2002/14/EC: Commission Decision of 12 July 2000 on the state aid granted by France to Scott Paper SA Kimberly-Clark (Text with EEA relevance) (notified under document number C(2000) 2183)
Date: 2000-07-12
Institutions: European Commission
Subjects: France, State aid, control of State aid, discount sale, industrial plot, infringement of EU law

15.1.2002

EN

Official Journal of the European Communities

L 12/1

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 12 July 2000

on the state aid granted by France to Scott Paper SA Kimberly-Clark

(notified under document number C(2000) 2183)

(Only the French text is authentic)

(Text with EEA relevance)

(2002/14/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 given notice to the parties concerned to submit their
comments in accordance with the said Article (1) and having
regard to those comments,

Whereas:

1. PROCEDURE

(1)

(2)

Following publication by the French Cour des Comptes
(Court of Auditors) in November 1996 of the special
public report entitled (cid:145)Local authority assistance for
firms(cid:146) (2), the Commission received by letter dated 23
December 1996 a complaint concerning the preferential
terms on which the Ville d’OrlØans ((cid:145)the city council(cid:146))
and the Conseil GØnØral du Loiret ((cid:145)the county council(cid:146))
(together referred to as (cid:145)the local authorities(cid:146)) had sold
48 ha of the La Saussaye industrial estate to the United
a manufacturer of
States
household and sanitary paper.

company

Paper,

Scott

By letter dated 17 January 1997,
requested

information

further

the Commission
French

from the

(1) OJ C 301, 30.9.1998, p. 4.
(2)

interventions des collectivitØs

(cid:145)Les
entreprises(cid:146), Cour des Comptes, Paris, November 1996.

territoriales en faveur des

authorities. By letter dated 14 February 1997,
the
French authorities requested a further extension of 15
days, which the Commission granted on 3 March 1997.
By letter dated 19 March 1997, the French authorities
supplied some of the information requested. Because the
information was
the
Commission renewed its request in a letter dated 26
March 1997, to which the French authorities replied in
part by letter dated 21 April 1997. In the same letter,
they requested a further extension of 20 days, which the
Commission granted on 2 May 1997.

complete,

however,

not

(3)

(4)

and 24 October 1997. The

On 3 June 1997 the Commission received the
supplementary information requested. On 8 August
1997 it once more asked the French authorities to
clarify certain matters. It sent them reminders on 24
September
French
authorities provided
information on 3
additional
November 1997, which was communicated to the
complainant on 17 November 1997. By letter dated 8
December 1997,
the complainant provided further
information, to which the Commission’s services replied
on 6 January 1998. The last additional
information
from the complainant reached the Commission on 29
January and 1 April 1998.

On 20 May 1998 the Commission decided to initiate
the procedure laid down in Article 88(2) of
the EC
Treaty in respect of the measures, in view of the doubts
it still had about the circumstances in which the French
authorities had acted in regard to Scott Paper and the
those measures with the Treaty. By
compatibility of
the
letter dated 10 July 1998 (SG(98) D/5663)
Commission informed the French authorities of
this
decision.

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Official Journal of the European Communities

15.1.2002

L 12/2

(5)

(6)

(7)

(8)

(9)

By letter dated 31 July 1998, the French authorities
requested a further extension of one month, which the
Commission granted on 5 August 1998. By letter dated
18 September 1998 they requested a further extension
of 20 days, which was granted on 25 September 1998.
French
By letter dated 25 November 1998,
authorities
said
replied to the
procedure.

initiation of

the

the

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

Journal

of

The Commission received comments on this subject
from interested parties. The comments were translated
into French and one third party was requested, by letter
dated 16 February 1999, to withdraw its request for
confidentiality. The comments were then sent to the
French authorities by letter dated 2 March 1999. After
the French authorities and third parties had submitted
comments, there were still many aspects which needed
clarification before the case could be closed. In the letter
the Commission also
therefore,
of 2 March 1999,
requested detailed information.

(12)

(13)

By letter dated 18 March 1999, the French authorities
requested a further extension of 10 days, which the
Commission granted in its letter of 24 March 1999. The
French authorities replied in part to the Commission’s
request in its letter of 30 April 1999.

Since, after a considerable delay,
its replies were still
inadequate, the French authorities were ordered by the
Commission on 8 July 1999 to provide the necessary
information. This decision was notified to the French
authorities by letter dated 20 July 1999 (SG(99)
D/5459), requiring them to submit their observations
within 15 working days of the date of notification of
the decision, i.e. by 11 August 1999.

(10)

By letter dated 9 August 1999, the French authorities
asked for the deadline to be extended by 30 working
days, which extension the Commission granted on 12
the French
August 1999. On 15 October 1999,
authorities
to supply
replied in part
information.

to the order

(11) At the request of the French authorities, a meeting with
the Commission services was held on 7 December

(3) OJ C 301, 30.9.1998, p. 4.

that meeting,

the Commission services
1999. At
in the
exceptionally allowed the French authorities,
interests of
to provide additional
information by the end of December 1999. This
information was finally forwarded on 10 January and
21 February 2000.

the proceedings,

2. DETAILED DESCRIPTION OF THE AID

2.1. AID BENEFICIARY

In 1969 the Scott Paper Company purchased the French
firm Bouton Brochard, subsequently founding a separate
company, Bouton Brochard Scott, which took over
Bouton Brochard’s business. Bouton Brochard Scott
changed its name to Scott SA in November 1987 (4).

paper

sanitary

production

Scott SA, whose shares were bought by Kimberly-Clark
Corporation (KC) in January 1996, owned a household
and
the
OrlØans-Sologne industrial estate in the municipality of
Saint-Cyr-en-Val,
Some 170 people were
the plant. KC announced its closure in
employed at
January 1998. The plant’s assets,
i.e. the site and the
paper mill, were bought by Procter & Gamble (P & G)
in June 1998 (5).

Loiret.

plant

on

2.2. SALE OF THE LAND

(14)

(Scott)

To enable Bouton Brochard Scott
to build a
household paper factory, the French subsidiary of the
Scott Paper Company, the county council and the city
council commissioned the SociØtØ d’economie mixte
pour l’equipement du Loiret ((cid:145)Sempel(cid:146)) on 12 September
1987 to carry out all the studies and work necessary for
developing some 68 hectares of
land on the (cid:145)La
Saussaye(cid:146)
industrial estate and the (cid:145)La Planche(cid:146) sector
(the La Saussaye industrial estate) (6).

(4) Comments from Scott, 23 November 1998, point B1.
(5) Comments from Scott, 23. November 1998, point B1.
(6) Preamble to the agreement of 31 August 1987 concluded between
Bouton Brochard Scott SA, OrlØans City Council and Loiret County
Council ((cid:145)the Scott agreement(cid:146)); preamble to the Agreement on the
improvement of
the La Saussaye and La Planche sites of 12
September 1987 concluded between Loiret County Council,
OrlØans City Council and Sempel ((cid:145)the Sempel agreement(cid:146)); extract
from the minutes of the meeting of OrlØans City Council of Friday,
27 May 1994 ((cid:145)the city council’s minutes of 1994(cid:146)), p. 1.

15.1.2002

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Official Journal of the European Communities

L 12/3

(15)

(16)

To this end the city council sold the 68 hectares
concerned to Sempel for a symbolic one franc (7). The
land, which was agricultural land at the time, had been
bought by the city council between 1975 and 1987 for
FRF 16/m2 (EUR 2,4/m2), or a total price of FRF 10,9
million (EUR 1,7 million) (8).

is a local

semi-public company subject

Sempel
to
private law and governed by law No 83-597 of 7 July
1983. Companies covered by this legislation are legal
persons governed by private law which link local
authorities
(regions, departments and municipalities),
and their associations, to private persons and, possibly,
to carry out
to other public persons,
in order
development and construction work,
industrial and
commercial services, or any other activity of public
interest. Although controlled by public persons, in this
case the local authorities, which must hold at least half
the capital
they are
governed by the rules of private law, in particular the
Law of 24 July 1966 on trading companies (9).

to a ceiling of 80 %)

(subject

(17) Under Article 2 of the Sempel agreement, Sempel was
commissioned to carry out
the following work in
particular on land intended for Scott’s proposed
facilities:

(cid:145)(cid:151) all surveys and preparations of preliminary plans,

(cid:151) all roads and miscellaneous networks, and all works
for supplying with water, gas and electricity the site
which is the subject of this agreement,

(cid:151) parking space for lorries and light vehicles,

(cid:151) the rail link to the site which is the subject of this

agreement,

(cid:151) the lighting for the roads and parking spaces,

(cid:151) green areas,

(cid:151) the

formation level

factory
for
warehouse and its superstructure, these structures to
be built under contract with the developer, the Scott
Paper company,

receiving the

(cid:151) tall primary, secondary and tertiary infrastructure
facilities situated within the estate to be developed
or necessary for directly connecting it to external
networks, and

(cid:151) all the development work required to make the land
suitable for the use to which it has been allocated(cid:146).

(18) At the time when the Scott agreement was concluded,
i.e. 1987, the city council and the Loiret undertook to
finance the site-preparation costs (cid:145)up to a maximum of
FRF 80 million(cid:146) (10). This amount was divided (cid:145)into two
parts, FRF 50 million for OrlØans City Council and FRF
30 million for the Loiret of the Loiret(cid:146) (11).

(7) Article 3.1 of the Sempel agreement and the city council’s minutes

of 1994, p. 1.

(8) By letters dated 17 March and 29 May 1997,

the French
the land had been
authorities informed the Commission that
bought by the city council for 15 FRF/m2. But, according to point
2.2 of the city council’s minutes of 1994, the initial value of the
land was FRF 10,9 million, i.e. FRF 16/m2.

(9) According to the letter from the French authorities, 21 April 1997,

p. 3.

(10) Article 4 of the Scott agreement.
(11) Point 1.1 of the city council’s minutes of 1994.

L 12/4

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Official Journal of the European Communities

15.1.2002

(19)

It is clear, however, from the statement of final account drawn up by Sempel for the improvement
of the La Saussaye industrial estate and dated 26 July 1993 (12)
final
account) and from the city council’s minutes that the total cost of developing the site must have
been considerably higher. According to Sempel’s statement of final account, it was some FRF 140
million (EUR 21,4 million), broken down as follows:

(Sempel’s statement of

Expenditure

Receipts

2,00

Advance from local authority

4 282 000,00

Purchase of land

Ancillary costs (land)

Other ancillary costs

47 181,35

Borrowings

36,00

Sale of land

Other, pre-concession studies

2 372 000,00

Topographical surveys

118 295,63

Annual payments from local
authority

Soil surveys and boreholes

685 510,97

VAT refunded

Other general studies

621,26

Financial revenue

Studies for secondary works

Secondary water supply

Other secondary works

45 942,90

58 761,45

490,57

Open credit:

(cid:151) Loiret County Council

(cid:151) OrlØans City Council

57 304 659,94

31 000 002,00

39 424 345,03

8 315 950,00

38 486,81

8 280,68

8 280,68

Other individual structures

4 020 456,51

Buildings studies and works

76 082 967,38

Financial charges on loans

27 477 505,98

Financial charges on
non-interest bearing advances

Company expenses

Other expenses concerning
the sale

291 106,92

1 590 000,00

519 283,08

Miscellaneous charges

2 030 054,14

Other sundry debtors

16 489 000,00

VAT paid

8 552 789,00

140 382 005,14

cost of

the operation to the

(20) According to point 2.2 of the city council’s minutes, the
total
Loiret was
approximately FRF 37,2 million (EUR 5,7 million) and
to the city council approximately FRF 92,5 million (EUR
14,1 million), of which FRF 65,85 million (EUR 10
million) was for the redemption of a loan of FRF 34,2
million (EUR 5,2 million) granted to Sempel, FRF 10,9
million (EUR 1,7 million) for the purchase of the land
and FRF 13,6 million (EUR 2,1 million) for the land
improvement operations carried out.

(12) Sempel’s statement of final account prepared for Loiret County
Council and OrlØans City Council on the La Saussaye and La
Planche industrial estate, 26 July 1993, p. 1.

140 382 005,14

(21)

(cid:145)[(cid:133)]

In 1987 Sempel sold 48 ha of the available 68 ha to
Scott at a price of FRF 65/m2 (EUR 9,9/m2), i.e. for a
total price of FRF 31 million (EUR 4,7 million) (13). This
price was already laid down in the Sempel agreement
the price for selling the factory
(point 12.3):
warehouse and the supporting land to the Scott Paper
Company shall be FRF 31 million inclusive of tax.(cid:146) The
remaining 20 ha were sold back to the OrlØans
municipal authorities at a symbolic price of one franc in
1989 and 1992 (14), after which Sempel was wound
up (15).

(13) Point 2.1 of the city council’s minutes of 1994; letter from the
French authorities, 3 June 1997, p. 2. In its letter of 23 November
1998, section B2, Scott claims, however, that it purchased the
OrlØans site in March 1988.

(14) Point 2.1 of the city council’s minutes of 1994.
(15) Letter from the French authorities, 21 April 1997, p. 3.

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Official Journal of the European Communities

L 12/5

(22)

In 1998 the La Saussaye industrial estate covered some
200 hectares, on which 70 firms were established
employing 2 000 staff (16).

2.3. PREFERENTIAL RATE OF WATER TREATMENT LEVY

calculates

the base for

(23) A water treatment levy expressed in FRF/m3 is charged
on the quantity of water consumed by a firm. OrlØans
City Council
levy in
accordance with the interministerial circular of 12
December 1978 (17). The circular explains how to
calculate the base (number of m3 metred (cid:215) effluent
coefficient (cid:215) coefficient of degressivity (cid:215) pollution
coefficient) for users with a consumption of over 6 000
m3/year (18). The amount of the levy has been freely
decided by the city council’s deliberative assembly since
1 January 1986 (19).

the

reduced from 1 to 0,5 in proportion to the volume.
Between 50 001 and 150 000 m3,
the coefficient
from 0,6 to 0,8. According to the city
increases
the aim is to encourage
council’s minutes of 1988,
of water
large-scale
their
consumers
effluent (23). However,
consumption exceeding
for
150 000 m3, the coefficient is reduced to 0,25, without
any reason being given. The coefficients of degressivity
are shown in the following table:

reduce

to

Coefficients of degressivity

0 to 6 000 m3

6 001 to 12 000 m3

12 001 to 24 000 m3

24 001 to 50 000 m3

50 001 to 75 000 m3

75 001 to 150 000 m3

over 150 000 m3

1,00

0,80

0,60

0,50

0,60

0,80

0,25

(24) However,

for quantities of water exceeding certain
thresholds, Article R. 372 of the Municipalities Code
(Code des Communes) (20) stipulates that (cid:145)The number
of cubic metres recorded, which serves as the basis for
the water
is adjusted upwards or
downwards to reflect the special costs imposed on the
water board as a result, in particular, of the level and
type of pollution caused by the firm(cid:146). This is known as
the (cid:145)coefficient of degressivity(cid:146), which is also fixed by
OrlØans City Council.

treatment

levy,

(25) Article 7 of

the Scott agreement provides
preferential rate of water treatment levy for Scott:

for a

(cid:145)OrlØans City Council undertakes to change the rates of
water treatment levy applicable to industrial users who
are in an exceptional situation and to lay down a rate
for
the most
favourable current rate. Subject to Scott’s compliance
with current technical standards and legislation, OrlØans
City Council will apply this preferential rate to it.(cid:146)

them that does not exceed 25 % of

(26) On 1 January 1989 OrlØans City Council set a new
amount for the water treatment levy (21) and a new
coefficient of degressivity (22). For volumes between 0
and 50 000 m3,
the coefficient of degressivity was

(16) Letter from the French authorities, 26 November 1998, p. 1.
(17) Letter from the French authorities, 6 October 1999, p. 5.
(18) Idem.
(19) Extract from the minutes of the OrlØans City Council’s meeting of
16 December 1988 ((cid:145)the city council’s minutes of 1988(cid:146)), p. 2.

(20) Decree No 77-241 of 7 March 1977.
(21) The city council’s minutes of 1988 (p. 2) state that (cid:145)to ensure that
the 1989 initial budget for water treatment is in balance,
it is
necessary to increase the current rate by about 5 %, i.e. to raise it
from FRF 2,40 to FRF 2,52(cid:146).

(22) The city council’s minutes of 1988, p. 3.

(27)

(28)

a

[a

of

part] (*)

substantial

In 1996 Scott’s consumption was some [(cid:133)] (*) m3 (24).
The company was thus eligible for the 0,25 coefficient
in respect
its
consumption, i.e. that part which exceeded 150 000 m3.
However, according to the French authorities, Scott is
not the only entity to qualify for the 0,25 coefficient;
the H(cid:244)pital de la Source does as well. In 1996 its water
consumption was approximately 155 000 m3 (25); a
coefficient of 0,25 was applied to that part in excess of
150 000 m3, i.e. 3 %.

of

3. GROUNDS FOR INITIATING THE PROCEDURE

authorities (26)

communication).

In 1997 the Commission published a communication
on state aid elements in sales of land and buildings by
This
(the
public
clarifies a policy which had emerged over a period of
more than 10 years. It describes a procedure for the sale
of land and buildings which automatically excludes any
state aid element (sale through an unconditional bidding
procedure or on the basis of an asset valuation by an
independent expert prior to negotiations in order to
determine its market value) and lists the types of sale
which have to be notified to the Commission.

(23) The city council’s minutes of 1988 (p. 2) state that

(cid:145)[(cid:133)] to
encourage water-intensive businesses to reduce their effluent,
it
was decided by the city council on 19 December 1980 to increase
the coefficient of degressivity for the proportion in excess of
50 000 m3(cid:146).

(24) According to Kimberly-Clark’s water treatment bill for 1996.
(25) According to the hospital’s water treatment bill for 1996.
(26) OJ C 209, 10.7.1997, p. 3.
(*) Business secret.

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L 12/6

(29)

Since no unconditional bidding procedure or valuation
by an independent expert took place in this particular
case, the Commission took the view in the decision to
initiate the procedure that the price at which the land
was sold could be justified, provided (i) it covers at least
the land-related costs incurred by the authorities or, if
there were an excessive supply of similar sites bringing
prices down, (ii) it corresponds at least to the market
price (27).

(30) On the basis of the information available to it at the
time, the Commission found that it was not possible to
establish with certainty that the price at which the land
was sold to Scott (i) covered the costs incurred by the
French authorities or (ii) corresponded to the market
price.
the rate of water
treatment levy might not contain elements of state aid.

It also wondered whether

4. GROUNDS FOR THE ORDER TO SUPPLY
INFORMATION

Since the French authorities had not given a satisfactory
reply to the questions raised in the decision to initiate
the procedure, the Commission ordered them to provide
the information requested. The questions were virtually
identical to those set out in the Commission’s letter to
the French authorities dated 2 March 1999.

The Commission
as
inadequate, since none of the following information was
supplied:

regarded

French

reply

the

(31)

(32)

(cid:151) an explanation of how Decree No 77-241 of 7
for a
March 1977 can provide the legal basis
reduction of the water treatment levy on the basis
of the quantity consumed, since it stipulates that the
levy should be adjusted according to the level of
pollution caused by the firm,

(cid:151) invoices for, and particulars of, all the other firms in
the region which qualify, or would have qualified,
for the same reduction of the water treatment levy
as that offered to Scott Paper.

(33)

Lastly, in the light of the comments received from third
parties following its decision to initiate the procedure,
the Commission required the French authorities
to
provide it in particular with:

(cid:151) a copy of

the agreements, concluded in 1987,
between Scott Paper, OrlØans City Council and
Loiret County Council,

(cid:151) a copy of the joint and several guarantee agreement
with OrlØans City Council,
loans
contracted by Sempel under its agreement with the
city council and the county council.

and of

the

(cid:151) a detailed description, and evidence, of the publicity

given to the sale in France and Europe,

electricity,

(cid:151) a detailed breakdown, by type, of the work carried
out by Sempel on the land occupied by Scott
construction,
(levelling,
etc.) and its actual cost, a breakdown of the use of
the funds arising from the loans contracted by
Sempel, and a copy of
the tripartite agreement
between OrlØans City Council, Loiret county Council
and Sempel,

infrastructure,

5. COMMENTS FROM THE PARTIES CONCERNED

(34)

Both the complainant and the beneficiary firm, Scott, in
its capacity as a third party, commented on the
initiation of the procedure.

5.1. COMMENTS FROM THE COMPLAINANT

(cid:151) the various sales contracts concluded,

including in
particular the sale prices agreed between OrlØans
City Council and the other six firms which had
bought plots on the remaining 20 ha (28),

(35)

(27) For further details see OJ C 301, 30.9.1998, p. 4.
(28) The Commission would point out in this respect that,

in their
letter of 2 June 1999, the French authorities expressly stated that
(cid:145)(they)(cid:146) are not prepared to send the Commission the documents it
requests (agreement between the local authorities and Sempel, sale
contracts with the other firms), as these have nothing to do with
the case and some are private.

set out

the Complainant
In its letter of 28 October 1998,
confirms and supports, in the main, the Commission’s
position as
in the decision to initiate the
procedure. The complainant stresses in particular (see
recitals 36 to 43) the need to clarify the links between
the local authorities, Sempel and Scott Paper and (see
recitals 44 and 45) the respective contributions from the
various authorities
the
in the Loiret.
complainant comments (see recitals 46, 47, and 48) on
the terms of the sale of the Saint-Cyr-en-Val site to P &
G and the new KC location in the Loiret.

In addition,

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Official Journal of the European Communities

L 12/7

5.1.1. THE NEED TO CLARIFY THE LINKS BETWEEN THE
LOCAL AUTHORITIES, SEMPEL AND SCOTT PAPER

for carrying out various infrastructure work for the
exclusive benefit of Scott Paper:

the

complainant

and Sempel,

(36) As regards the obscurity of the links between the local
authorities
requests
clarification of Sempel’s use of the funds arising from
the loans it contracted. It also draws the Commission’s
that Sempel was dissolved
attention to the
following an administration order,
the
expiry of the tripartite agreement between OrlØans City
Council, Loiret County council and Sempel of 12
September 1987 relating to the period 1987 to 1993,
and that its object was (cid:145)to carry out all the surveys and
work needed for the development of the sites on the La
Saussaye industrial estate(cid:146).

shortly after

fact

(37)

In this respect the complainant also points out that, in
its administration order on Sempel of 19 March 1996,
the OrlØans Commercial Court noted that an audit
report on the company dating from January 1995 found
(cid:145)a deficit of FRF 4 to 5 million in 1994 and in 1995(cid:146).
The complainant also invites the Commission to ask the
French local
the
tripartite agreement between Sempel, Loiret County
Council and OrlØans City Council.

concerned to submit

authorities

(38) As regards the work carried out by Sempel

for the
benefit of Scott paper on the Saint-Cyr-en-Val site, the
complainant maintains that
the loans contracted by
Sempel are in reality explained by the hidden financing,
for the exclusive benefit of Scott Paper, of a number of
works which should have been financed, under
undistorted competitive arrangements, by Scott Paper
alone.

(39) According to the complainant, the Journal de Gien of
17 September 1987 (29) reveals very clearly what the
local authorities’ policy was from 1987 onwards as
regards getting Scott Paper to locate in the Loiret:

the

factors which,

(cid:145)While OrlØans is putting out the flags, we can now
reveal
year’s
negotiations, made it possible to win the day. The
authorities have revealed the resources which they
deployed to hook the United States giant: FRF 80
million.(cid:146)

after

one

(cid:145)In this particular case the authorities are including
in the package the public services needed to make
the La Saussaye estate meet the expectations of Scott
Paper, which
sale
free-of-charge, through Sempel, of 50 ha of land.(cid:146)

from the

benefits

also

(41) According to the complainant, the press article states in
particular that: (cid:145)Sempel is responsible for all the work to
services; miscellaneous
be carried out: provision of
development work and construction of
factory
warehouse. Total bill: FRF 80 million, to be shared by
the county council (FRF 35 million) and OrlØans City
the two
(FRF 45 million). Next February,
Council
authorities will
stake when
Bouton-Brochard-Scott, a subsidiary of Scott Paper, will
buy the building for FRF 31 million. All these measures
constitute the first instalment, the only one to which the
authorities will make a financial contribution(cid:146).

some of

recover

this

a

(42)

(43)

complainant

The
confirms the view set out
Auditors’ report of November 1996:

concludes

this

that

information
in the French Court of

round the urban planning rules,

(cid:145)To get
some
authorities have no hesitation in hiding the purpose
of the aid which they collect or allocate. This is the
case with facilities in the Loiret, which are not
eligible for regional planning grant. The agreements
the aid
concluded with the firms stipulate that
relates to the land and its development; but,
in
several large cases, the aid is much greater than the
cost of the developed land and is used to finance,
quite illegally, much of the building work. In some
cases, the aid intensity may be as high as 40 % to
50 % of
the real estate
investment project(cid:146).

the declared cost of

the proposal

The complainant argues that
from the
Loiret authorities to finance such an infrastructure was
thus decisive for Scott Paper’s choice to locate in
Saint-Cyr-en-Val
the (cid:145)competitive(cid:146)
in July
offers of other French local authorities. Thus,
1987, the (cid:145)Nouvelle RØpublique(cid:146) (30) noted Scott Paper’s
hesitations in deciding where it was going to locate in
France:

than accept

rather

(40)

The complainant adds that the article clearly shows that
the bulk of the aid granted by the local authorities was
for developing the land for the Scott Paper site and also

the Scott Paper dossier is
(cid:145)With the result
making its way slowly between the government’s

that

(29) Scott Paper. Local authorities overwhelmingly in favour.

19 July 1987.

(30) Scott Paper: 1 000 jobs to wrap up, La Nouvelle RØpublique, 18 to

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doubts about opening national markets to a foreign
giant and the municipalities’ willingness to host the
United States’ firm, (a rivalry which Scott Paper is
using) to obtain the best location terms(cid:146).

[(cid:133)]

(cid:145)As to the municipalities, OrlØans seemed to have
eliminated its rivals one after the other, when the
availability of a 25 000 m2 warehouse to the south
of Sens caught Scott Paper’s attention(cid:146).

Paper) on advantageous terms, noting that the site in
for (cid:145)a price of FRF 200
question had been bought
million when it is worth FRF 600 million(cid:146).

(47) On 22 October 1998, i.e. barely 10 months after the
announcement of
the KC factory at
the closure of
Saint-Cyr-en-Val, the daily (cid:145)Les Echos(cid:146) reported that the
company was to set up a new plant in the Loiret (33).

[(cid:133)]

(48)

(cid:145)The challenge for OrlØans now, therefore, is to find
arguments that will save it time. The first is the
commitment to put up buildings in no more than
five months. This is an apparently satisfactory time
frame, since it would enable Scott Paper to become
operational at the end of that period, if the United
States’ multinational’s initial aims are confined to
using a warehouse and a processing chain which it
would supply with paper
from its Belgian and
Italian factories (in Antwerp and Turin)(cid:146).

for

the

that,

stresses

complainant

Finally,
the
Commission to be able to verify the information
provided by the French authorities, it should have access
to (cid:145)the tripartite agreement concluded between Sempel
and the local authorities on 12 September 1987(cid:146) and
(cid:145)the agreement concluded initially by Scott Paper and
the local authorities(cid:146).

5.2. COMMENTS FROM THE PRESUMED BENEFICIARY OF
THE AID

5.1.2. RESPECTIVE CONTRIBUTIONS OF THE VARIOUS

AUTHORITIES IN THE LOIRET

(49)

In its letter of 23 November 1998, Scott comments on
the procedure with regard to the
the initiation of
purchase price of the OrlØans site (see recitals 50 to 59),
the grant
to Scott of a concessionary rate of water
treatment levy (see recital 60) and repayment of the aid
by Scott (see recital 61).

(44) As regards the contributions of the different authorities,
it should be noted that,
in January 1998, Le Canard
Encha(cid:238)nØ (31) mentioned that there was an agreement
between Scott Paper and the local authorities:

5.2.1. PURCHASE PRICE OF THE ORL(cid:201)ANS SITE

(45)

(cid:145)OrlØans City Council and Loiret County Council can
hardly hope to recover their stake. Nothing in the
contract signed with Scott indicates that they will get a
penny back, if the company fails to meet its obligations.
The only hope is Brussels [(cid:133)](cid:146).

(50)

5.1.3. TERMS OF THE SALE OF THE SAINT-CYR-EN-VAL

SITE TO PROCTER & GAMBLE, AND KIMBERLY
CLARK’S DECISION TO LOCATE IN THE LOIRET

(46)

Early in 1998, KC/Scott Paper sold the Saint-Cyr-en-Val
site to P & G. La RØpublique du Centre on 19
September 1998 (32) stated that P & G had acquired the
Saint-Cyr-en-Val site (which used to belong to Scott

(31) Le Canard Encha(cid:238)nØ, 14 January 1998, US toilet paper absorbs FRF

(32)

550 000 in subsidies per new employee.
(cid:145)Procter & Gamble Ex-Scott Paper: first clouds over the Saint-Cyr
site(cid:146).

5.2.1.1. The price paid by Scott was the market price

the

to Scott,

In order to expand its market share to France, Scott
announced in June 1986 that it was looking to set up a
plant in France in the medium term, for an expected
investment of up to USD 80 to 100 million. At that
time, Scott used to supply France from its plants in Italy
and Belgium. According
company
thereafter began to look for sites in France, which
would meet its various needs (location, to take account
of transportation costs; size, allowing for possible future
expansion; infrastructure; skilled labour; and a sufficient
In response to the
supply of water and energy).
firm
announcement,
information on available
financial
conditions concerning location. Scott states that, despite
the consultants’ extensive marketing efforts and budget,
they did not
to Scott’s
announcement that it was interested in setting up in
France.

(cid:145)find(cid:146) Scott, but

regions
sites

(cid:145)responded(cid:146)

several

sent

and

the

the

(33) Les Echos, Kimberly Clark: new location in the Loiret, 22 October

1998.

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(51) Over the succeeding months Scott carefully investigated
a large number of different sites. It finally shortlisted
first eight and then four sites (March 1987), of which La
Saussaye was one. Scott explains, however,
that no
definitive decisions were taken at that time, since it was
understood that other local authorities in France were
considering offering sites to the company.

(52)

(53)

(54)

(55)

In this respect, Scott stresses that the market price is
simply what a buyer and seller mutually agree is an
acceptable price to each. The assessment that has to be
is to determine the market price at
made, therefore,
which a private-sector owner and developer of
the
Sologne business park would itself have handled the
case and the conditions on which such an investor
would have sold the site.

Scott remarks that, at the time, many local authorities
were scanning the market for industrial investors, such
as itself, to buy sites, invest in them and operate them.
The number of such companies was limited at the time,
however, so the market price had to reflect the fact that
the demand for such firms exceeded their supply, thus
enhancing their negotiating power.

(FRF 31 million (EUR 4,7
The price paid by Scott
million)) was the price it was prepared to pay for the
site in question in the light of (i) the extensive research
which it had carried out in the preceding months into
the net cost of acquiring competing available sites and
(ii) its own analysis of the total investment it was ready
to make, plus the fact
it could quite easily
that
continue to supply the French market from elsewhere in
the Community and (b)
the new French plant
that
would be loss-making for five years.

(a)

Scott claims that, apart from the fact that the company
would have attracted other firms to the business park,
the purchase price and the direct receipts generated by
its activities would, over time, have more than repaid
the costs incurred by the local authorities, who would
of course have continued to benefit from this source of
revenue thereafter. In this connection, Scott refers to the
Commission decision in Daimler-Benz (34), which,
it
asserts, shows that the business rate and other forms of
local tax can be included in a local authority’s revenue
to determine if it has been paid a proper price.

(34) Seventeenth Report on Competition Policy 1987, point 220.

(56)

(57)

(58)

Regarding the price difference between the site sold to
Scott and the adjoining sites, Scott points out that the
difference in size between a site of 48 ha and sites of
only a few thousand square meters would obviously be
reflected in the sales’ prices obtained. It also points out
that the sales of the adjoining sites took place some
years after the sale of the site to Scott, and therefore the
prices of these sites could have been influenced by a
large number of factors, including of course the increase
in the value of land in the area following Scott’s arrival.

5.2.1.2. The site was sold after extensive marketing

campaigns

(RDI), more than meet

Scott believes that all the marketing and promotional
initiatives undertaken by the local authorities, or on
et DØveloppement
their behalf by e.g. Recherche
International
the requirement
that they must be (cid:145)sufficiently well-publicised(cid:146), as this
could have been understood in 1986/1987 in the
absence of any clarification or guidance from the
Commission; consequently, Scott believes that, by the
standards of
the communication relied upon by the
Commission, even though this was only published in
1997, it could not have received any aid in this case.

5.2.1.3. Retrospective application of the principles in

the 1997 communication

the institution itself has

Scott does not accept that the 1997 communication can
apply to a sale of public land which took place in 1987.
The Commission, it claims, is trying to apply a policy
the following ten years and more,
developed over
which, as
stated, needed
clarifying through the publication of the communication
in 1997, even though during those ten years a number
of decisions had been adopted on the sale of land by
public authorities. Scott also considers that
the legal
instrument (cid:151) the communication of 1997 (cid:151) which
the Commission appears to be relying on is (cid:145)soft law(cid:146)
and therefore has no binding legal effect.

5.2.1.4. The legal basis of the aid granted to Scott

was notified

(59) According to Scott, France advised the company that if
aid, of whatever description, had been allocated by one
or other of the local authorities,
it would have been
granted as indirect aid under Law No 82-6, and that this
Law had definitely been sent
to the Commission in
1982. Scott claims that, even if Law No 82-6 was not
formally notified to the Commission in 1982,
the
Commission received a copy of it, so it was obliged to
act expeditiously in compiling the file and in carrying

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out a preliminary investigation (35), failing which Law
No 82-6 could be implemented by France on the
ground that it had become an existing aid measure in
accordance with the principles in Lorenz (36).

November 1998, 30 April 1999, 6 October 1999, 7
January 2000 and 21 February 2000), which are
summarised below.

5.2.2. GRANT TO SCOTT OF A PREFERENTIAL RATE OF

WATER TREATMENT LEVY

(60)

to the alleged preferential

rate of water
Lastly, as
treatment levy, Scott understands that the rate applies to
all customers who use the same quantity of water as it
does and that other firms or institutions pay the same
rate. Thus Scott simply pays a rate provided for by law
and available to all firms in the same category as itself.

(63) According to the French authorities, Scott did not
receive any aid for the following reasons: there was no
market for industrial sites in rural areas at the time of
the sale of the land (recital 64); if the Commission were
to find that there was a market, the land was sold at the
market price (recitals 65 to 72); the land was sufficiently
well-publicised
the
communication (recitals 73 to 88); if the Commission
the
thinks that
following costs should be deducted (recitals 89, 90 and
91); the preferential rate of water treatment levy (recitals
92, 93 and 94); the limitation period (recital 95), and
the status of KC in the case (recital 96).

land does constitute aid,

the meaning

the sale of

within

of

5.2.3. REPAYMENT OF AID BY SCOTT

6.1. NO MARKET FOR INDUSTRIAL SITES IN RURAL
AREAS

(61)

(62)

Justice,

Scott maintains that, in accordance with the decisions of
the Court of
the beneficiary of aid granted
unlawfully may invoke exceptional circumstances, as a
result of which it had legitimately assumed the aid to be
lawful. The reasons why aid granted unlawfully should
not be repaid in this case are as follows:
(a) any
advantage that Scott may have had when it operated the
plant has been entirely neutralised by P & G buying the
site and the plant at their combined market value; (b)
Scott
is not now retaining any advantage from any
incompatible aid, as the book value of the site and the
plant at the time of the sale to P & G was much less
than the total cost of those assets to Scott, and those
assets were sold to P & G at less than half their book
value;
the non-transparent manner in which the
Commission dealt with the various laws either notified
or sent to it by France in 1982, on the aid that may be
granted by French local and regional authorities, made it
almost
impossible for a firm to obtain information
about the status of these enactments from a Community
law perspective.

(c)

6. COMMENTS FROM THE FRENCH AUTHORITIES

The French authorities
replied to the Commission
decision to initiate the Article 88(2) procedure and to its
(dated 25
request

information by five

letters

for

(35) Case C-312/90 Spain v Commission [1992] ECR p. I-4117.
(36) Case 120/73 Lorenz [1973] ECR p. 1471.

(64) At the time of the sale of the land, there was no market
at all for industrial sites in rural areas (37). According to
the French authorities, there were, in 1987, no private
developers in the OrlØans area carrying out this type of
work. The lack of a market in industrial land made it
difficult to set a market price within the meaning of the
in
communication. The French authorities claim that,
order
to create such a market, and stimulate and
develop the local economy, the local authorities had to
prepare the land and sell it to firms. They point out that
the first firm to establish itself on the estate, i.e. Scott,
attracted other companies. It is not possible in any way
to conclude from the size of the business park in 1998
that there was a market in 1987 for this type of land.

6.2. THE LAND WAS SOLD AT THE MARKET PRICE

(65)

Even if the Commission should conclude that there was
a market, the land was in fact sold at the market price,
and for three reasons (38).

(37) Letter from the French authorities, 25 November 1998, pp. 2 and
3;
letter from the French authorities, 30 April 1999, p. 1 and
letter from the French authorities, 15 October 1999, pp. 1 and 2.
(38) Letter from the French authorities, 25 November 1998, p. 3; letter
from the French authorities, 30 April 1999, p. 2 and letter from
the French authorities, 21 February 2000, pp. 2 to 4.

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6.2.1. THE DIFFERENCE BETWEEN THE PRICE OF THE LAND

SOLD TO SCOTT AND THAT OF THE REMAINING
LAND IS DUE TO ECONOMIES OF SCALE

(66)

Sempel sold 48 ha to Scott in 1987 for FRF 31 million
(EUR 4,7 million), i.e. FRF 65/m2 (EUR 9,9/m2). Of the
remaining 20 ha sold back to the city council, only
2,8 ha were sold to firms at an average price of FRF
72/m2 (EUR 11/m2) between 1990 and 1994. By selling
a plot of this size (48 ha) to Scott, the city council
achieved economies of scale (39) of some FRF 11/m2,
which justified a selling price of approximately FRF
65/m2 (EUR 9,9m2) instead of FRF 72/m2 (EUR 11/m2).
The different transactions are summarised in the table
below:

Period

Number of transactions

Selling price

1986 to 1990

1992

1994

5

1

2

FRF 40/m2

FRF 80/m2

FRF 100/m2

the land included in Sempel’s selling price, and other
buildings which Scott itself had had built and had paid
for. The total cost to Scott of what it sold to P & G was
[(cid:133)] (i.e. the FRF 31 million (EUR 4,7 million) paid to
Sempel and the [(cid:133)] paid for other buildings). At the
time of the sale, the written down cost of these assets
was [(cid:133)]. Scott received [(cid:133)] from P & G for the assets
which it sold to that company. Scott therefore made a
loss of [(cid:133)] (or 38 %) compared with the purchase cost,
and a slight profit of [(cid:133)] (or 5 %) compared with the
written down value.

(69)

In its communication on the decision to initiate the
the Commission indicated that Scott had
procedure,
perhaps received aid of between FRF 59,3 million (EUR
9,0 million) and FRF 98,7 million (EUR 15 million). If
one adds these sums to the price which Scott effectively
paid for the assets it sold to P & G, the cost of these
goes up from [(cid:133)] to [(cid:133)] or [(cid:133)]. The losses which
Scott would then have made on the sale to P & G
would have been as follows:

6.2.2. THE PURCHASE PRICE DID NOT COVER ALL THE

EXPENSES (40)

(67)

The sale of the site by Scott to P & G clearly shows that
sellers in the privately owned paper sector do not
necessarily cover their expenses completely, even on the
basis of the written down cost. Scott and KC sold the
OrlØans factory to P & G in May 1998 for [(cid:133)]. The
concluded under normal market
transaction was
the
conditions. The total cost,
factory sold was [(cid:133)]. The written down cost (or net
value) of the factory was [(cid:133)].

to Scott and KC, of

(68)

The factory sold to P & G belonged partly to Scott and
partly to KC. The assets which Scott sold to P & G were
the land bought from Sempel in 1987, the building on

(39) In their letter of 30 April 1999, p. 2, the French authorities give
the following explanation of the difference between the price per
m2 paid by Scott and that paid by the other investors on the
estate:
(cid:145)(cid:151) the size of the plots, since the sale of a large plot reduces the
landowner’s
compared with a
carrying
hypothetical situation involving many sales of smaller plots.
[(cid:133)] The costs associated with the servicing of the site are not
to be taken into consideration in this particular case, since
Sempel developed the 68 ha,

financial

costs

(cid:151) the appreciation of the estate as a whole following Scott’s

move,

(cid:151) the land was sold to Scott in 1987, the other sales took place

between 1990 and 1994(cid:146).

(40) Letter from the French authorities, 21 February 2000, pp. 2 to 4.

Acquisition cost of [(cid:133)]:

(cid:151) on an undepreciated basis, the loss would have been

[(cid:133)] or 59 %;

(cid:151) on a depreciated basis, the loss would have been

[(cid:133)] or 25 %.

Acquisition cost of [(cid:133)]:

(cid:151) on an undepreciated basis, the loss would have been

[(cid:133)] or 66 %;

(cid:151) on a depreciated basis, the loss would have been

[(cid:133)] or 38 %.

(70) According to the French authorities,

the experience
which Scott and KC gained from the OrlØans site also
taught them that experts’ valuations should be treated
with considerable caution, since the valuations given
could often not be fulfilled on the market. The Galtier
firm of consultants valued the assets belonging to Scott
and KC, and sold to P & G, as follows: Scott [(cid:133)]; KC
[(cid:133)], giving a total of [(cid:133)].

(71)

the

concluded that

The French authorities
expert
valuation resulted in figures that were some 22 % lower
than the written down cost of the assets [(cid:133)] but the
two companies did not manage to obtain a price that
was anywhere near that given in the valuation: Scott
and KC only found a buyer prepared to pay [(cid:133)] they
therefore had to accept a loss on the sale of their assets

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to P & G of [(cid:133)] (or 30 %) compared with Galtier’s
expert valuation, and of [(cid:133)] compared with the written
down cost of the assets.

6.2.3. THE 1987 VALUE AS A FUNCTION OF THE ACTUAL

(76)

1998 MARKET PRICE (41)

industrial estate is planned, it is often not prepared, or a
are
rough draft only
disinclined to invest heavily in site preparation unless
they are sure their search will succeed (44).

authorities

is made:

local

the Loiret

the years as

In the present case, the French authorities claim (45) that
the county council and the city council made a
regards
substantial commitment over
marketing by setting up an agency for the economic
development of
(ADEL) and inter alia a
business investment consultant in the United States of
location of new
America, RDI,
to promote
the
course
businesses
city,
OrlØans-Sologne site.
In 1986 a French consultancy,
DML et AssociØs, was recruited by the county council to
the same campaign vis-(cid:224)-vis European and
conduct
non-European potential
investors located in the Paris
area (46).

including of

in the

the

(77) According to the French authorities (47), marketing
activities focused initially,
in 1986 and 1987, on the
state of Michigan. They took the form in particular of:
(a) stands at industrial exhibitions to alert United States
companies to investment opportunities in the Loiret
(e.g. at Detroit in September 1986); (b) the search for
investors wishing to come to the Loiret and/or OrlØans;
(c) a meeting in OrlØans of local development agencies,
to which representatives of agencies in Michigan and
Hannover were specifically invited; (d) in May 1987, an
official
to the United States was
organised for the city’s and Loiret’s local development
agencies; and (e) important contacts were maintained in
the United States with local chambers of commerce,
lawyers’ offices, accountants, French companies and
banks, development agencies and DATAR (Directorate
for Town and Country Planning and Rural Action).
Through these activities, RDI succeeded in identifying a
number of United states companies (such as Symplex
Inc., Saturn Inc. or ICB) initially interested in investing
in the Loiret or OrlØans.

fifteen-day visit

(78) ADEL has also produced a business atlas entitled
(cid:145)OrlØans, an environment for business people(cid:146) (48).
In
OrlØans, ADEL took on the role of the Chamber of
Commerce and Industry in order to find buyers, having
been specially set up and hired to find potential
investors. As part of
its programme, ADEL was in
contact with other local chambers of commerce and
industry (49).

(44) Letter, 7 January 2000, p. 1.
(45) Letter from the French authorities, 25 November 1998, p. 3 and
4, and letter from the French authorities, 6 October 1999, p. 2
and 3.

(46) Letter, 7 January 2000, p. 1.
(47) Letter from the French authorities, 25 November 1998, p. 3 and 4
and letter from the French authorities, 6 October 1999, p. 2 and
3.

(48) Letter from the French authorities, 7 January 2000, p. 4.
(49) Idem.

(72)

The French authorities claim that the market value of
the land in question was probably FRF 31 million (EUR
4,7 million), and for two reasons. First, Scott sold to P
& G in 1998 for [(cid:133)] what it had bought from Sempel
in 1987 for FRF 31 million (EUR 4,7 million), despite
the increase at the time in the price of land. Second,
Scott applied the Commission’s
time value concept
inversely to the land and buildings which it sold to P &
G in order to calculate the current value of the aid
granted in the past. At an average interest rate of 6 %,
the market value in 1987 of what Scott sold to P & G
in 1998 [(cid:133)] would have been [(cid:133)] and for just the land
and buildings bought from Sempel would have been
[(cid:133)].

6.3. THE LAND WAS SUFFICIENTLY WELL-PUBLICISED
WITHIN THE MEANING OF THE COMMUNICATION

(73) As

regards

the publicity given in France and the
Community to the sale, the French authorities point out
that Scott Paper set up its plant in 1987 and that it is
difficult
the publicity
organised at the time (42).

today to produce evidence of

(74)

(75)

(a)

identifying target

The French authorities emphasise first of all that to find
a potential investor it is not enough to (cid:145)publish(cid:146) in the
press a notice announcing a piece of land is available.
firms that
The search involves:
could locate to Europe or France permanently and on a
substantial scale; (b) approaching such firms directly or
or
indirectly
specialised
(d) selecting,
(c) presenting the region;
intermediary;
after initial contacts, those firms that are likely to react
to the tender, and (e) the discussions associated with the
final move (43).

consultant

through

a

The search cannot be conducted on the basis of just one
available
in case negotiations with potential
investors are concluded too quickly: as a rule, several
if an
sites are proposed to potential

investors, and,

site,

(41) Letter from the French authorities, 21 February 2000, p. 4.
(42) Letter, 6 October 1999, p. 1.
(43) Letter, 7 January 2000, p. 1.

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(79)

(80)

(81)

the sites available in the Loiret

The French authorities also provided (50) a letter from
the DML consultancy to Scott, dated 17 December
investors could be
1999, describing how potential
identified for
in
1985/86. According to the letter, DML specialises in
assistance for restructuring companies and industrial
groups and assistance to local authorities and regional
development
industrial
for
investors.

identifying

agencies

In the letter DML explains its working methods. It first
the activities which the region concerned
identifies
wants to attract, and the companies in those sectors in
the target zone. Secondly, once it has identified a
potential interest, its consultants meet the company to
determine its requirements and the level of investment
envisaged. ADEL then examines the sites available in the
region, to identify those which are most likely to meet
the potential investor’s requirements. It presents them to
the investor, which itself selects those it wants to visit.
Lastly, ADEL presents technical and economic studies to
is
enable the investor to decide whether its project
viable in the region selected and on the particular site
proposed.

Regarding the present case, DML writes (cid:145)As an example
of our work for ADEL, which began in July 1986, we
initially identified over 500 companies to contact in the
south of the Paris region. In the first three months, 150
companies were contacted, with the following results:
interested at all, 12 wanted more
130 were not
the Loiret and five wanted to be
information about
contacted. [(cid:133)] In the following months, DML contacted
the 350 remaining companies
their
interest, identify new leads and follow up the projects
identified(cid:146).

to determine

(82) According to DML,

is

not

the identification of potential
investors
placing
usually
advertisements in the press and waiting for companies
to reply, but rather by directly contacting the managers
of firms.

achieved

by

(83) DML explains

that

(cid:145)DML’s method of operation is
predicated on the awareness that potential investors can
be found only after substantial preparatory work has
been carried out, personal contacts established and
assistance provided over a long period. We have to
the
persuade the potential
region concerned and then a particular site. The final
decision as to its place of establishment or location is of

investor to choose,

first,

course the investor’s. The job of companies like ours,
which have been hired by local development agencies, is
to direct the potential investor to the region concerned
rather than to a particular site. The choice of the site
itself
is determined by the technical and financial
requirements of the investor(cid:146).

(84) DML concludes by stating that (cid:145)lastly, we can confirm to
you that DML was not involved, and did not play a
part, in the identification and location of Scott Paper’s
investment project in OrlØans(cid:146).

(85)

(86)

(87)

that,

since

consider

French authorities

The
the
Commission had not clarified its policy in 1987, the
initiatives described above
regarded as
meeting the condition in the communication that the
been (cid:145)sufficiently
should have
bidding procedure
well-publicised(cid:146), as this could have been interpreted at
the time (51).

should be

the communication,

to the Commission’s position that

In reply
the
circumstances of the Scott sale did not fall within the
scope of
since the advertising
carried out by or on behalf of the public authorities was
not
French
authorities emphasise that the Commission applied the
1997 communication flexibly in its decision on the
Fresenius case (52).

sufficiently

to the

specific

site,

the

in Fresenius

The French authorities claim that
the
conditions laid down in the communication were not
met on two counts. First, the communication authorises
land to be sold at up to 5 % below the valuation price,
if no purchaser can be found after a reasonable period;
in Fresenius’ case, the land was sold at more than 10 %
below the valuation price. Secondly, the communication
also provides that if the land cannot be sold after a
reasonable period for 95 % or more of
the price at
which it was valued, a new valuation may be carried
out in order to determine a more realistic market value;
no such valuation was done in the Fresenius case (53).

(51) Letter from the French authorities, 25 November 1998, p. 3; letter
from the French authorities, 30 April 1999, p. 1; letter from the
French authorities, 6 October 1999, p. 2 and letter from the
French authorities, 7 January 2000, p. 1 and 2.

(52) Letter from the French authorities, 10 January 2000, pp. 3 to 5;
Notice C 36/92 (ex NN 108/92) concerning the terms of a land
purchase agreement between the city council of Friedberg/Hessen
and Fresenius AG (OJ C 21, 25.1.1994, p. 4).

(50) Letter from the French authorities, 21 February 2000, Annex 1.

(53) Letter from the French authorities, 7 January 2000, p. 3.

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(88)

The French authorities conclude that Fresenius shows
that in 1994 the Commission was not applying strictly
and inflexibly the criterion which it was to establish
more clearly three years later in the communication: the
same approach should be adopted in the Scott case,
especially since the events took place seven years before
the Fresenius decision was adopted, with the result that
in 1987 it was that much less clear which procedures
the local authorities should apply in order to sell an
undeveloped piece of land.

6.4. IF THE COMMISSION WERE TO FIND THAT THE SALE
OF LAND CONSTITUTES AID, THE FOLLOWING COSTS
SHOULD BE DEDUCTED

(89) As regards the total cost of

the project

to the city

council, the following sums should be deducted (54):

(cid:151) FRF 31,7 million (EUR 4,8 million)

(FRF 65,85
million (cid:151) FRF 34,2 million) for the amortisation of
the loan of FRF 37,2 million (EUR 5,7 million).
Only the nominal value of
the loan should be
included in the calculation of the cost,

the whole

community,

(cid:151) FRF 13,6 million (EUR 2,1 million) representing the
cost of a public intercepting sewer serving not just
i.e. 25 000
Scott but
inhabitants and other firms as well. Before this
social overhead capital was built, waste water was
treated and discharged directly into the
river.
Environmental pressures had for some time been
leading the local authorities to consider such a
facility. The decision was undoubtedly speeded up
by Scott’s locating to the area, but was not based on
it,

(cid:151) FRF 8,3 million (EUR 1,3 million) for the refund of
VAT on the various site improvement operations,

(cid:151) as a general point,

it should be noted that these
costs relate to 68 ha of land, and not just the 48 ha
sold to Scott.

(90)

The French authorities point out that,
in accordance
with the Commission’s decision in Daimler Benz (55),
(cid:145)the payment of local taxes by the purchaser of a site
should be taken into account in the price paid for that
site(cid:146). The Seventeenth Report on Competition Policy
specifically notes that the expenses incurred by the Land
of Baden-W(cid:252)rttemberg and the Ratstatt authorities for

(i) clearing the site and (ii) connecting it to the public
services, such as water supply, were not regarded as
constituting aid, since the purchaser had to pay them
through local taxes. It is clear from the report that these
costs were specifically incurred for
the benefit of
Daimler Benz.

(91) At its meeting on 7 December 1999, the Commission
adopted a position whereby the payment of local taxes
could not be taken into account
in determining the
price paid by the purchaser of the site. This was clearly
neither the position nor the practice of the Commission
when Scott bought the site from OrlØans City Council
(end of 1987), as the Daimler Benz case, which also
occurred in 1987, shows.

6.5. THE PREFERENTIAL RATE OF WATER TREATMENT
LEVY

(92)

(93)

The French authorities maintain that the rate of the
water treatment levy applied to Scott is part of a general
measure and does not, therefore, constitute a selective
advantage within the meaning of Article 87(1) of the EC
Treaty (56). The H(cid:244)pital de la Source is subject to the
same rate as Scott.

The French authorities claim that the reference in the
city council’s minutes of 1994 to a (cid:145)preferential rate of
water treatment levy(cid:146) is linked to the inclusion, in the
overall financial statement for the development of the
La Saussaye estate, of the receipts lost as a result of a
meeting on 16 December 1988 at which a degressive
rate of levy based on the level of water consumption
introduced. The location of Scott Paper was
was
undoubtedly the catalyst for such a decision, but the
latter is a general measure which benefits, and will
benefit, all plants meeting the same requirements (57).

levy,

treatment

(94) According to the French authorities, taxpayers with a
water consumption of more than 6 000 m3 qualify for a
their
coefficient of degressivity in the calculation of
water
that
account of
consumption. OrlØans City Council wanted, for its part,
to encourage large-scale consumers (over 50 000 m3) to
limit their effluent (hence the increase of the coefficient
from 0,5 to 0,8 entered in the minutes), to reflect water
treatment costs. This rationale is not applied in the case
of taxpayers with a consumption of more than 150 000
m3, since the volume of water consumed makes it

to take

(54) Letter from the French authorities, 25 November 1998, p. 5 and
letter from the French authorities, 30 April 1999, p. 2 and

6;
letter from the French authorities, 6 October 1999, p. 4.

(55) Letter from the French authorities, 10 January 2000, p. 3; see

footnote 34.

(56) Letter from the French authorities, 25 November 1998, p. 5; letter
from the French authorities, 30 April 1999, p. 3; letter from the
French authorities, 6 October 1999, p. 5 and letter from the
French authorities, 10 January 2000, p. 1 and 2.

(57) Letter from the French authorities, 6 October 1999, p. 5.

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possible to cover the related water treatment costs. The
incentive effect of raising the coefficient of degressivity
of the levy is less or even zero, if consumption is very
high (hence the reduction to 0,25 entered in the
minutes) (58).

unlikely that those authorities would have told KC
if such were the
that aid had been paid to Scott,
case, and in what circumstances.

7. ASSESSMENT OF THE AID MEASURES

6.6. LIMITATION PERIOD

7.1. ASSESSMENT OF THE AID MEASURES IN THE LIGHT
OF THE ORDER TO PROVIDE INFORMATION

(95)

The French authorities draw the Commission’s attention
to the fact that Scott moved to the Loiret back in 1987
the first requests for information from the
and that
Commission date from 1997. The French authorities
note that the new Procedural Regulation provides for a
limitation period of ten years, and hope that in the case
in point the virtually complete expiry of such a period
will be taken into account by the Commission. They
consider that the time the complainant has taken to
acquaint the Commission with the facts shows that the
loss
probably
non-existent (59).

competition

suffered

the

by

is

6.7. STATUS OF KIMBERLY CLARK IN THE CASE

(96) According to the

French authorities (60), KC can
reasonably expect not to have to repay the aid, and for
the following reasons:

(a) KC has received no aid from France. Any aid that
may have been granted was paid to Scott some
seven years before KC acquired an interest in the
company;

(b) any diligence shown by KC with regard to Scott at
the time of acquisition would not,
in accordance
with normal commercial and legal practice, have
extended back as far as 1987 and would not have
revealed any grant of aid to Scott in 1987;

(c) moreover, Scott’s accounts between the date of their
the year when KC
initial publication and 1995,
acquired Scott, did not show that the company had
received any assistance whatsoever from any source
in France;

(d) the only way KC could have discovered if Scott had
received any aid in France would have been either
to scan the relevant local or national press or the
minutes of the meetings of the local authorities, or
is very
the competent authorities.
to contact

It

(97) Although

the

Commission

French
authorities to provide information, it still does not have
any information, or has inadequate information only, on
the following points:

ordered

the

(cid:151) a detailed breakdown of the work carried out by
Sempel on the land occupied by Scott, by type of
infrastructure,
operation
buildings,
a
cost, plus
breakdown of the use of the funds arising from the
loans contracted by Sempel,

electricity,
actual

(levelling,
etc.),

and their

(cid:151) the various sale contracts concluded,

including in
particular the selling prices agreed between OrlØans
City Council and the other six firms which bought
plots on the remaining 20 ha. The Commission
would point out in this respect that, in their letter
of 2 June 1999,
the French authorities expressly
(cid:145)they are not prepared to send the
stated that
Commission the documents it requests (agreement
sales
between the local authorities and Sempel,
contracts with the other
these
since
documents have nothing to do with the case and
some are private(cid:146),

firms),

(cid:151) invoices and details relating to all the other firms in
the region which are, or would have been, eligible
for the same (cid:145)discount(cid:146) on the water treatment levy
as that granted to Scott Paper.

(98) According to the ruling in Pleuger,

that

(cid:145)it is only if the
Member State, notwithstanding the Commission’s order,
fails to provide the information requested,
the
Commission is empowered to terminate the procedure
and make its decision, on the basis of the information
available to it, on the question whether or not the aids
are compatible with the common market(cid:146) (61). This
power of the Commission’s to take a decision on the
basis of the information available if a Member State fails
to comply with an information injunction was
subsequently enshrined in Article 13(1) of Council
Regulation (EC) No 659/1999 of 22 March 1999 laying
down detailed rules for the application of Article 93
the EC Treaty (the Procedural
(now Article 88) of
(cid:145)the Procedural
Regulation on state aid, hereinafter
Regulation(cid:146)) (62).

(58) Letter from the French authorities, 7 January 2000, p. 2.
(59) Letter from the French authorities, 6 October 1999, p. 6.
(60) Letter from the French authorities, 7 January 2000, p. 4.

(61) Joined Cases C-324/90 and C-342/90 Pleuger [1994] ECR p.

I-1173, point 26.

(62) OJ L 83, 27.3.1999, p. 1.

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(99) As a result,

the Commission will have to base its
assessment on the available information, in particular as
regards calculating the value of the aid measures, the
market prices of comparable plots and the preferential
rate of water treatment levy.

the proposed aid, provided that it has given prior notice
to the Commission, and that aid will then come under
the system of existing aid ((cid:145)the Lorenz rule(cid:146)) (66).

7.2. LEGAL BASIS

7.2.1. PREFERENTIAL PRICE OF THE LAND

(100) Scott maintains that the preferential price of the land
was granted as an indirect aid under Law No 82-6 and
that there is no doubt that this Law was sent to the
Commission in 1982. The company adds, referring to
Case C-312/90 Spain v Commission (63), that even if
Law No 82-6 was not officially notified to it in 1982,
the Commission did receive a copy, so that
it was
regards both the
obliged to act
composition of the file and its preliminary examination,
failing which Law No 82-6 could be implemented by
France on the grounds that,
in accordance with the
principles laid down in Lorenz (64), it had become an
existing aid.

expeditiously as

(101) This position is rejected, for the following three reasons:

(105)

(106)

(107)

the

third parties,

Law in their

(102) Firstly, the French authorities never invoked this Law as
the legal basis of the measure in question. Although all
the comments of
including Scott, were
sent to the French authorities, the latter never referred
to
correspondence with the
Commission. Nor did the local authorities cite it in the
agreement which they concluded with Scott; rather, they
made the general statement
is
concluded in accordance with the statutory provisions
and other
local
authorities(cid:146) (65). Furthermore, there was no reference to
this Law in the city council’s minutes of 1994.

the powers of

(cid:145)this agreement

governing

rules

that

that

In the case in point,
the French authorities never
submitted to the Commission that the Law should have
been notified. Scott does not claim either that the aid
was officially notified, but maintains that (cid:145)France advised
to the
[(cid:133)] Law No 82-6 was
Scott
1982(cid:146) (67). Neither
Commission
French
authorities nor Scott provided the Commission with
written evidence that the Law had in fact been sent to
it. In any event, contrary to Scott’s position, the Lorenz
rule does not apply where a measure has not been
officially notified.

sent
the

in

that,

respect

in this

should be pointed out

It
in
accordance with its practice as determined in Article 2
of the Procedural Regulation, the Commission informs
the Member State concerned without delay of
the
receipt of a notification. If they had not received such
information,
have
recontacted the Commission to verify that it had indeed
received the said notification.

authorities

French

should

the

It should also be said that
the quotation cited by
Scott (68), according to which, even if an aid measure
has not been officially notified to the Commission, the
latter is obliged to act expeditiously as regards both
compiling the file and the preliminary investigation,
failing which the measure will be governed by the rule
in Lorenz, is taken out of context. Firstly, the quotation
is taken from the Opinion of Advocate-General Van
Gerven and not from the Court of Justice’s judgment.
footnote
Secondly,
commenting on the time limit within which the
Commission should investigate an aid which it has itself
discovered or following complaints made by interested
undertakings.

statement

is made

in a

the

(103) Secondly, even supposing that the measure concerned
was granted under Law No 82-6, it is still the case that
the Law does not constitute an existing aid within the
meaning of the Lorenz judgment, as Scott claims.

(104) According to the Lorenz judgment, the effect of Article
88(3) of the Treaty is that, if the Commission, having
been notified by a Member State of a plan to grant aid,
that State
fails to initiate the contentious procedure,
may at the expiration of a period of two months grant

(108) Advocate-General Van Gerven underlines that

that

to complete

the Commission has

(cid:145)where
it is in principle not the
unnotified aid is concerned,
case
its
investigation within a two-month period. [(cid:133)] This does
not mean that the Commission is not under a duty to
act expeditiously in compiling the file and carrying out
its preliminary investigation of it.(cid:146) This means that when
the Commission does investigate a case, either pursuant
to a complaint or ex officio, it has to act expeditiously,
such
failing
but
notification, the Lorenz rule is applied in all cases.

it by no means

implies

that,

(63) See footnote 35.
(64) See footnote 36.
(65) Article 11 of the Scott agreement, p. 4.

(66) See footnote 36.
(67) Letter from Scott, 23 November 1998, p. 11.
(68) Case C-312/90 Spain v Commission [1992] ECR p. I-4117.

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(109)

complaint

It should be pointed out in this respect that, following
the
the
Commission compiled the present file and carried out
its preliminary investigation, which lead to its decision
in May 1998 to initiate an in-depth investigation.

in December

lodged

1996,

(110) Lastly, as regards the Lorenz rule, neither the French
authorities nor Scott claimed that the French authorities
had given prior notice to the Commission before
implementing Law No 82-6. Without such notice, an
aid measure does not come under the system applying
to existing aid pursuant to the Lorenz rule.

(111) Thirdly, even if

the Commission treated Decree No
82-809 (69), which is based on Article 4(4) of Law No
82-6 (70), as existing aid without prior notification, this
does not mean that Article 4(6) constitutes existing
aid (71).

(112) At the time the measure was granted, Article 4 of Law
No 82-6 approving the Interim Plan for 1982/83 of 7
January 1982 (72) stated that:

(cid:145)The local authorities and their associations and the
regions may, where the purpose of their action is to
create or expand economic activity, grant direct or
indirect aid to firms under the following conditions:

grants,

regional

employment

Direct aid shall take the form of regional business
start-up
grants,
interest-rate subsidies or loans and advances at more
favourable rates than the average yield on bonds.
Direct aid shall be granted by the region under
conditions laid down by decree of the Conseil d’Etat:
the decree will determine in particular the rules as
regards ceilings and zones which are essential for
the implementation of national regional planning
policy and compatible with France’s international
commitments.

forms

various

The
be
of
supplemented by the Loiret, the municipalities or
their associations, where the assistance from the

aid may

direct

(69) Decree No 82-809 of 22 September 1982 on aid for the purchase
and leasing of buildings granted by the local authorities, their
associations or the regions, Official Journal of the French Republic,
24 September 1982, (Decree No 82-809), p. 2853.

(70) Article 4 of Law No 82-6 was repealed by Law No 96-142 of 21

February 1996.

(71) Case C-295/97 Piaggio [1999] ECR p. I-3735, points 45 to 49.
(72) Official Journal of the French Republic, 8 January 1982, p. 222.

region does not reach the ceiling laid down in the
decree mentioned in the preceding paragraph.

Indirect aid may be granted by local authorities and
their associations, and by regions,
severally or
jointly.

sell or

lease buildings on market

their associations and regions
Local authorities,
must
terms.
However, discounts on those terms may be granted,
renovating old
and abatements on the cost of
industrial buildings, in accordance with the rules on
ceilings
laid down in the decree
mentioned in the second paragraph.

and zones

Other indirect aid shall be unconditional.

Local authorities and their associations and the
regions shall determine the nature and amount of
the guarantees required, where appropriate, of the
firms receiving the aid and of their managers.

In addition, agricultural measures of an industrial
character may be taken by local authorities, their
associations
agreements
regions
concluded by them with the central government
laying down the procedures for the aid which they
may agree.

under

and

This Law will be implemented as a national law(cid:146).

(113)

In accordance with Article 4 of Law No 82-6 and
French legal commentators (73), French national
law
appears to distinguish three types of aid. First of all,
there are direct aid measures, the terms of which must
be laid down by decree of the Conseil d’Etat (direct
aid) (74) and for which only assisted regions are eligible.
Then there are indirect aid measures relating to firms’

the

(73) L’action Øconomique des collectivitØs locales, Ministry of

the
Interior (Local Authorities Department), Paris 1992 (report of the
Ministry of
Interior), Droit administratif: L’encadrement
juridique des aides des collectivitØs territoriales aux entreprises,
Supplement No 1 to La Semaine Juridique No 5, 29 January 1998
(article in La Semaine Juridique), and Les
interventions des
collectivitØs territoriales en faveur des entreprises, special public
report by the French Court of Auditors, Paris, November 1996
(report by the French Court of Auditors).

(74) Decree No 82-379 of 6 May 1982 on the land-use planning grant,
(hereinafter Decree 82-379), Official Journal of the French Republic
of 7 May 1982, p. 1294; see Report of French Court of Auditors,
p. 16 and 62, the report by the Ministry of the Interior, p. 94.

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real estate (type I indirect aid) (75), for which rules on
ceilings and zones have to be laid down by the same
i.e. only assisted regions may apply for them.
decree,
there is (cid:145)other indirect aid(cid:146), which does not
Lastly,
and
require
i.e.
(cid:145)unconditional(cid:146)
which is
(type II
independent of whether
the region is assisted or
not (76).

supplementary implementing measures
indirect aid),

whether these measures can be regarded as coming
under Law No 82-6.

(117) Measure (a) (cid:151) the costs associated with building a
factory warehouse (cid:151) should be regarded as constituting
type I indirect aid for the purposes of French law, i.e. a
measure whose implementing procedures should be laid
down by Decree No 82-809 and for which only assisted
areas are eligible.

(114) Decree No 82-379 lays down the procedures

for
It was notified as the legal
implementing direct aid.
basis of the French scheme of regional planning grants.
Commission Decision 85/18/EEC of 10 October 1984
scheme (77)
on the French regional planning grant
Decree No 82-379 cites Article 4 of Law 82-6 as the
legal basis. Article 4 of Law No 82-6 was not notified
directly to the Commission.

(118)

Irrespective of the fact that the Commission, at the time
of the building of the factory warehouse, considered
that Decree No 82-809 constituted an existing aid,
measure (a) does not in any case come under the said
decree,
is not an assisted area.
Moreover, Article 2 of Decree No 82-809 provides that:

the Loiret

since

(115) Decree No 82-809 lays down the procedures

for
implementing type I indirect aid, i.e. real-estate aid. It
cites Article 4 of Law No 82-6 as its legal basis. Even if
this decree was never notified to the Commission (78),
the latter has
the scheme
constituted an existing aid.

so far considered that

(116)

In the case in point, the measures concerned, namely (a)
the building of a factory warehouse and (b)
the
development of the site, should be regarded as indirect
aid within the meaning of Article 4(5) and (6) of Law
No 82-6. It should be noted in this respect that the
distinction between direct and indirect aid is still not
recognised in Community law. This classification of the
intended only to determine
measures concerned is

(75) Report by the French Court of Auditors, p. 19, 31. 37 and 62;
article in La Semaine Juridique, p. 24 and report by the Ministry of
the Interior, p. 94.

(76) Report by the French Court of Auditors, p. 16, 62 and 126,
article in La Semaine Juridique, p. 41 and 42 and report by the
Ministry of the Interior, p. 14 and 94. The latter states (p. 94)
that: (cid:145)Since indirect aid, apart from aid for industrial buildings, is
unconditional, it has not been subject to specific rules. It does not,
fall within the scope of schemes notified, or to be
therefore,
since it makes general action
to the Commission,
notified,
affecting the economic environment of
the region concerned
possible and is not therefore caught by Article 92(cid:146).

(77) OJ L 11, 12.1.1985, p. 28.
(78) Contrary to what is stated in Commission Decision 93/193/EEC of
the creation of
23 December 1992 on the aid granted for
industrial enterprises in Modane, Savoie (OJ L 85, 6.4.1993, p.
22),
(cid:145)local authorities can provide assistance in Modane under
Article 1 of Order No 82-809 of 22 September 1982, which was
the same time as the PAT
approved by the Commission at
(regional development premium)(cid:146);
the said decree was never
notified to the Commission.

in the zones

listed in Annex I

(cid:145)In addition to the aid granted under the preceding
Article,
to the
abovementioned Decree of 6 May 1982 (Decree No
to promote the creation or
82-379), and in order
expansion of economic activity,
local authorities, their
associations or regions may, severally or jointly, grant
discounts on the price of property which they sell or
lease to firms up to 25 % of the sale value of buildings
or leases of corresponding market value.(cid:146)

(119) Annex I to Decree No 82-379 lists the areas which
qualify for industrial projects. However, according to
Annex II of the same decree, the Loiret is not eligible
for the grant at all. Consequently, the costs associated
with the building of a factory warehouse are not
covered by Decree No 82-809. Measure (a) should
therefore be regarded as a new aid, which the French
authorities should have notified to the Commission
under Article 88(3) of the EC Treaty.

(120) Measure (b) site development, should be regarded as
type II indirect aid for the purposes of French law. This
measure is based directly on Article 4(6) of Law No
82-6. It should be pointed out in this respect that this
legal basis
supplementary
implementing procedure and applies in all regions.

does not

require

any

(121) As mentioned in recital 105, Article 4 of Law No 82-6
It cannot be inferred that Article
was never notified.
4(6) must constitute an existing aid, simply from the
fact that the commission approved the French scheme
of regional development grants, based on Decree No
82-379, which refers
in turn to Article 4(2), not
notified. It cannot be claimed either that Article 4(6)

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must constitute an existing aid, simply because the
Commission considered that Decree No 82-809, which
is based on Article 4(5), was an existing aid. Measure
(b), therefore, should be regarded as a new aid, which
the French authorities
should have notified to the
Commission pursuant to Article 88(3).

7.2.2. PREFERENTIAL RATE OF WATER TREATMENT LEVY

amount of

levy has been freely

(122) The basis for the water treatment levy is calculated in
accordance with the interministerial circular of 12
December 1978 (79). The
the water
treatment
the
since 1
deliberative assembly of
January 1986 (80). The coefficient of degressivity is
based on Article R. 372 of
the Municipalities Code
(Code des Communes) (81). None of these legal bases
was notified to the Commission, as is required by
Article 88(3) of the EC Treaty.

the City Council

decided by

7.3. AID WITHIN THE MEANING OF ARTICLE 87(1)

7.3.1. PREFERENTIAL PRICE OF LAND

(123) The question arises whether the price of land which
Scott was charged is a preferential price that is caught
by the prohibition in Article 87(1) of the Treaty.

(124) Under the said Article, any aid granted by a Member
State or through state resources in any form whatsoever
which distorts or threatens to distort competition by
favouring certain undertakings or the production of
certain goods shall, in so far as it affects trade between
Member States, be incompatible with the common
market.

(125) Thus the preferential price of

land is caught by the
prohibition in Article 87(1), if it satisfies the following
three tests:

(a)

it was granted by the state or
resources;

through state

(b)

(c)

favours

it
production of certain goods;

certain

undertakings

and/or

the

it distorts competition between the undertakings
favoured and similar undertakings and/or types of
production, where
concerned are
traded within the Community.

the products

7.3.1.1. Granted by the state or through state

resources

(126) The first test, i.e. the grant of the measure by the state
or through state resources, concerns the advantages

(79) Letter from the French authorities, 6 October 1999, p. 5.
(80) City council minutes of 1988, p. 2.
(81) Decree 77-241, 7 March 1977.

scenario,

the concept of

granted both directly,
i.e. by the public authorities
themselves, and indirectly through bodies which are not
strictly speaking part of the structure of the state. In the
first
the state should be
understood in the broadest sense, comprising the organs
the
of
decentralised local authorities at whatever level (82). In
the second scenario, public or sometimes even private
bodies are responsible for granting state aid,
the
important
the aid in question is
chargeable to the state.

and also those of

thing being that

authority

central

the

(127) The criterion of chargeability is intended to determine
whether the bodies in question act autonomously or
whether their conduct, on the contrary, is dictated by
the state under a supervisory power or controlling
influence which it has in regard to them (83). The
second criterion, for its part, makes it possible to check
whether the aid was in fact financed, either directly or
indirectly, through state resources (84).

(128)

In this particular case,
it was Sempel which sold the
land in question to Scott at a preferential price. The
question arises, therefore, whether (a) this preferential
price is chargeable to the state,
to the local
authorities ((cid:145)state(cid:146) in the broadest sense), and (b) whether
it was financed by them.

i.e.

(129) The preferential price should be regarded as chargeable
to the local authorities for the following reasons:

(130) Firstly, the agreement was concluded between Scott and
the local authorities. It is clear from Article 2 of this
agreement
through
Sempel, which carried out the land improvements (85).
To this end,
sold the land for
development to Sempel for the sum of one franc (86).

it was the local authorities,

the city council

that

(82) Case 323/82 Intermills [1984] ECR p. 3809 and Case 248/84

Germany v Commission [1987] ECR p. 4013.

(83) Case 290/83 Commission v France [1985] ECR p. 439; Joined
Cases 67, 68 and 70/85 Van der Kooy [1988] p. 219 and Case
C-305/89 Italy v Commission [1991] ECR p. I-1603.

(84) Case 82/77 Van Tiggele [1978] ECR p. 25 and joined Cases
C-72/91 and C-73/91 Sloman Neptun [1993] ECR p. I-887.
(85) Article 2 states that (cid:145)the local authorities, through a specialist
company, Sempel (SociØtØ d’economie mixte pour l’equipement du
Loiret), in which the local authorities are majority shareholders,
will carry out the necessary improvements, as defined: parking
space, roads, miscellaneous networks, site development etc. (cid:133), in
accordance with Scott’s specifications for the processing plant and
warehouse (30 000 m2 on the site of about 25 ha)(cid:146).

(86) Point 3.1 of

the Agreement on the development of

the La
Saussaye and La Planche sites
(cid:145)the city council
undertakes to sell to Sempel the sites which are to be developed,
in accordance with the attached plans and references, for the sum
of FRF 1 (one franc)(cid:146).

states

that

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(131) Secondly, Sempel

is an undertaking controlled by the
local authorities and governed by private law. The local
authorities must hold at least half the capital up to a
limit of 80 % (87). Under Law No 83-597 of 7 July
1983, companies falling under this legislation are legal
persons in private law, linking local authorities (regions,
departments and municipalities) and their associations
to private persons and, possibly, other public persons,
in order to carry out development and construction
operations, provide industrial and commercial public
services or carry out any other activity of public
interest.

(132) Thirdly and lastly, the price of the land and the factory
warehouse was fixed by the local authorities. This is
the
established by two documents:
agreement between Scott and the local authorities sets
the price for the sale to Scott of the factory warehouse
and the land on which it is built at FRF 31 million (88);
(b) point 12.3 of the Sempel agreement sets the same
price (89).

(a) Article 4 of

(133) The preferential price must

therefore be regarded as
financed by the local authorities. According to point
12.1 of the Sempel agreement, the project is financed
by the local authorities through the payment of annual
instalments in respect of the loans contracted by Sempel
for the purpose (90).

(134)

therefore,

is clear from the above,

It
that Sempel’s
behaviour must be regarded as dictated by the local
authorities through the controlling influence which they
have with regard to the company, and that
the
preferential prices were financed by the local authorities.
Thus the first test of Article 87(1) is satisfied.

the

agreement

(87) Letter from the French authorities, 17 April 1997, p. 1.
(88) Article 4(2) of

these
development works are estimated at FRF 50 million,
it being
understood that Scott will build, under the conditions referred to
at Article 2 above, a factory (processing plant and warehouse) of
about 30 000 m2 which will be bought from Sempel for FRF 31
million [(cid:133)](cid:146).

(cid:145)initially

states

that

(89) Point 12.3 of the agreement states that (cid:145)[(cid:133)] the price for the sale
of the factory warehouse and the site on which it stands to the
Scott Paper Company [is] FRF 31 million inclusive of tax(cid:146).

(90) Point 12.1 of the agreement provides that (cid:145)the local authorities
undertake to give financial assistance to Sempel in the form of an
overall amount of FRF 20 million inclusive of tax in the case of
Loiret County Council and FRF 30 million in the case of OrlØans
City Council.(cid:146)
These sums will be paid in annual amounts by the local
authorities to Sempel to ensure payment of the annual instalments
on the loans required for the performance of
the operations
contracted for by Sempel, up to a ceiling of FRF 50 million, and
in accordance with their respective liabilities.

7.3.1.2. In favour of Scott

7.3.1.2.1. Commission communication on state aid
elements in sales of land and buildings by
public authorities

(135) As regards the second test, i.e. whether the aid favours
certain undertakings or the production of certain goods,
the Commission considers that the sale of land is not a
selective advantage for the purposes of Article 87(1), if
the land is sold at its market value. It was to this end
that the Commission published the communication (91).
Although the sale of the land in question in the present
i.e. 10 years before the
case goes back to 1987,
the same principles
communication was published,
apply, since the communication clarified a policy which,
at the time, had emerged over a period of more than
ten years. It should, however, be borne in mind that, at
the time of the sale, case law on this subject was still
limited.

(136) The

communication describes

two sale procedures
which automatically exclude any element of state aid
(sale through an unconditional bidding procedure, and
on the basis of an asset valuation by an independent
expert prior to the sale negotiations in order to establish
its market value) and indicates those transactions which
In the case in
must be notified to the Commission.
point, no valuation of the land was made at the time of
the sale to Scott. The question arises, however, whether
the manner in which the plot was sold met the criteria
for a sale through an unconditional bidding procedure.

(137) The French authorities argue that, since in 1987 the
their
Commission had not yet clarified its policy,
appointment of a consultant in France and the United
States to promote the region (see recitals 73 to 88)
should be regarded as satisfying the criterion that the
been (cid:145)sufficiently
bidding procedure
should have
the
well-publicised(cid:146)
communication, as this could have been understood at
the time. Scott takes the same line (see recital 57).

the meaning

within

of

(138) This argument cannot be accepted.

(139) Under

is

the communication, an offer

(cid:145)sufficiently
well-publicised(cid:146) when it is repeatedly advertised over a
reasonably long period (two months or more)
in the
national press, estate gazettes or other appropriate
publications (the intended sale of land and buildings of
high value should be announced in publications having
an international circulation) and through real-estate
agents addressing a broad range of potential buyers, so

(91) See footnote 26.

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that
it
buyers (92).

can come

to the notice of all potential

(140) Even if it cannot be expected that the advertising carried
out at the time of this sale complied with the letter of
the basic principles as stated in
the communication,
decided cases must be observed,
in other words the
tender for an industrial site and a factory warehouse
must have been widely disseminated (a) in the national
and international press and (b) through estate agents.
The Commission emphasises in this respect that the use
of only one of these two means of advertising a sale of
land is not sufficient, and that a combination of the two
is required if all potential buyers are to be informed of
the tender.

(141)

If

It should be pointed out at the outset that the principles
derived from the Fresenius case mentioned by the
French authorities are not applicable. In that particular
case the land in question was valued, whereas it was not
the communication was not
in the present case.
followed to the letter in Fresenius,
it is because the
events took place in 1994 and the communication was
only published in 1997. However, and this is one of the
requirements in the present case, the basic principle laid
down by the communication with regard to sales
through an unconditional bidding procedure was
observed, namely that an independent expert should
carry out a valuation, a certain discrepancy as to price
having
consistent with market
conditions.

considered

been

(142) The French authorities gave a long description of the
advertising measures supposed to have been taken by
ADEL and RDI (see recitals 73 to 88). However, despite
an order to provide information, which explicitly called
for
the
advertising of the sale in France and Europe, the French
authorities produced only two documents in support of
their arguments.

a detailed description, plus

evidence, of

these, entitled (cid:145)OrlØans, A businessman’s
(143) The first of
environment(cid:146)
(OrlØans, environnement pour hommes
d’affaires) (93), describes the Loiret under the following
headings:
(i) French government and Development of
the Free-enterprise system; (ii) Political risk and union
activity in the Loiret; (iii) Infrastructure;
(iv) Industrial
network and (v) Orleans Economic Policy. Nowhere
does the document mention the creation of
the La
Saussaye business park nor the fact that a site and a
factor warehouse are for sale. The document cannot be
regarded,
criteria for a
(cid:145)sufficiently well-publicised(cid:146) tender within the meaning
intended by the Commission in its established practice,
as consolidated in the communication.

therefore, as meeting the

(92) Communication,

II Principles, 1 Sale through an unconditional
bidding procedure, point (a) concerning the definition of the term
(cid:145)sufficiently well-publicised(cid:146).

(93) Letter from the French authorities, 7 January 2000, Annex I.

(144) The second document

is a letter

the methods described meet

letter DML explicitly confirms

from the DML
consultancy to Scott, dated 17 December 1999. The
letter describes the methods used to identify potential
investors for the sites available in the Loiret in 1985/86
(see recitals 79 to 84). It is nevertheless not necessary to
the
examine whether
criteria of a (cid:145)sufficiently well-publicised(cid:146) tender within
the meaning of the communication, since at the end of
its
it was not
involved in Scott’s location to the region in 1987: (cid:145)lastly
we can confirm to you that DML was not involved and
did not play a part in the identification and location of
the Scott Paper investment project
in OrlØans(cid:146). The
description given in the letter is therefore irrelevant and
its author not competent to give an opinion on whether
the land and the factory warehouse sold to Scott were
(cid:145)sufficiently well-publicised(cid:146) before they were sold to the
firm.

that

in the national or

(145) As regards the description of the advertising measures
(see recitals 73 to 88), for
taken by ADEL and RDI
which no evidence was produced,
the Commission
would point out that the plot of land was not advertised
at all
international press (cid:151) a
requirement of the communication (the first condition
in (a)) as expressed in recital 140. As far as the second
condition in (a) is concerned, namely through real-estate
agents addressing a broad range of potential buyers, the
efforts of the RDI consultancy were directed above all at
the United States market,
in particular the state of
Michigan (see recital 77). The contention that DML et
AssociØs was recruited by the Loiret (cid:145)to make the same
approach to European and non-European potential
investors in the Paris region(cid:146)
is totally at odds with
DML’s statement that it was never involved in Scott’s
location to the site in question.

local

(146) The Commission also lacks information on what was
actually publicised. It would seem from the document
entitled (cid:145)OrlØans, a businessman’s environment(cid:146) that the
authorities were
the
marketing activities of
intended to promote the Loiret in general and not the
site of the factory warehouse in particular. But, for the
criteria laid down in the communication to be met, the
in
advertising should have specified the site and,
particular, the improvements and the building of the
factory warehouse. The site and the factory warehouse
would then have been sold,
in accordance with the
Commission’s established practice as consolidated by the
an open and unconditional
communication,
bidding procedure, comparable to an auction, which is
carried out by
and
consequently does not contain state aid.

definition at market

value

after

(147)

In the case in point, however,
is clear from the
agreement concluded between Scott and the local

it

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in question states

authorities that the operation was (cid:145)made to measure(cid:146) in
the
to meet Scott’s desiderata. Article 2 of
order
the necessary
agreement
in
improvements to the land should be carried out
accordance with Scott’s
a
and that
processing plant and warehouse covering 30 000 m2
should be built (94).

specifications

that

any tax receipts be taken into account for this purpose,
as is clear from Commission Decision 96/631/EC (96).

(148)

It is clear from the above that the marketing measures
taken by the local authorities cannot be regarded as
meeting the criteria for a sale through an unconditional
bidding procedure within the meaning intended by the
Commission in its established practice, as consolidated
in the communication. Consequently, given that neither
of the two sale procedures was applied to the sale of
it cannot be ruled out that the sale
land in question,
does not contain an element of state aid to Scott.

(151) This conclusion does not contradict the Commission’s
decision in Daimler-Benz (97), contrary to what
the
French authorities claim (see recital 72). It is clear from
that decision that the Commission concluded that the
proposed price for the sale of the site contained no aid
element, since Daimler-Benz was to acquire unsuitable
agricultural
land at the market price for this type of
land in the region and that the firm alone would then
bear the costs of improving that land (98).

(152)

7.3.1.2.2. Principle of the private investor

(149) The Commission considers that the sale of land does
not constitute a selective advantage for the purpose of
Article 87(1),
if a private investor, on the basis of
forecast potential profitability and ignoring any social,
regional or sectoral policy considerations, would have
invested in the land and then sold the plot at the same
price as that asked by the local authorities (95).

the

the

the

central

decision,

government or

certain connection costs

its Daimler-Benz
that

Commission
In
considered
(drains,
electricity, water, etc.) did not constitute aid, since the
firm would contribute to them through local taxes. Such
connection expenditure
an example of general
is
infrastructure, which is normally funded from the
budget of
local
authorities. It is therefore a general measure, provided
that the infrastructure is not built solely for one or
more firms. Contrary to what
the French authorities
maintain, there is nothing in the decision to indicate
that
incurred
specifically for the benefit of Daimler-Benz and was
in nature. As regards the
therefore no longer general
demolition
the Daimler-Benz
decision, the Commission concluded that the measure
did not constitute aid, since it was expenditure which all
landowners had to incur in order to sell a piece of
land (99).

expenditure was

cost mentioned

connection

this

in

(150) Consequently,

French

the Commission,

in contrast to the position defended by
the
its
authorities,
assessment designed to determine whether, in the case
in point, the public authorities behaved like a lender
acting under normal economic conditions, cannot take
account of the importance for the local authorities of
promoting and developing the local economy. Nor can

in

(94) Article 2 of the agreement between Scott and the local authorities
states: (cid:145)The local authorities, through a specialist company, Sempel
(SociØtØ d’economie mixte pour l’Øquipement du Loiret), in which
the local authorities are majority shareholders, will carry out the
roads,
necessary
miscellaneous networks, site improvements, etc.,
in accordance
with Scott’s specifications, for the processing plant and warehouse
30 000 m2 on the site of about 25 ha)(cid:146).

as defined: parking space,

improvements,

(95) Same principle as that established by the Court of Justice in Case

40/85 Belgium v Commission (Boch) [1986] ECR p. 2321.

IV:

(96) Commission Decision of 17 July 1996 concerning State aid that
the City of Mainz has granted to Grundst(cid:252)cksverwaltungs-
gesellschaft Fort Malakoff Mainz mbH & Co. KG, OJ L 283,
5.11.1996, p. 43, point
(cid:145)When assessing whether in the
present case the state acted in line with a normal market investor’s
behaviour, the future possibility of tax receipts cannot be taken
into account. Also in cases where the state sells its own property
the terms and conditions should be in line with the normal
behaviour of a private investor that does not have the particular
position of
the state with its responsibilities regarding public
interest and its corresponding right to collect taxes(cid:146).

(97) See footnote 34.
(98) The Seventeenth Report on Competition Policy states

that
(cid:145)Contrary to the initial plan, Daimler-Benz AG will now be
acquiring agricultural
land unsuitable for industrial use and the
company will bear site-preparation costs, currently estimated at
DM 132 million (ECU 63,6 million)(cid:146). The decision itself states
(section 2, Assessment) that the firm alone will now bear all the
site-preparation costs.

(99) The decision itself states (section 2, Assessment) that, as owners of
the site, the Land and the local authorities will also have to bear
the normal cost of demolition, in accordance with usual practice
before land is sold.

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(153)

In accordance with its reasoning in the Daimler-Benz
the Commission is excluding the cost of a
decision,
public interceptor sewer from the valuation of the aid in
this particular case. The French authorities have shown
that the sewer was not intended exclusively for Scott,
but served the whole community (see recitals 168 to
172).

be explained as the granting of state aid. The alternative
for the local authorities would have been not to sell the
plot and, hence,
lose the FRF 10,9 million (EUR 1,7
million) originally invested. It should be remembered in
this connection that a private investor aims not only to
maximise its profit but also to limit its losses.

the land,

the sale of

there was no market

(154) The argument of the French authorities that, at the time
of
for
industrial sites in rural areas has to be rejected. It is
absolutely clear from the comments submitted by Scott
in its capacity as a third party that the La Saussaye
industrial estate was in direct competition, initially, with
at least eight other sites, and subsequently with four
shortlisted ones (see in particular recital 51).

(155)

in this respect

It should be pointed out
that only
projects for which the Commission considers that there
were no objective or bona fide reasons for reasonably
expecting an adequate rate of return, at the moment the
investment decision was taken, can be treated as state
aid (100).

(156)

It is clear from the agreement concluded between the
local authorities and Scott (Article 4) that, at the time of
the sale, the former knew that the land improvement
operations and the construction of a factory warehouse
would cost at least FRF 80 million (EUR 12,2 million)
and that Scott would pay FRF 31 million (EUR 4,7
million) for the plot:

(cid:145)To enable Scott to set up under this project, which
will have to be implemented in several stages, the
local authorities undertake to improve the land on
which the La Saussaye and La Planche industrial
estate will be built, up to a ceiling of FRF 80
million.

In an initial stage, the improvements are estimated
at FRF 50 million,
it being understood that Scott
will build, under the conditions referred to in Article
2 above, a factory (processing plant and warehouse)
covering about 30 000 m2, which will be bought
from Sempel for FRF 31 million [(cid:133)](cid:146).

(157)

If one includes the cost of the land, i.e. FRF 10,9 million
(EUR 1,7 million), the local authorities knew when they
concluded their contract with Scott that the loss would
be at least FRF 60 million (EUR 9,2 million) (10,9 + 80
ﬂ 31) (see recitals 168 to 172). Consequently, there can
be no doubt that the provision of public funds can only

(100) Commission communication to the Member States, OJ C 307,

13.11.1993, p. 3, point 28.

(158) The French authorities maintain that the land was sold
to Scott at the market price. In their view, the difference
between the price Scott paid for 48 ha, i.e. FRF 65/m2
(EUR 9,9/m2), and the average price of FRF 72/m2 (EUR
11/m2), which the city council obtained between 1990
and 1994 for 2,8 of the remaining 20 ha, was justified
by economies of scale.

(159) The Commission does not share this view.

(160) Firstly, despite being ordered to provide information,
the French authorities refused to account for the price
paid for the remaining land by providing a copy of the
sale contracts. Without those contracts the Commission
cannot check the correctness of the prices claimed.

(161) Secondly, it should be remembered that, at the time of
the sale of the remaining, already prepared land, the
situation of the local authorities was different to what it
had been at the time of the sale to Scott. The cost of
preparing the land was already a sunk cost, and a
private investor could quite easily maintain that it was
better to sell the 2,8 ha than not to sell at all. This
argument does not apply, however,
local
authorities’ situation when they took the decision to
invest FRF 80 million (EUR 12,2 million)
in land
improvements while aware of
the price Scott was
willing to pay, i.e. FRF 31 million (EUR 4,7 million), not
forgetting the initial cost of
i.e. FRF 10,9
million (EUR 1,7 million).

the land,

to the

(162) The French authorities object (see recitals 67 to 71) that
a price which does not cover all the costs can still be
the market price. They point out, for instance, that the
price at which KC sold the La Saussaye industrial estate
and the factories to P & G in 1998 did not enable it to
meet all its costs. Yet that price should be considered
the market price. They also add (see recital 72) that the
market value of the land and the factory warehouse in
question ought probably to be FRF 31 million (EUR 4,7
million), since (a) Scott sold to P & G in 1998 for [(cid:133)]
what it had bought from Sempel in 1987 for FRF 31
million (EUR 4,7 million) and (b) as a result of
discounting the 1998 purchase at 6 % to 1987,
the
value of the site in 1987 was FRF 15,4 million (EUR 2,4
million).

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(163) While there is no need to check the correctness of the
French authorities’ figures for the costs borne by KC for
the La Saussaye estate and the price obtained from P &
G for that estate (see recitals 67 to 72), their reasoning
has to be refuted.

they already knew that

warehouse,
the investment
would result in a loss of some FRF 60 million (EUR 9,2
million). A private operator would not have gone ahead
with such an investment.

it

to close

as part of

(164) First, as regards the argument that a market price does
not have to cover total cost, the Commission would
emphasise that the situation facing KC in 1998 differed
significantly from that
facing the local authorities in
1987. In 1998, KC had already invested in the site in
question, so that those costs should be regarded as sunk
costs. Before P & G purchased the site, KC had already
decided
its world-wide
restructuring. Everything suggests that the operation of
the site in question involved heavy losses for KC (101).
Furthermore, in 1998, the household and sanitary paper
sector in Europe was suffering from overcapacity (102),
especially in France (103), whereas
in 1987 it was
the
booming (see recital 182 below). Consequently,
price paid by P & G for the site was probably the best
price that KC could have obtained for a loss-making
in a market suffering from overcapacity,
paper mill
regardless of
invested. The question,
therefore, was not whether KC should invest in the La
Saussaye estate, but what it could get out of it given the
investments it had already made.

amount

the

the

[(cid:133)]

is a correct price

(166) The same reasoning applies to the French authorities’
second argument, namely that the market price in 1987
was probably that which Scott actually paid, i.e. FRF 31
million (EUR 4,7 million), given what P & G paid in
Irrespective of
1998 and its discounted 1987 value.
whether
(the French
authorities have not supplied any evidence establishing
that this sum relates to the land and the site which
Scott actually bought in 1987 and that this really was
the price paid for the site by P & G), the Commission
would again refer to the conditions on the market in
1998, which determined the purchase price paid by P &
G, as compared with those obtaining in 1987. The latter
are confirmed by the fact that Scott was ready in 1987
to increase its capacity in France. Lastly, the commission
rejects the argument that a simple discounting operation
consisting in the reduction of a 1998 market value to
its 1987 value gives an indication of the market price as
established in 1987.

(165)

the local authorities

In 1987, by contrast,
found
themselves in a situation where no investment had been
made apart from the initial purchase of the land in
question for FRF 10,9 million (EUR 1,7 million). As
explained in recital 157, when the local authorities
decided to prepare the land and to build the factory

(101) Extract from the Tribune DesfossØs, 20 January 1998,

(cid:145)Kimberly
(cid:145)[(cid:133)] the factory, which had been occupied by
closes its doors(cid:146):
175 workers for several days, was liberated at
the end of
yesterday. The overproduction of household paper in France and
the huge losses accumulated by the factory since it opened, more
than FRF 500 million, made this decision apparently inevitable(cid:146).

(102) Extract from Le Monde, 9 January 1998: (cid:145)As part of its worldwide
restructuring, Kimberly Clark is closing its OrlØans factory(cid:146): (cid:145)[(cid:133)]
Although the market is growing very slowly (2 % to 3 % a year),
excess capacity has increased and now stands at more than
90 000 tonnes in Europe(cid:146).

In France, Kimberley is a victim of

(103) Extract from Le Figaro, 9 January 1998: (cid:145)As part of its worldwide
restructuring, Kimberly Clark is closing its OrlØans factory(cid:146): (cid:145)[(cid:133)]
The closure of the site is part of a global restructuring of the
toilet paper, kitchen
household paper giant
(handkerchiefs,
towels).
the stagnant
household paper market (+ 2 % a year) and has excess capacity of
50 000 tonnes a year and cumulative losses of nearly FRF 4
billion in ten years [(cid:133)](cid:146).
Extract from the Courrier Val de Loire-Sologne (16 to 22 January
(cid:145)The Chairman of Loiret County Council, Eric DoligØ,
1998)
reacts to the announcement of
the
Kimberly-Clark Site at Saint-Cyr-en-Val(cid:146): (cid:145)[(cid:133)] This development is
justified by the group on the grounds of excess production
capacity, which in France is about 49 %(cid:146).

the proposed closure of

local

authorities

should have

(167) There were, therefore, no objective or bona fide reasons
why the
reasonably
expected their investment, namely the transformation of
agricultural land into an industrial site and the building
of a factory warehouse before selling the plot to Scott,
to give an adequate rate of return at the price paid by
Scott for the site. The preferential price at which the
local authorities sold the site in question to Scott must
therefore be regarded as constituting an advantage for
that firm.

7.3.1.2.3. Value of the advantage

(168) The problem in the present case is to establish with
certainty the costs associated with the sale of the land in
question and what those costs cover. Despite the order
to provide information, the French authorities did not
supply, as the Commission requested them, a detailed
breakdown of (a) the work actually done by Sempel on
the site (levelling, electricity,
infrastructure, buildings,
etc.), (b) the real cost of that work and (c) the method
of
therefore
restrict its assessment to the information available to
it (104).

financing used. The Commission must

(104) See

footnote 61 (Pleuger, paragraph 26). The

rule was

consolidated later by Article 13(1) of the Procedural Regulation.

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the

infrastructure

(169) Because it does not have this detailed information, the
Commission is unable to determine whether, as Scott
claims, part of
could count as
infrastructure which is normally provided from the
central government or
local authority budget and
therefore does not constitute aid. Such infrastructure,
though, may be caught by Article 87(1),
if work is
carried out for the benefit of one or more firms or a
certain type of product.
the
preparation of the site must be regarded as benefiting
Scott alone, because that firm was the owner and sole
is
user of
the factory warehouse is
particularly so as
concerned,
Scott’s
specifications (106).

infrastructure provided (105). This

In the case in point,

far as

which

built

was

the

to

(170)

It is clear from the document entitled (cid:145)Statement of final
account: La Saussaye and La Planche industrial estate(cid:146),
dated 26 July 1993, which is
the most detailed
document provided by the French authorities, that the
total
land improvement
operations is approximately FRF 140,4 million (EUR
21,4 million). To this should be added the cost of the
original land, i.e. FRF 10,9 million (EUR 1,7 million).

to Sempel of

cost

the

(171) From this amount

for

the

should be subtracted FRF 29,4
million (EUR 4,5 million) for the financial cost of the
loans contracted by Sempel (107), FRF 8,3 million (EUR
1,3 million)
refund of VAT on land
improvement operations and FRF 13,6 million (EUR 2,1
for the cost of a public intercepting sewer,
million)
which the French authorities showed was not intended
solely for Scott but served the whole community,
i.e.
25 000 inhabitants and other firms as well (see recital
89).

(172) The cost of the land sale is therefore some FRF 100
million (EUR 15,2 million). The cost of the transaction
relating directly to Scott is 48/68 of FRF 100 million
(EUR 15,2 million), or FRF 70,588 million (EUR 10,76
million). This figure, less the FRF 31 million (EUR 4,7
million) which Sempel received from Scott, gives a net
loss of approximately FRF 39,58 million (EUR 6,03
million) or, at present value, FRF 80,77 million (EUR
12,3 million).
In the absence of a breakdown of the
work carried out by Sempel on the land occupied by
Scott (levelling, electricity, infrastructure, buildings, etc.)
and of
cost, which
information the French authorities were requested to
the
provide by the order

an indication of

to them,

that was

actual

sent

its

the

(105) Commission Decision C 20/94 (NN 27/94) concerning state aid
by
of
for
Kimberly-Clark-Industries
Toul/Villey-Saint-Etienne
at
(Meurthe-et-Moselle), communication published in OJ C 283,
27.10.1995.

development

occupied

site

the

Commission has thought it reasonable and appropriate
to use the fraction of 48/68 without taking account of
any economies of scale. The present value includes the
application of an interest rate from the date when the
the date the Scott
unlawful aid was granted,
repayment. The
its
agreement was
reference rate used by the Commission to measure the
aid element of public subsidies in France is 5,7 % as
from 1 January 2000 (108).

i.e.
signed, until

7.3.1.3. Distorts competition and affects trade

between Member States

(173) For a measure to be caught by Article 87(1) EC, it must
trade between
the Court of

also distort
Member States.
Justice defined this criterion as follows:

competition and affect

In Phillip Morris (109),

(cid:145)when state financial aid strengthens the position of
an undertaking compared with other undertakings
competing in intra-Community trade, the latter must
be regarded as affected by the aid.(cid:146)

Accordingly, the product in question must be traded
between Member States and the aid must strengthen the
beneficiary’s position vis-(cid:224)-vis its competitors.

(174)

toilet and hygiene articles

In the present case, Scott manufactures paper products
for sanitary use in particular (110).
In 1987 apparent
in the
consumption of
Community was 2 427 thousand tonnes, net exports
were 132 thousand tonnes and Community production
was 2 295 thousand tonnes (111). The relevant product
is thus traded on at least a Community-wide basis. This
conclusion is also supported by the fact that before the
factory was established on the La Saussaye estate in the
Loiret, Scott supplied France from its plants in Italy and
Belgium (see recital 50).

(175) Even if

the production of sanitary paper in the La
Saussaye factory was mainly intended for the French
market and was therefore not exported, the aid would
still distort
trade between
Member States, since Scott competes with products

competition and affect

(106) Point 2.1 of the Sempel agreement refers in particular to (cid:145)the
formation level
receiving the factory warehouse and its
superstructure, these structures to be built under contract with
the developer, the Scott Paper Company(cid:146).

for

(107) The present value is then calculated, taking the years 1987 and

2000.

(108) See website http://europa.eu.int/comm/dg04/aid/tauxref.htm.
(109) Case 730/79 Philip Morris v Commission [1980] ECR p. 2671,

point 11.

(110) Scott Paper Company Annual Report 1987, p. 1.
(111) Panorama of Community Industry 1990, section 19-18.

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sector

from other Member States (112). Such a
coming
situation may also arise where there is no overcapacity
in question (113). According to the
in the
Panorama of Community Industry 1990 (114), the sector
concerned was one of the most dynamic in Community
industry in the decade from 1980 to 1990 (output grew
by about 5 % a year).

production, sanitary and household paper being traded
the aid is caught by the
within the Community,
prohibition in that Article.

7.3.2. PREFERENTIAL RATE OF WATER TREATMENT LEVY

(176) The fact

that Scott was able to buy the site at a
preferential price strengthened its position vis-(cid:224)-vis its
competitors. The aid in question was intended to help
Scott locate to the Loiret and, hence, increase its share
of the French market (see recital 50). It thus reduced the
cost of the investment to Scott and gave the company a
competitive advantage over manufacturers making, or
planning to make, a similar investment at their own
expense.

(177) The French authorities claim that the time taken by the
complainant to acquaint the Commission with the facts
the loss suffered by the competition is
shows that
probably non-existent (see recital 95).

(178) This argument has to be rejected.

(183) As with the preferential price of

the question
arises whether the preferential rate of water treatment
levy granted to Scott constitutes a preferential price
which is caught by the prohibition in Article 87(1) of
the EC Treaty.

land,

(184) The Commission would point out that, under the said
Article, any aid granted by a Member State or through
state resources in any form whatsoever which distorts
or threatens to distort competition by favouring certain
undertakings or the production of certain goods shall,
insofar as it affects trade between Member States, be
incompatible with the common market.

(185) Thus the preferential rate of water treatment levy will be
caught by Article 87(1), if it satisfies the following three
tests:

(a)

it was granted by the state or
resources;

through state

(179) Firstly,

the possible strengthening of Scott’s position
through the preferential price granted to the company
for the purchase of the site should be assessed in the
light of the position of all its competitors generally and
not just that of the complainant.

(b)

(c)

favours

it
production of certain goods;

certain

undertakings

and/or

the

it distorts competition between the undertakings
favoured and similar undertakings and/or types of
concerned are
production, where
traded within the Community.

the products

(180) Secondly, the fact that the complaint was not lodged
until December 1996 does not prove that
the loss
suffered by the competition was non-existent. The
Commission would point out that the complaint was
lodged in December 1996 following the report in which
the French Court of Auditors discussed the alleged aid
measures and which was only published in November
1996 (see recital 1).

7.3.2.1. Granted by the state or through state

resources

(186)

It should be pointed out that the concept of the state
comprises the organs of the central authority and also
those of the decentralised local authorities at whatever
level (115) (see recitals 126 to 134).

(181)

It is clear from the above that the preferential price of
the land was likely to affect competition within the
Community.

(187) The preferential

rate of water

treatment

levy was

granted by the city council in two stages.

(182) To sum up, given that the preferential price of the land
satisfies the three tests of Article 87(1) of the EC Treaty,
i.e.
through state
it favours Scott, and it distorts competition
resources,
types of
between Scott and similar

it was granted by the state or

firms and/or

(112) Case 102/87 France v Commission [1988] ECR p. 4067, point

19.

(113) Idem.
(114) See footnote 111.

(188) As a first stage the city council explicitly undertook, in
Article 7 of the Scott agreement, to apply a preferential
rate of water treatment levy to Scott (see recitals 191 to
203).

(189) As a second stage, the city council, pursuant to the
agreement, adopted on 16 December 1988 a decision
on the new levy rates for 1989.

(115) See footnote 84.

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(190) The preferential rate of water treatment

levy should
therefore be regarded as granted by the state. Thus the
first test of Article 87(1) is satisfied.

rate of water treatment levy for 1989, consisting in a
for the levy plus a new coefficient of
new amount
degressivity.

7.3.2.2. Favouring Scott

(191) Apart from its state character, the aid should, still

in
accordance with Article 87(1), be selective and favour
only certain undertakings or the production of certain
goods, thus affecting the balance which exists between
beneficiary firms and their competitors. This selective
character distinguishes state aid from general economic
assistance measures, which are applicable to all firms in
all sectors of a Member State’s economy.

(192)

In Kimberly Clark (116), the Court of Justice held that
where the body granting the aid enjoys a degree of
latitude which enables it to adjust its financial assistance
having regard to a number of considerations such as the
the financial
choice of beneficiaries,
is
assistance
provided,
certain
undertakings in a more favourable situation than others
and thus to meet the conditions for classification as aid
within the meaning of Article 87(1).

conditions under which it

and the
the

the amount of

system is

to place

liable

(193) Having examined the case in detail, and in particular in
the light of the limited information provided despite the
order to supply information, the Commission considers
that setting the coefficient of degressivity at 0,25 for a
level of consumption exceeding 150 000 m3 should be
regarded as constituting a selective advantage in favour
of Scott Paper which is not
justified on commercial
grounds or by general tax policy considerations. The
reasons for this are as follows:

(194) First, the city council explicitly undertook to grant Scott
a preferential rate of water treatment levy. Article 7 of
the Scott agreement concluded between that firm and
the local authorities on 31 August 1987 lays down that:

(196) As described in recitals 23 to 27,

the coefficient of
for
degressivity (which was reduced from 1 to 0,5)
volumes between 0 and 50 000 m3 is justified as a form
of quantity discount. According to the city council’s
minutes, the coefficient increases (from 0,6 to 0,8) for
volumes between 50 001 and 150 000 m3 as a way of
encouraging large-scale consumers of water to reduce
their effluent
(city council decision of 19 December
1980). The coefficient for volumes exceeding 150 000
m3 is then set at 0,25 without justification.
In their
letter of 10 January 2000, the French authorities justify
(cid:145)the volume consumed
the latter rate by saying that
makes it possible to cover the cost of water treatment(cid:146).
Despite the order to supply information which was sent
to them, the French authorities’
(cid:145)justification(cid:146) consists
simply of this sentence, so that the Commission has
nothing by which to judge whether such a claim has
the slightest basis.

(197) The justification given by the French authorities seems
to have been worked out after the event. To begin with,
it directly contradicts the objective of reducing effluent,
which is the reason given for the coefficient applicable
to volumes exceeding 50 000 m3. Furthermore, not
only does the paper industry consume a large quantity
of water, but the liquid effluent from bleaching requires
extensive processing before it can be discharged to the
environment. Thus, even if, logically, large quantities of
water generate higher
in itself
receipts,
sufficient reason to reduce the rate of levy accordingly,
since, given the characteristics of the paper industry,
those quantities create more pollution.

this is not

(cid:145)OrlØans City Council undertakes to alter the rates of
water treatment levy applicable to industrial users in
special circumstances and to provide for them a rate
which does not exceed 25 % of the most favourable
current rate. Subject to Scott’s compliance with the
technical standards and legislation in force, OrlØans
City Council will apply this preferential rate to the
company(cid:146).

(198)

(195) Second, pursuant

the city council
to the agreement,
adopted on 16 December 1988 a decision on a new

(116) Case C-241/94 France v Commission (Kimberly Clark) [1996]

ECR p. I-4551, points 23 and 24.

the

same

alia water bills

(cid:145)discount(cid:146) on the

In addition, by setting the threshold for the preferential
rate at 150 000 m3 it is only water-intensive industries
like paper, and in particular the firm of Scott Paper, that
will actually qualify for it. Despite being ordered by the
Commission to supply inter
and
particulars of all the other firms in the region qualifying
for
the French
authorities only sent in a single bill, that for the H(cid:244)pital
de la Source in 1996. According to this, the hospital,
whose water consumption was approximately 155 000
m3, qualified for the 0,25 coefficient in respect of that
part of its consumption which exceeded 150 000 m3,
i.e. 3 % of its total consumption. That same year, Scott’s
water consumption was nearly [(cid:133)] m3, so that the firm
qualified for
(a
substantial part) of it’s total consumption.

rate in respect of

the preferential

levy,

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Official Journal of the European Communities

it

when
aid
incompatible with the common market(cid:146) (118).

repayment

demands

of

15.1.2002

declared

(199) The Commission considers that the fact that, for the
period from 1989, when the preferential rate came into
force, to the present day, the French authorities were
able to show, for just one year, that a hospital had
qualified for the rate in respect of 3 % of
its total
consumption when Scott Paper had qualified for it in
respect of (a substantial part) does not, in the light of
the factual information described in recitals 192 to 198,
deprive the measure of its selective character.

(200) Consequently, by setting a coefficient of degressivity of
0,25 for volumes exceeding 150 000 m3, which de
facto basically benefited Scott, the city council placed
Scott in a more favourable situation than the others,
which must be considered as constituting a selective
advantage within the meaning of Article 87(1).

(201) Lastly, the value of the advantage should be calculated
by multiplying the following factors: (a) the differential
between a (cid:145)reasonable(cid:146) coefficient of degressivity for a
consumption level exceeding 150 000 m3 and the
preferential rate,
(b) Scott’s annual effluent coefficient,
(c) the annual pollution coefficient and (d) Scott’s annual
offtake (m3). The calculation should be done for each
year since 1989. The results obtained would then be
added.

(202) However, the Commission is unable to determine the
value of the advantage, since, despite its order to supply
information (117), the French authorities did not send it
the information necessary for
the calculations. As
regards the (cid:145)reasonable(cid:146) coefficient of degressivity for
consumption exceeding 150 000 m3,
French
authorities will have to determine this in connection
with the proceedings for the recovery of the aid. To do
this,
is
reasonable by producing evidence of the rates applicable
to firms with comparable levels of consumption and
French departments.
in other
effluent
Irrespective
of
coefficient
outcome,
degressivity should not be less than 0,5, since this is the
most preferential rate regardless of the quantity of water
consumed.

they will have to show that

established
the
of

the coefficient

the

the

(203)

It is therefore for the French authorities to determine
the value of
the recovery
the advantage as part of
proceedings. This was established by the Court of First
Instance in Ladbroke, when it held that
(cid:145)neither the
case-law nor any provision of Community law requires
the Commission to determine the sum to be reimbursed

7.3.2.3. Distorts competition and affects trade

between Member States

its

(a)

competitors (119). As

trade between Member States,

(204) The Commission would point out (see recitals 173 to
182) that, for an advantage to distort competition and
affect
the relevant
product must be traded between member States and (b)
the aid must strengthen the position of the beneficiary
first
vis-(cid:224)-vis
condition,
i.e. whether the relevant product is traded
between Member States, the Commission refers to its
assessment in recitals 173 to 182, which also applies to
the preferential rate of water treatment levy. Regarding
the second condition,
the preferential rate of water
treatment levy strengthens Scott’s position vis-(cid:224)-vis its
competitors, since it reduces the costs which Scott
would have to bear in the course of its normal business.

regards

the

(205)

It is clear from the above that the preferential rate of
water treatment levy was likely to affect competition
within the Community.

(206) To sum up,

(i)

i.e.

rate of water
since the preferential
treatment levy satisfies the three tests of Article 87(1) of
the EC Treaty,
it was granted by the state or
through state resources, (ii) it favours Scott and (iii) it
distorts competition between Scott and similar firms
and/or types of production, sanitary and household
paper being traded within the Community, the aid is
caught by the prohibition in that Article.

7.4. COMPATIBILITY OF THE AID

be

the

(207) Article 87(3) of the Treaty lists the types of aid that
may be considered to be compatible with the common
market. Compatibility must
determined with
reference to the Community as a whole, and not with
reference to one Member State, or region thereof, taken
common market
that
individually. To ensure
functions normally and given the principle established
in Article 3(g) of the Treaty, the exceptions listed in
Article 87(3) should be interpreted strictly when it
comes to examining any aid scheme or individual aid
measure. In particular, the exceptions may be relied on
only where it can be demonstrated that, without the aid,
market forces would not be sufficient on their own to
induce the beneficiaries to act in such a way that would
the objectives mentioned in the
enable one of
exceptions to be achieved.

(117) See footnote 61. Rule consolidated by Article 13(1) of

the

Procedural Regulation.

II-1, point 187.

(119) See footnote 111.

(118) Case T-67/94 Ladbroke Racing v Commission [1998] ECR p.

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(208) The aid measure in question does not qualify for the
exceptions under Article 87(2)(a) to (c). It is not social
aid granted to certain consumers, but aid designed to
attract an investor to a particular city. Nor is it related
to natural disasters or other exceptional occurrences, or
to the former division of Germany.

(213) Consequently, the aid granted to Scott in the form of a
preferential land price does not qualify for one of the
exceptions in Article 87(2) or (3) and should therefore
be declared unlawful
and incompatible with the
common market.

(209) As

regards

in Article
the exceptions provided for
87(3)(b) and (d), the aid in question is not intended to
promote the execution of an important project of
common European interest. The fact that a producer of
household and sanitary paper is located in a certain city
is not of common European interest. The aid is not
intended, either, to remedy a serious disturbance in the
economy of France, nor does it have the characteristics
of such a project. Therefore the exception in Article
87(3)(b) does not apply. Neither is the measure intended
to promote culture or heritage conservation (Article
87(3)(d)).

(210) As far as the exception in Article 87(3)(c) is concerned,
namely aid to facilitate the development of certain
economic activities, it is clear that the measures under
to promote small and
examination are not meant
medium-sized
development,
job creation or training in
environmental protection,
accordance with
and
frameworks on state aid.

the Community

guidelines

research

firms,

and

(211) To complete the assessment of whether the aid in
question is possibly compatible under
the regional
exceptions provided for in the Treaty, a distinction has
to be drawn between investment aid (the preferential
price of the land) and operating aid (the preferential rate
of water treatment levy).

7.4.1. PREFERENTIAL PRICE OF THE LAND

(212) The preferential price of the land must be regarded as
an ad hoc investment aid, aimed at reducing the cost to
Scott of locating in OrlØans-Sologne (see recital 182).
The aid was granted outside the framework of an
approved investment aid scheme (see recitals 100 to
121). Irrespective of whether this ad hoc aid may be
the
regarded as contributing to the development of
Loiret, it should be noted that OrlØans-Sologne is not
situated in an area recognised as falling under Article
87(3)(a) or (c), so that the aid cannot be regarded as
compatible with the common market because it is a
regional investment aid (see recitals 100 to 121).

7.4.2. PREFERENTIAL RATE OF WATER TREATMENT LEVY

(214) The Commission would point out (see recital 206) that
the preferential rate of water treatment levy constitutes
operating aid because it is intended to reduce the costs
which Scott would have to bear in the course of its
normal business.

(215)

its

by

justified

In the absence of any compensatory effects, operating
aid may be granted on an exceptional and temporary
basis to offset operating losses in Article 87(3)(a) areas,
where
regional
development and its nature and where the amount of
the aid is in proportion to the handicaps it is intended
to alleviate. However, the exception provided for in that
Article does not apply here, since the Loiret
is not
recognised as an area with an abnormally low standard
of living or serious underemployment.

contribution

to

(216) Consequently, the aid granted to Scott in the form of a
preferential rate of water treatment levy does not qualify
for one of the exceptions in Article 87(2) or (3) and
should therefore be declared unlawful and incompatible
with the common market.

7.5. RECOVERY OF ILLEGAL AND INCOMPATIBLE AID

7.5.1. PREFERENTIAL PRICE OF THE LAND

(217)

It has to be concluded that
the sum of FRF 39,58
million (EUR 6,03 million), or at present value FRF
80,77 million (EUR 12,3 million), which is the net loss
made by the local authorities from the sale of the La
Saussaye site, including the factory warehouse, to Scott,
should be declared unlawful and incompatible with the
common market.

(218) Where

is

to

aid

found

granted

unlawfully

be
incompatible with the common market, Article 88(2) of
the EC Treaty requires the Commission to request the
Member State to recover it from the beneficiary, as the
Court
several
occasions (120). This practice is also established by
Article 14 of the Procedural Regulation, according to
which the Commission decides that the Member State

confirmed

Justice

has

on

of

(120) See Case 70/72 Commission v Germany [1973] ECR p. 813;
Case 310/85 Deufil v Commission [1987] ECR p. 901 and Case
C-5/89 Commission v Germany (BUG-Alutechnik) [1990] ECR p.
I-3437.

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concerned shall take all necessary measures to recover
the aid from the beneficiary. The rationale behind
recovering unlawful and incompatible state aid is that
effective competition should be restored (121).

7.5.1.1. Limitation period

i.e. (cid:145)the day on which the unlawful aid is awarded to the
therefore, does not
beneficiary(cid:146). The said Article 15,
derogate in any way from the normal procedure, which
is conducted exclusively between the Member State
concerned and the Commission. In that procedure, the
rights acknowledged to third parties are the procedural
rights deriving from Article 88(2) of the EC Treaty.

(219) Under Article 15 of

the Procedural Regulation,

the
powers of the Commission to recover aid are subject to
a limitation period of ten years, which begins on the
day the unlawful aid is granted to the beneficiary.
However, any action taken by the Commission with
regard to the unlawful aid interrupts the limitation
period.

(220)

In the case in point, aid in the form of a preferential
price for land was granted on 31 August 1987, when
the Scott agreement was signed by Scott and the local
authorities. The first measure taken by the Commission,
following the complaint of 23 December 1996, dates
from 16 January 1997. This took the form of a formal
request for information made to the French authorities.
The limitation period was therefore interrupted before
the 10 years provided for had expired, so that
the
the aid in
the power
Commission has
question.

to recover

(221) Scott argues that the limitation period is designed to
protect the beneficiary of aid and that, consequently, it
is interrupted only where the beneficiary has been
informed of the investigation which the Commission is
conducting. Scott also maintains that it learned of the
the
conducted
investigation
publication of the decision to initiate the procedure, i.e.
on 30 September 1998. At that date more than 11
years had gone by since Scott had concluded the
agreement with the local authorities. The Commission
therefore no longer had the power to recover the aid.

through

being

only

(222) This argument has to be rejected.

(i.e.

(223) The purpose of the limitation period is to ensure legal
certainty (122). Both the addressees of Commission
the Member States) and the wider
decisions
including in particular the beneficiary of
community,
the aid, benefit from this legal certainty. However, the
question of who, ultimately, benefits from the limitation
period is a separate matter from how that period is
calculated, which is determined by Article 15 of the
Procedural Regulation. That Article does not refer to
third parties; it is confined to the relation between the
Commission and the Member States.
It confers no
specific right on the beneficiary and lays no obligation
on the Commission with regard to third parties. The
beneficiary of the aid is mentioned only to determine
the date from which the limitation period starts to run,

If

(224) The Commission would point out that the beneficiary of
aid must check whether the aid it was granted was
notified (123).
the aid is not notified and not
approved, there is no legal certainty. The Commission
should not be bound by any obligation to provide
information which is intended to protect the beneficiary
of aid not in a situation that should be the subject of
such protection.

7.5.1.2. Exceptional circumstances

(225) Scott claims that the beneficiary of unlawfully granted
aid may rely on exceptional circumstances which led
him reasonably to suppose that the aid was lawful.

(226) According to Scott,

the reasons why any unlawfully
granted aid should not be repaid in this case are as
follows:

(a) [(cid:133)] was neutralised by P & G buying the site and
the factory at
their combined market value (any
advantage that Scott may have received when
so that any competitive
operating the factory),
advantage deriving from the grant of the aid no
longer affects competition; consequently,
there is
currently no distortion of competition which needs
to be corrected by repaying the aid;

(b) [(cid:133)] since, when the land and the factory were sold
to P & G, their book value was much less than their
total cost to Scott; these assets were sold to P & G
at less than half their book value (Scott is not now
retaining any benefit from any incompatible aid),
and

(c)

non-transparent manner

the
the
Commission dealt with the various laws notified or
sent to it by France in 1982 concerning the aid that
could be granted by French local and regional

in which

(121) Procedural Regulation, recital 13.
(122) Procedural Regulation, recital 14.

(123) Case C-5/89 Commission v Germany (BUG-Alutechnik) [1990]
ECR p. I-3437, point 14 and Case C-24/95 Land Rheinland-Pfalz
v Alcan [1997] ECR p. I-1591, point 25.

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L 12/31

authorities made it almost impossible for a firm to
these
obtain information about
enactments from a Community-law perspective.

status of

the

(227) None of these arguments can be accepted.

(228) The first and second arguments are irrelevant. The
Commission would point out that, in accordance with
established case-law, the lack of residual benefit to the
final purchaser (several years after the aid was granted)
is immaterial, since the economic activity of the original
target firm (subsequently absorbed), in this case Scott,
continued uninterrupted. As long as the unlawful aid is
not recovered, the distortion of competition continues.
The distortion is
entity
remaining, even though Scott no longer operates in the
paper sector.
the Commission would
point out that, unlike the acquisition of Scott by KC,
P & G acquired only the assets of the La Saussaye site.
The aid should therefore be recovered from Scott and
not P & G (124). The fact that the ownership of Scott
has changed since the aid was granted is irrelevant.

In this respect,

attributable

to the

legal

(229) As regards the third agreement, the Commission refers

to its reasoning in recitals 100 to 121.

(230) According to the French authorities, KC may rely on the
legitimate expectation that it is not under a duty to
in particular because any diligence
repay the aid,
exercised by KC with regard to Scott at the time of the
acquisition would not have revealed if any aid had been
granted to Scott. The only way KC could have
discovered such aid would have been either to scan the
the local
local or national press or the minutes of
authorities’ meetings or
the competent
authorities (see recital 96).

to contact

(231) This

argument

the
Commission considers that, in the case in point, it is for
Scott as the beneficiary to repay the aid received.

cannot be

accepted,

even if

(232) The Commission would point out that firms receiving
aid can in principle legitimately expect that aid to be
lawful only if it has been granted in accordance with the
procedure laid down by Article 88. A diligent economic
operator should normally be able to ensure that that
procedure has been followed (125). KC could have
established, before buying shares in Scott, whether or
not the latter had checked that the procedure had been
complied with.

(233) At no stage did the French authorities show how KC’s
alleged legitimate expectation could be attributed to

or

have

asked

claim to

some act of the Commission’s. Neither Scott, when it
received the aid, nor KC, when it bought Scott, asked
the Commission,
the
Commission, whether the aid had been notified and
approved. The fact that KC’s diligence did not reveal any
state aid problems when the company bought Scott is
not a legitimate reason for not requiring the recovery of
the aid. In this respect the Commission can only stress
how important it is for a firm interested in acquiring
another firm to show all due diligence with regard to
state aid as well as other issues.

(234) As for whether it was possible for KC to detect if there
was a state aid component in the preferential price of
the land,
the
the Commission would point out
advantage conferred by the local authorities on Scott
clearly derives from the agreement they concluded with
that company (see recitals 191 to 203). Normally, Scott
should have had a copy of that agreement.

that

(235) The Commission

concludes,

the
arguments put
forward by Scott and the French
authorities respectively do not give it any reason not to
proceed with the recovery of the incompatible aid.

therefore,

that

7.5.2. PREFERENTIAL RATE OF WATER TREATMENT LEVY

(236) Likewise,

for

the French authorities

the advantage conferred in the form of a
preferential rate of water treatment levy, whose value it
is
to determine in the
recovery proceedings (see recitals 191 to 203), must be
declared unlawful and incompatible with the common
market. The Commission would point out (see recitals
217 to 218) that, where aid granted unlawfully is found
to be incompatible with the common market, Article 14
of the Procedural Regulation requires the institution to
request the Member State concerned to recover the aid
from the beneficiary.

(237) The question whether

the

far as

limitation period was
the
interrupted or not does not arise as
preferential rate of water treatment levy is concerned,
since the measure has been applied continuously since
1989, the year it was introduced. Given the continuous
application of the preferential rate of water treatment
levy, none of
forward by Scott
applies. Not only Scott but KC too benefited from this
advantage.

the arguments put

(124) Case C-305/89

Italy

v Commission

(Alfa Romeo

and

Finmeccanica) [1991] ECR p. I-1603.

(125) Case C-5/89 Commission v Germany (BUG-Alutechnik) [1990]

ECR p. I-3437, point 14.

(238) The Commission concludes therefore that the arguments
put
forward by Scott and the French authorities
respectively give it no reason not to proceed with the
recovery of the incompatible aid.

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8. CONCLUSIONS

HAS ADOPTED THIS DECISION:

(239)

In view of the above and, in particular, of the following
considerations:

Article 1

The state aid in the form of a preferential
land price and a
preferential rate of water treatment levy granted by France to
Scott and amounting,
in the case of the land price, to FRF
39,58 million (EUR 6,03 million) or, at present value, FRF
80,77 million (EUR 12,3 million) and,
the
second advantage, to a value which the French authorities will
have to calculate using a method worked out by the
Commission is incompatible with the common market.

in the case of

Article 2

1.
France shall take all necessary measures to recover from
the beneficiary the aid referred to in Article 1 and already
made available to it unlawfully.

Recovery

shall be

effected without delay

2.
and in
accordance with the procedures of national law provided that
they allow the immediate and effective execution of
this
Decision. The aid to be recovered shall include interest from
the date on which it was made available to the beneficiary
until the date of its recovery. Interest shall be calculated on the
basis of
the reference rate used for calculating the grant
equivalent of regional aid.

Article 3

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

Article 4

This Decision is addressed to the French Republic.

Done at Brussels, 12 July 2000.

For the Commission

Mario MONTI

Member of the Commission

(a)

there are no objective or bona fide grounds why the
local authorities should reasonably have expected
investment, namely the transformation of
their
agricultural
land into an industrial estate and the
building of a factory warehouse before selling the
plot to Scott, to give an appropriate rate of return at
the price paid by Scott for the site, and

(b) setting the coefficient of degressivity at 0,25 for a
level of consumption exceeding 150 000 m3, with
Scott as the de facto principal beneficiary, without
this advantage being justified on commercial or
general tax policy grounds,

the Commission finds that, in breach of Article 88(3) of
the EC Treaty, France has unlawfully granted Scott the
following aid:

(a) an ad hoc preferential price of FRF 39,58 million
(EUR 6,03 million), present value FRF 80,77 million
(EUR 12,3 million), for a 48 ha industrial site on
the La Saussaye industrial estate, and

(b) a preferential rate of water treatment levy for any
exceeding 150 000 m3,
consumption of water
pursuant to Article R. 372 of the Local Authorities
Code, whose value will have to be determined by
the French authorities
the
recovery of the aid.

in proceedings

for

The aid referred to in (a) and (b) should be regarded as
incompatible with the common market.

Consequently,
in order to re-establish the economic
conditions with which the company would have had to
contend if it had not been granted incompatible aid, the
French authorities must
take all necessary steps to
eliminate the advantages deriving from the aid and
recover it from the beneficiary.

The aid must be recovered in accordance with the
procedures of French law, and must include the interest
which has accrued between the date on which it was
granted and the date on which it is actually repaid,
calculated using the reference rate for determining the
net grant equivalent of regional aid in France (126),

(126) Commission letter to Member States SG(91) D/4577 of 4 March
1991. See also Case C-142/87 Belgium v Commission [1990]
ECR p. I-959. Rule consolidated by Article 14 of the Procedural
Regulation.