2001/52/EC: Commission Decision of 20 September 2000 on the State aid implemented by France in the wine-growing sector (notified under document number C(2000) 2754)
Date: 2000-09-20
Institutions: European Commission
Subjects: France, State aid, control of State aid, infringement of EU law, viticulture

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Official Journal of the European Communities

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COMMISSION

COMMISSION DECISION

of 20 September 2000

on the State aid implemented by France in the wine-growing sector

(notified under document number C(2000) 2754)

(Only the French text is authentic)

(2001/52/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

from interested parties. The French authorities sent their
comments by letter of 13 December 1999.

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

(4)

Having called on interested parties to submit their comments
pursuant
to those provisions and having regard to those
comments,

Whereas:

I

PROCEDURE

(1)

(2)

(3)

The French authorities notified an aid scheme for
adapting the vineyards in Charentes by letter of 3
February 1999, recorded as recieved on 8 February
1999. Requests for further information were sent on 18
March and 14 July 1999. The French authorities replied
by letters of 6 May and 28 July 1999.

The Commission initiated the procedure provided for in
Article 88(2) of the EC Treaty in respect of the above aid
measure by letter No SG (99) D/8176 of 15 October
1999. The procedure was initiated in respect of three of
the four measures initially notified by the French author-
ities. The Commission raised no objections to the
measure to supplement the grubbing premium.

The decision to initiate the procedure was published in
the Official Journal of the European Communities (1). The
Commission called on the other Member States and
interested parties to submit their comments on the aid
in question. The Commission has received no comments

On 12 March 1999 and 6 April 2000, without
informing the Commission or awaiting completion of
the investigation procedure,
the French authorities
adopted two decrees on the conditions for granting the
aid for improving the vine population of wine-growing
holdings in the Cognac region for the 1998/1999 and
1999/2000 wine years, respectively (2). The Commission
again contacted the French authorities, by letter from the
for Agriculture of 31 May
deputy Director-General
2000, to inquire whether the supplement to national aid
for improving the vine population had actually been
implemented. It drew attention to Article 88(3) of the
Treaty, which prohibits the implementation of State aid.
It also mentioned the principle that aid which is not
compatible with the common market is to be recovered.
The French authorities sent the abovementioned legisla-
tive
implicitly
confirming thereby that the measure had been adopted.

texts by letter of 28 June 2000,

II

DESCRIPTION

(5)

(6)

The envisaged scheme continues the conversion of the
vineyards
in Charentes, currently used to produce
cognac, to the production of other wines (‘local wines’).
This scheme is a response to the crisis affecting the
sector, which is resulting in a substantial accumulation
of stocks.

The conversion is to be effected through four measures
intended to promote the production of wine for which
there is consumer demand and reduce the volumes of
cognac produced.

(1) OJ C 359, 11.12.1999, p. 7.

(2) JORF, 11.4.1999 and JORF, 23.4.2000.

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Supplement to national aid for improving the vine
population

The purpose of the aid is to improve the quality of the
vineyards. The measure edncourages cognac producers
to switch to ‘local wine’ production by promoting the
use of certain vine varieties (1). The measure would cover
only 1 000 hectares of vineyards.

budget

estimated

FRF 10 000 000
The
(EUR 1 524 000) and the aid would be granted in the
form of an additional payment of FRF 10 000/ha
(EUR 1 524)
for
eligible
to wine-growers
national aid for improving the vine population.

alreade

is

The aid would be granted for one year, the French
authorities having indicated that the multiannual char-
acter of the measure would not be endorsed until an
assessment had been made at the end of the first year of
operation.

(7)

The level of aid would be as follows:

— FRF 24 000/ha for wine-growers delivering their
entire production to a producer group acting as a
marketing consortium or a wine-growers' cooper-
ative belonging to such a group. The aid supplement
aid to
total
would increase
FRF 34 000/ha,

amount of

the

— FRF 22 000/ha for wine-growers delivering part of
their production to a wine-growers' cooperative
belonging to a producer group recognised as a
marketing consortium or belonging to an association
of producer groups or a vineyard-restructuring asso-
ciation. The aid supplement would increase the total
amount of aid to FRF 32 000/ha,

— FRF 10 000/ha to other wine-growers. The aid
supplement would increase the total amount of aid
to FRF 20 000/ha.

Technical support for producers

their production methods by means of

This measure is designed to accompany the measure
described above and consists in helping wine-growers to
adapt
a
programme of events and training initiatives focusing on
the conversion of vineyards. Under this programme,
information meetings would be organised, booklets
would be distributed and experts would dispense advice
on growing and wine-making techniques. The estimated
budget amounts to FRF 5 000 000 (EUR 762 000).

(8)

Promotion of cognac

These measures are intended to halt the disappearance of
outlets for cognac by promoting the product. They
include the organisation of fairs and exhibitions, public

relations events and publicity compaigns. They will
mainly be held in third countries, particularly in Asia
and America. The
to
FRF 5 000 000 (EUR 762 000) for 1999.

estimated budget

amounts

Supplements to the grubbing premium

These are structural measures to reduce cognac produc-
tion capacity in the Charentes region.

Turning to the supplement to national aid for improving
the vine population, when the examination procedure
was initiated for the notified measures the Commission
took the view that Article 14 of Council Regulation
(EEC) No 822/87 of 16 March 1987 on the common
organisation of the market in wine (2), as amended by
Regulation (EEC) No 2253/88 (3), prohibits the grant of
national aid for the planting of wine-growing areas from
1 September 1988, except where such aid contains
criteria to ensure,
in particular, that the objective of
reducing production or improving quality is achieved
without leading to increased production. Accordingly,
only varieties which bring about an improvement in
quality and to not have high productivity in the terrain
concerned will be allowed. The varieties communicated
to the Commission by the French authorities met these
conditions. Moreover, the total amount of aid would not
exceed the ceiling laid down in Commission Regulation
(EEC) No 2741/89 (4), which stipulates that the amount
of aid granted per hectare of vineyard planted may not
exceed 30 % of
the actual cost of grubbing-up and
planting, which may be determined on a flat-rate basis
in each region, particularly in the light of geomorpho-
logical characteristics.

However, the new Council Regulation (EC) No 1493/
1999 of 17 May 1999 on the common organisation of
the market in wine (5) contains provisions on the aban-
donment of wine-growing areas and the restructuring
and conversion of vineyards. Since the programme
presented by the French authorities seeks a long-term
solution to the problem of wine production in the Char-
entes region, the measures envisaged must take account
of the new rules under this common organisation of the
market. This Regulation establishes a system for the
restructuring and conversion of vineyards, the objective
of which is to adapt production to market demand. In
accordance with Article 15(c) of Regulation (EC) No
1493/1999, Commission Regulation (EC) No 1227/
2000 of 31 May 2000 laying down detailed rules for the

(1) Arriloba B, Cabernet franc N, Cabernet Sauvignon N, Chardonnay B,
Chasan B, Chemin B, Cot N, white-juiced Gamay N, Merlot N and
Sauvignon B.

(2) OJ L 84, 27.3.1987.
(3) OJ L 198, 26.7.1988.
(4) OJ L 264, 12.9.1989.
(5) OJ L 179, 14.7.1999.

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application of Council Regulation (EC) No 1493/1999
on the common organisation of the market in wine (1),
contains provisions aimed at preventing increases in
production potential resulting from the implementation
of conversion measures. The information sent shows
that conversion involved producing new quantities of
‘local wine’, in other words increasing overall produc-
tion.
In addition, Article 2(1) of Regulation (EC) No
1493/1999 prohibits planting with vines classified as
wine-grape varieties until 31 July 2010. The Commis-
sion was therefore bound to conclude that one of the
legislator's aims in establishing the new organisation of
the market in wine was to prevent an increase in wine
production.

(9)

According to the French authorities, the additional wine
production resulting from the varietal conversion (1 to
1,5 million hectolitres) should be absorbed by the ‘local
wine’ market, which they claim has been growing
steadily in France since 1988. However, other informa-
tion from French sources — in particular Report No 65
of 7 July 1999 of the Office national interprofessionnel
des vins (Onivins — National
Interprofessional wine
office) — gives a less optimistic outlook for ‘local wine’
sales. Thus, although sales of local wines increased by
9 % in the period 1994 to 1998 they have levelled off
over the last two years.

(10) While the Commission agreed that the varietal conver-
sion of the vineyards in the Charentes region has the
advantage of reducing the production of wines for
which there is no market, it considered that the resulting
increase in ‘local wine’ production in France is incom-
patible with the principles contained in the new organ-
isation of the market in wine and is likely to distort
competition on a wine market which is showing no
signs of growth. It had to be borne in mind that the
wines resulting from the conversion of these vineyards
would enter the ordinary wine market, while current
production by definition goes to other destinations
outside that market. Consequently, there was a strong
these vineyards
risk that
would shift the problem on to other markets since it
would lead to an overall net increase in the quantity of
wine placed on the market, which would be incompat-
ible with the objectives of the new common organ-
isation of the market.

the general conversion of

(11)

In these circumstances, and in the absence of any action
on the part of the French Government to adapt the
measure to the new requirements in the sector,
for
example by ensuring that the conversion of the vine-
yards in the Charentes region was accompained by a
substantial reduction in wine-growing areas and yields,
the Commission doubted whether the measure was in
keeping with the new requirements at Community level.

(12)

(13)

(14)

(15)

for producers,

the
Turning to the technical support
Commission concluded that this measure was compar-
able to training aid aimed at improving farmers' tech-
nical skills and could therefore help develop the wine-
growing sector without affecting trading conditions to
an extent that was contrary to the common interest.
However, since this measure was designed to accompany
the measure described above, the Commission decided
not to state a position on it until the other measure had
been approved.

the cognac promotion measure,

In the case of
the
Commission noted that taken in isolation the planned
measure complied with the Community rules, but
decided nevertheless to examine it in the light of similar
measures authorised in the past. In 1998, for example, it
authorised aid to the Bureau national interprofessionnel
du cognac (National interprofessional cognac office) for
four-year
promotional measures planned over
period (2). The Commission wondered therefore whether
the new allocation for measures to promote cognac
might not
cumulative distortion of
competition having adverse effects on producers of
other spirits in the Community. Accordingly, it could
not authorise this aid without first hearing the French
authorities'
relationship
between the aid already authorised and that notified and
the steps which they intended to take to prevent exces-
other
of
distortions
sive
Community producers.

competition

arguments

regarding

vis-à-vis

result

in a

the

a

the
Conversely, when the procedure was
to the
Commission considered that
grubbing premium was
in conformity with the
Community competition rules, and so the examination
procedure did not concern this fourth measure.

the supplement

initiated,

The Commission thus considered that
the measures
consisting in a supplement to national aid for improving
the vine population, technical support for producers and
cognac promotion constituted an advantage for wine-
growers. These aid measures were therefore not regarded
in principle as compatible with the common market,
unless they could qualify under one of the derogations
provided for in Article 87(2) or (3) of the Treaty. On the
basis of the information available, the Commission was
unable to conclude that the aid measures were compat-
ible. The Commission therefore deemed it necessary to
initiate the procedure provided for in Article 88(2) of
the Treaty.

III

COMMENTS FROM FRANCE

(16)

By letter of 13 December 1999, the French authorities
presented their comments on the Commission's decision
to initiate the procedure provided for in Article 88(2) in
respect of the aid measures notified.

(2) State aid N 327/98. Letter to France SG(98) D/6737 of 4 August

(1) OJ L 143, 16.6.2000.

1998.

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(17)

The French authorities point out that the objective of the
supplement to national aid for improving the vine popu-
lation is to reduce production potential in the region by
restricting yields. Thus,
the average yields currently
recorded are around 150 hectolitres per hectare of vines
in production. After conversion to local wine the
average yield of the converted vineyards should drop to
around 90 hectolitres per hectare.

(18) According to the French authorities, conversion would
help the vineyards in Charentes to meet market require-
ments, while the wines they are currently producing are
not of sufficient quality to have guaranteed outlets. In
addition, conversion would in the long term reduce the
volume to be delivered for compulsory distillation of
dual-purpose grapes,
thereby also reducing EAGGF
expenditure in that connection.

(19)

(20)

Since only 1 000 hectares would be converted under
this measure, the French authorities think it might even
be necessary to continue the conversion effort further,
particularly for the purpose of implementing the scheme
provided for in Article 11 of Regulation (EC) No 1493/
1999. They add that the notified measures comply with
the abovementioned Reuglation, which prohibits new
vine planting and introduces a scheme for conversion of
vineyards, because they aim not at extending the vine-
yards in Charentes, but at helping to adapt
to the
market, through both abandonment and conversion of
existing vines (1 000 ha).

The French authorities go on to contest the Commis-
sion's calculations of the volume of local wines likely to
be placed on the market, which it assessed at 1,5 million
hectolitres. They claim that the conversion measure will
result in a reduction of 150 000 hectolitres in table
wines and the production, three years hence, of 80 000
to 90 000 hectolitres of local wines. According to the
French authorities, however, the market in local wine is
very buoyant and well able to continue expanding on
the world market. They argue that
the approved
volumes have increased appreciably in recent years, from
7 million hectolitres in 1996 to more than 10 million in
1997 and 1998, despite a smaller harvest as a result of
poor weather during the last two wine years. The slower
growth noted in 1998/1999 to which the Commission
referred when it
initiated the examination procedure
could not mean that demand was levelling off, because
the prices of local wines had risen substantially during
the wine year: up 14 % for local red wines (and up as

much as 20 % for varietal wines) and up 11 % for local
white wines (up as much as 16 % for varietals). The
French authorities therefore consider that the measure
will not result in a net increase in wine production on
the market but, rather, will help adapt to the market a
wine-growing region permitted to make wine under the
Community rules.

(21)

Regarding the cognac promotion measure, the French
authorities have informed the Commission that they had
decided not to implement the measure and were thus
withdrawing its notification under Article 8 of Council
Regulation (EC) No 659/1999 of 22 March 1999 laying
down detailed rules for the application of Article 88 of
the EC Treaty (1).

IV

ASSESSMENT

(22) Article 7(1) of the Treaty states that, save for the deroga-
tions provided for therein, any aid granted by the
Member States or through State resources in any form
whatsoever which distorts or
to distort
competition by favouring certain undertakings or the
production of certain goods is incompatible with the
common market, in so far as it affects trade between
Member States.

threatens

(23)

(24)

(25)

For its part, Article 76 of Regulation (EEC) No 822/87
provides that Articles 87, 88 and 89 of the Treaty are to
apply to the production of and trade in wine-growing
products, save as otherwise provided in that Regulation.

The supplement to national aid for improving the vine
population and the accompanying technical support
measure confer an advantage on the wine-growers
concerned that other producers cannot enjoy. As a
consequence, the measures distort or threaten to distort
competition in the ways already described and therefore
fall within the definition of State aid in Article 87(1).

The aid is likely to affect trade between Member States
in so far as it favours national production over that of
the other Member States. The wine-growing sector is
especially open to competition at Community level,
particularly in France, and is consequently very sensitive
to any measure favouring production in a particular
country.

(26)

The following table shows the level of trade in wine-
growing products between France and the other Member
States:

Wine — Total

1999/2000

EU-15

France

Usable production

168 076 000 hl 54 271 000 hl

Exports to EU-15

Imports from EU-15

—

—

15 500 000 hl

5 700 000 hl

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

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(27) However,

there

to the principle
concerning the incompatibility of State aid set out in
Article 87(1).

exceptions

are

(28)

(29)

(30)

The derogations from this incompatibility provided for
in Article 87(2) are obviously not applicable. Nor did the
French authorities invoke them.

The derogations provided for in Article 87(3) of the
Treaty must be interpreted strictly when considering
regional or sectoral aid programmes or any individual
case of application of general aid schemes. In particular,
they may be allowed only where the Commission is able
to establish that the aid is necessary to achieve one of
the aims in question. Allowing such derogations to
apply to aid not meeting that condition would be tanta-
mount to allowing trade between Member States to be
affected and permitting distortion of competition that
has no justification in the light of
the Community
interest and, by the same token, undue advantages for
the operators of certain Member States.

The Commission considers that
the aid measures in
question are not intended to encourage economic devel-
opment in a region where the standard of
living is
abnormally low or where there is serious underemploy-
ment within the meaning of Article 87(3)(a) of
the
Treaty. Nor are they intended to promote the execution
of an important project of common European interest or
to remedy a serious disturbance in the economy of a
Member State within the meaning of Article 87(3)(b).
Nor again are they intended to promote either culture or
heritage conservation within the meaning of Article
87(3)(d).

(31)

The only possible derogation in this case is
that
provided for in Article 87(3)(c), which stipulates that aid
to facilitate the development of certain economic activi-
ties or of certain economic areas may be considered to
be compatible with the common market, where such aid
does not adversely affect trading conditions to an extent
contrary to the common interest.

Supplement to national aid for improving the vine
population

(32) When initiating

the

examination procedure,

the
Commission concluded that the vine varieties envisaged
by the French authorities in theory meet the require-
ments of Community
legislation (see description,
recital 7).

(33)

The Commission also concluded that
the measure
complied with Article 5 of Regulation (EEC) No 2741/
89, which stipulates that the amount of aid granted per
hectare of vineyard planted may not exceed 30 % of the
actual cost of grubbing-up and planting (recital 7).

(34) However,

the Commission noted that

the common
organisation of the market in wine introduced by Regu-
lation (EEC) No 822/87 prohibits the grant of national
aid for the planting of wine-growing areas from 1
September 1988, except where such aid contains criteria
to ensure, in particular, that the objective of reducing
production or improving quality is achieved without
leading to increased production (recital 8).

(35)

(36)

(37)

(38)

The Commission concludes, moreover, that any increase
in the production of local wines in France is incompat-
ible with the principles contained in the new organ-
isation of the market in wine and is likely to distort
competition on a wine market which is showing no
signs of growth (recital 10).

In these circumstances, and in the absence of any action
on the part of the French Government to adapt the
measure to the new requirements in the sector,
for
example by ensuring that the conversion of the vine-
yards in the Charentes region is accompanied by a
substantial reduction in wine-growing areas and yields,
the Commission doubted whether the measure was in
keeping with the new requirements at Community level
(recital 11).

Reducing production potential: reducing yields

from 150 hl

The French authorities explain that the measure is aimed
precisely at reducing production potential and restricting
yields, and should reduce the average yield of
the
converted vineyards
to approximately
90 hl pe hectare. Moreover, such conversion would help
bring wine production into line with market demand,
and in the long tem reduce the volume to be delivered
for compulsory distillation of dual-purpose grapes,
thereby also reducing EAGGF expenditure in that
connection.

the

The Commission endorses
French authorities'
conclusion that conversion to other varieties would
considerably reduce production potential. However, the
problem of reducing yields should not be analysed
exclusively in terms of the results of varietal conversion,
but also in terms of reducing the yield capacity of vines
intended for the production of cognac. In this connec-
tion, the figures supplied to the Commission by the
French authorities by letter of 30 May 2000, on the
scheme in Charentes in the context of the common
organisation of the market in wine, show that the yields
of vines of the ‘ugni-blanc’ variety intended for cognac
production have increased substantially, from 80 hl per
hectare in 1976 to 120 hl per hectare today (1). The
Commission takes the view that yield reduction should

(1) The latter figure is different from the figure provided by the French

authorities in their letter of 13 December 1999.

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also apply to the ‘ugni-blanc’ variety intended for the
production of cognac, which is causing the region's
production surpluses. The French authorities'
figures
show room for manœuvre in which to bring about such
a reduction. The Commission cannot therefore consider
reduction resulting from varietal conversion alone suffi-
cient.

(42)

Firstly, the French authorities challenge the Commis-
sion's estimate of the volume of local wines likely to be
placed on the market
(1,5 million hectolitres). They
claim that the conversion measure will result in a reduc-
tion of a 150 000 hectolitres in table wines and the
production, three years hence, of 80 000 to 90 000
hectolitres of local wines.

Reduction in wine-growing areas

(39)

(40)

The French authorities consider that half the reduction
in wine-growing areas is being implemented through the
permanent abandonment measure and half through the
conversion of existing vines. They go on to argue that,
since only 1 000 hectares would be converted under this
measure,
it might even be necessary to continue the
conversion effort further in the context of implementing
the scheme provided for in Article 11 of Regulation (EC)
No 1493/1999. They add that their notified measure
would comply with that Regulation, which prohibits
new vine planting and introduces
for
converting vineyards, since it aims not at extending the
vineyards in Charentes, but at helping to adapt them to
the market by encouraging permanent abandonment.

scheme

a

in Charentes

The Commission agrees with the French authorities that
permanent abandonment is an effective way of encour-
aging adaptation of vineyards
to the
market. However, it is bound to point out that, since
grubbing is voluntary, there is no a priori guarantee that
restructuring 1 000 ha will be accompanied by the
grubbing of an equivalent area. Moreover, the French
authorities have themselves in the past calculated the
percentage by which the total wine-growing area in the
region (estimated at around 80 000 ha)
should be
reduced at 15 % to 20 % (12 000 to 16 000 ha), which
proves that merely applying this measure will do little to
contribute to a satisfactory solution for the region
the French authorities are
concerned. The fact
proposing to continue conversion under the new market
organisation in wine shows that they are aware of this
fact.

that

Bringing production into line with demand

(41) Article 11(1) of Regulation (EC) No 1493/1999 does
indeed establish a scheme for restructuring and conver-
sion of vineyards. Article 11(2) states that the purpose of
the scheme is to adapt production to market demand.
The French authorities have tried to demonstrate that
their measures comply with this condition.

(43) Moreover, according to the French authorities, contrary
to the Commission's argument in recital 9, the market in
local wine should be able to continue expanding on the
world market (recital 20), According to them, approved
volumes have increased appreciably in recent years,
despite a smaller harvest due to poor weather in the last
two wine years. The slower growth recorded in 1998/
1999 could not mean that demand was levelling off,
because the prices of local wines had risen substantially
during the wine year: up 14 % for local red wines (and
up as much as 20 % for varietal wines), and up 11 % for
local white wines (up as much as 16 % for varietals).

(44)

Information received after intiation of the examination
procedure, again provided by the ‘Office national inter-
professionnel des vins (Onivins)’ (1), confirms that the
weighted average price of red and rosé local wines 20
weeks into the 1999/2000 wine year was 5 % down on
the previous wine year (7 % for red local wines with
mention of the variety and 5 % for rosé local wines with
mention of the variety) and 8 % down for white local
wines (10 % for white local wines with mention of the
variety). This information, which should certainly be
treated with caution, does not coincide with the French
authorities' position that the market in local wines is
constantly expanding.

(45)

In the light of the information it has received and in the
absence of any analysis of the real market impact of
such a measure, the Commission continues to doubt
whether the market has the capacity to absorb the new
quantities of local wine which would be produced as a
result of varietal conversion in the Charentes region.

Distortions of competition

(46)

Consequently, while reiterating that
the measure is
concerned with conversion of the sector which will have
long-term effects, the Commission confirms the conclu-
sion it drew when it initiated the examination procedure,
that the increase in production of local wines in France
goes against the principles of the new market organ-
isation in wine and is likely to create distortions of
competition on a wine market which does not show
sure signs of expansion. The Commission therefore
maintains that the fact that the wines resulting from the
conversion of these vineyards would go onto the normal

(1) Report No 70, of 2 February 2000.

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(47)

(48)

wine market, while the wine currently produced has, by
definition, other destinations outside that market,
is
highly likely to shift the problem to other markets/areas
while causing a net increase in the production of wines
placed on the market. This would run counter to the
objectives of the new market organisation.

The Commission wishes to stress that this conclusion
also applies to the former market organisation for wine,
which also contained the principle of zero increase in
production.

specifically under

The Commission takes the view that, by shifting the
problems experienced in Charentes to other regions in
the Community the measure implemented by the French
authorities is likely to create substantial distortions of
competition in a sector where increases in production
are particularly strictly controlled and considers that
only measures adopted in the context of the common
agricultural policy,
the common
organisation of the market concerned, can ensure that
the interests of all those operating on this market are
taken into account.
In this connection it should be
remembered that recourse by a Member State to Articles
87, 88 and 89 of the Treaty cannot take precedence
over the regulation governing the organisation of the
market in question (1). The application of those Articles
continues to be subject to the regulations concerned.
The Commission cannot approve aid measures which,
incompatible with the provisions
by nature,
governing the common organisation of a market or
which hamper the proper operation of
the market
organisation concerned.

are

(49)

The Commission thus finds that the French authorities
have not managed to adapt the measure to the new rules
in the sector by requiring, in particular, that conversion
the Charentes vineyards be accompanied by a
of
substantial reduction in wine-growing areas and yields. It
must therefore conclude that the measure is not compat-
ible with the new Community requirements or, there-
fore, with the Community competition rules, in partic-
ular Article 87(3)(c) of the Treaty.

Technical support

(50)

Since the technical support measure accompanies the
measure dealt with above, which is incompatible with
the common market, there are no longer any grounds
for applying it, and the Commission is not in a position
to approve it.

(1) Judgment of the Court of 26 June 1979 in Case 177/78 Pigs and
Bacon Commission v McCarren and Company Limited [1979]ECR 2161.

Promotion of cognac

(51)

There is no need for the Commission to assess this
measure, since the French authorities have withdrawn it.

V

CONCLUSION

(52)

The measure consisting of a supplement to national aid
for improving the vine population and the accompa-
nying measure entailing technical support for producers
do not qualify for the derogation provided for in Article
87(3) of the Treaty, since they do not meet the require-
ments laid down in the common organisation of the
market in wine. As a consequence, they are not compat-
ible with the Treaty and may not be implemented.

(53) On 12 March 1999 the French authorities adopted a
decree on the conditions for granting the aid for
improving the vine population of wine-growing hold-
ings in the Cognac region for the 1998/1999 wine year.
On 6 April 2000 they adopted an identical decree for
the 1999/2000 wine year. These decrees implement the
measure notified to the Commission in contravention of
Article 88(3). The measure is therefore unlawful aid
within the meaning of Article 1(f) of Regulation (EC) No
659/1999.

(54)

The Commission regrets that the French Republic imple-
mented the above aid measure in contravention of
Article 88(3) of the Treaty.

(55)

It should be remembered that, in the case of aid meas-
ures implemented without awaiting the Commission's
final decision, given the binding nature of the rules of
procedure laid down in Article 88(3) of the Treaty,
which the Court of Justice recognised as having direct
effect in its judgments of 19 June 1973 in Case 77/72,
Carmine Capolongo v Azienda Agricola Maya (2); of 11
December 1973 in Case 120/73, Gebrueder Lorenz GmbH
v Federal Republic of Germany (3) and of 22 March 1977
in Case 78/76, Steinike & Weinlig v Federal Republic of
Germany (4), the illegality of the aid concerned cannot be
regularised ex post facto (judgment of 21 November 1991
in case C-354/90, Fédération Nationale du Commerce Extér-
ieur des Produits Alimentaires v French Republic) (5).

(2) ECR 1973, p. 611.
(3) ECR 1973, p. 1471.
(4) ECR 1977, p. 595.
(5) ECR 1991, p. I-5505.

19.1.2001

EN

Official Journal of the European Communities

L 17/37

(56) Where an unlawful aid is

incompatible with the
common market, Article 14(1) of Regulation (EC) No
659/1999 provides that the Commission must decide
that the Member State concerned should take all neces-
sary measures to recover the aid from the beneficiary.
is necessary to re-establish the
Such reimbursement
situation applying previously, and involves cancelling all
the financial advantages from which beneficiaries of the
unlawfully granted aid have unduly benefited since the
date the aid was granted.

(57) Article 14(2) of Regulation (EC) No 659/1999 stipulates
that recovery includes interest at an appropriate rate
fixed by the Commission. Such interest is payable from
the date on which the unlawful aid was made available
to the beneficiary.

(58)

(59)

(60)

The aid must be reimbursed in accordance with the
procedures laid down by French law. The amounts
include interest from the date on which aid was granted
until the date of its effective recovery. It is to be calcu-
lated at the Commission's reference rate, laid down by
the method for setting the reference and discount
rates (1).

This Decision will not prejudice the conclusions the
Commission may draw, if necessary, for the financing of
the common agricultural policy by the European Agri-
cultural Guidance and Guarantee Fund (EAGGF).

The measure entitled ‘promotion of cognac’ was with-
drawn by the French authorities under Article 8 of Regu-
lation (EC) No 659/1999. The Commission therefore
concludes that there is no longer any need to rule on
that measure,

1999 and 1999/2000 wine years is an unlawful aid incompat-
ible with Articles 87, 88 and 89 of the Treaty and does not
qualify for the derogation provided for in Article 87(3) of the
Treaty.

The accompanying measure providing for

technical
2.
support to producers is incompatible with Articles 87, 88 and
89 of the Treaty and does not qualify for the derogation
provided for in Article 87(3) of the Treaty.

Article 2

France shall be required to cancel the aid schemes referred to in
Article 1.

Article 3

France shall take the measures necessary to recover the aid
granted to beneficiaries under the schemes referred to in
Article 1.

Article 4

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

Article 5

This Decision is addressed to the French Republic.

HAS ADOPTED THIS DECISION:

Done at Brussels, 20 September 2000.

Article 1

The measure implemented by France consisting of a
1.
supplement to national aid for improving the vine population
of wine-growing holdings in the Cognac region for the 1998/

For the Commission

Franz FISCHLER

Member of the Commission

(1) OJ L 273, 9.9.1997.