEC, was complied with in 1999.

(33) On the basis of the method of calculation used in the
Decision of 8 July 1999, the amount of incompatible aid
in 1998 resulting from the fact that the capacity limita-
tion was exceeded corresponds to the proportion of the
excess — in this case, more than 20 %, which represents
a significant distortion of competition — to the total
capacity limitation, on the basis of the total aid received
by KWW,
i.e. EUR 604,7 million (DEM 1 209,4
million), made up of EUR 367,25 million (DEM 734,5
million)
in operating aid and EUR 237,45 million
(DEM 474,9 million) in investment aid. The amount of
aid which, in 1998, cannot be deemed compatible with
the common market as a result of the fact that KWW
exceeded the authorised capacity is thus EUR 41,5
million (DEM 82,2 million). This amount should be
recovered.

(10) State aid case C 46/99.
(11) See footnote 6.

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(34) As the Commission stated in its Decision of 8 July 1999
on the exceeding of capacity in 1998 (12) and its
Decision of 15 February 2000 on the exceeding of
capacity in 1997 (13) the extent to which competition is
distorted depends on the extent to which the authorised
capacity is exceeded. The Commission accordingly takes
the view that the amount of aid corresponding to the
extent to which the capacity limitation was exceeded
should be deemed incompatible with the common
market.

(35)

(36)

(37)

(38)

Since the capacity limitation was complied with in
1999, none of
that year can,
the aid granted for
according to the same reasoning, be deemed incompat-
ible with the common market.

that of

The Commission thus notes
the aid of
EUR 618,2 million (DEM 1 236,4 million) received by
KWW which was approved in four tranches in Commis-
sion Decisions notified 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 portion which
corresponds to compliance with the capacity limitation
in 1999 meets the conditions of Article 87(3)(e) of the
EC Treaty and is compatible with the common market
pursuant to Article 87(1) of the EC Treaty.

VI. Conclusions

The Commission concludes that KWW did not exceed
the annual capacity limitation of 91 000 cgt in 1999.
This annual capacity limitation was laid down by the
Commission in Decisions notified by letters of 3 March
1993, 17 January 1994, 20 February 1995, 18 October
1995 and 11 December 1995 as an essential condition
for the approval of aid totalling EUR 23,95 million
(DEM 1 246,9 million) pursuant
to Directive 90/
684/EEC, as amended by Directive 92/68/EEC, and thus
for the compatibility of
the aid with the common
market under Article 87(3)(e) of the EC Treaty.

In the Decision of 8 July 1999 on the exceeding of
capacity in 1998 and of 15 February 2000 on the
exceeding of capacity in 1997, the Commission based its
assessment on the premise that the extent to which
competition was distorted depended on the extent to

which the capacity limitation was exceeded, and that the
amount of aid corresponding to this exceeding of
capacity should be deemed incompatible with the
common market. The amount of aid corresponding to
compliance with the capacity limitation meets the condi-
tions of Article 87(3)(e) of the EC Treaty and is compat-
ible with the common market pursuant to Article 87(1)
of the EC Treaty,

HAS ADOPTED THIS DECISION:

Article 1

Kvaerner Warnow Werft GmbH (KWW) complied in 1999
with the capacity limitation compliance with which is,
pursuant to the Decision on State aid measure N 325/99,
notified by letter of 5 August 1999, a condition for the compa-
tibility of the aid with the common market.

Article 2

Article 1 of Decision 1999/675/EC shall be worded as follows:

‘Article 1

The State aid which Germany has implemented in favour of
Kvaerner Warnow Werft GmbH in an amount of
EUR 41,1 million (DEM 82,2 million) is incompatible with
the common market pursuant to Article 87(1) of the EC
Treaty.’.

Article 3

This Decision is addressed to the Federal Republic of Germany.

Done at Brussels, 29 March 2000.

For the Commission

Mario MONTI

Member of the Commission

(12) See footnote 6.
(13) State aid case C 46/99.