Commission Decision of 15 November 2000 concerning State aid granted by Belgium to Cockerill Sambre SA (Text with EEA relevance) (notified under document number C(2000) 3563)
Date: 2000-11-15
Institutions: European Commission
Subjects: Belgium, State aid, control of State aid, infringement of EU law, iron and steel industry, reduction of working time

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COMMISSION

COMMISSION DECISION

of 15 November 2000

concerning State aid granted by Belgium to Cockerill Sambre SA

(notified under document number C(2000) 3563)

(Only the French and Dutch texts are authentic)

(Text with EEA relevance)

(2001/198/ECSC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

(4)

Having regard to the Treaty establishing the European Coal and
Steel Community, and in particular Article 4(c) thereof,

Having regard to Commission Decision No 2496/96/ECSC of
18 December 1996 establishing Community rules for State aid
to the steel

industry (1),

The comments which the Commission received were
forwarded to Belgium on 23 May 2000 to give the latter
an opportunity to respond, which it did by letter of 8
June 2000.

II. DETAILED DESCRIPTION OF THE AID

Having called on interested parties to submit their comments
pursuant to the abovementioned Decision (2) and having regard
to those comments,

(5)

The aid granted by Belgium to Cockerill Sambre SA
and
totals BEF 553,3 million (EUR 13,7 million)
consists of two parts:

Whereas:

I. PROCEDURAL STEPS

(1)

(2)

(3)

Further to information published in the Belgian press,
the Commission wrote to the Belgian authorities on 23
November 1998 (ref. D/54789) to request details of the
aid allegedly granted to the steel company Cockerill
Sambre SA as part of a scheme to reduce working time.
The Belgian authorities
replied by letter dated 11
December 1998 stating that they had indeed taken the
measures in question but that, in their view, they did not
constitute State aid.

By letter of 25 January 2000, the Commission informed
Belgium of
its decision to initiate the procedure in
Article 6(5) of Decision No 2496/96/ECSC (hereinafter
the ‘steel aid code’) in respect of the measures in ques-
tion.

The Commission Decision to initiate the procedure was
published in the Official Journal of the European Communi-
ties (3). The Commission invited interested parties to
comment on the measures in question.

(6)

(7)

1. A reduction in employers' social security contribu-
tions, decided by the Federal Government, amounting
to BEF 418 million (EUR 10,36 million) over a
seven-year period from 1999 to 2005.

2. A grant of BEF 135,3 million (EUR 3,35 million)
from the Walloon Government over the same seven-
year period.

The aid was granted in connection with a reduction in
established
the
the working week of
employees from 37 to 34 hours. It applies to 1 852
employees and covers the period 1999 to 2005.

company's

The federal aid was granted pursuant
to the Royal
Decree of 24 December 1993, which provides for
certain reductions in social security payments with a
view to job redistribution (4). The Decree was supple-
mented by the Royal Decree of 24 February 1997,
which provides for more favourable conditions for firms
in difficulty or undergoing restructuring. The special
facilities allowed are related in particular to the number
of
jobs to be created and the period in which the
reduction can be granted, which for present purposes is
the period in which the firm is recognised as being in
difficulty or undergoing restructuring, with a maximum

(1) OJ L 338, 28.12.1996, p. 42.
(2) OJ C 88, 25.3.2000, p. 8.
(3) See footnote 2.

(4) The Decree was approved by the Commission, as aid compatible
with the EC Treaty, by letter of 30 June 1994 (ref. D/9395).

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extension of seven years. On 28 July 1997 the Federal
Government accorded Cockerill Sambre SA the status of
a firm undergoing restructuring, and on 19 May 1998 it
granted it a reduction in social security contributions
provided for in the Royal Decree of 24 December 1993
under the more favourable conditions in the Decree of
24 February 1997.

III. COMMENTS FROM INTERESTED PARTIES

(11) As part of

the procedure,

the Commission received
comments from the UK Steel Association and the United
Kingdom Permanent Representation to the European
Union.

The Walloon Government granted aid on 18 December
1998 to supplement
the federal aid. The Walloon
Government aid was paid to the employees through a
non-profit making association set up for that purpose.

(12)

The comments from both parties reflect the same doubts
as those raised by the Commission in its decision to
initiate the procedure. Both parties consider that the
measures in question constitute aid to Cockerill Sambre
that is incompatible with the steel aid code.

(8)

(9)

The aid was granted to maintain the level of remu-
neration of the established employees of the firm for
seven years, despite the reduction in working time; the
firm was to pay only the same hourly rate as before.
During the 1997 to 1998 wage negotiations, the estab-
lished employees had demanded and obtained a reduc-
tion in the working week from 37 to 34 hours, as
follows:

1. working week reduced from 37 to 34 hours for an

indefinite period;

2. total working hours for all established employees
together to be maintained at the level envisaged in
the firm's business plan, ‘Horizon 2000’; this resulted
in the creation of 150 new jobs, bringing the total
workforce to 1 852;

3. wages to be maintained at 1998 levels, until re-
absorbed through wage indexing on the basis of
34 hours (by the end of 2005).

(13)

(14)

(10)

The company itself pays only the part of the wage
corresponding to what would be payable on the basis of
34 hours,
indexed yearly. The difference between the
amount paid by the company and the wage received by
the employees is financed by resources from different
sources:

1. the employees themselves, who contribute the wage
increase to which they were entitled in 1997 and
1998,
(BEF 29,2
million = EUR 0,7 million);

they waived

but which

2. the Federal Government, which contributes the aid
granted in respect of the 150 new jobs resulting from
the
(BEF 418
million = EURO 10,4 million);

reorganisation of working

time

3. the Walloon Regional Government, which contri-
butes aid to supplement the federal aid (BEF 135,3
million = EUR 3,4 million).

IV. COMMENTS FROM BELGIUM

In its comments, Belgium reiterates the position it had
already expressed before the procedure was opened,
namely that the measures do not constitute State aid.

Belgium claims that the measures do not confer any
financial advantage on the company either directly or
indirectly, and that therefore they do not constitute State
aid. Belgium argues that there is no financial advantage
for the following reasons:

1. The concept of the working time reduction plan was
put forward by the employees, and Cockerill Sambre
agreed only on condition that the operation did not
impose any extra burdens on the firm. Accordingly,
the State aid, it is claimed, does not finance commit-
ments given by Cockerill to its established employees.
The 1998 collective agreement, which approved the
is dependent on
the agreement
plan, states that
obtaining public funds, the amount being decided
jointly. In the event of failure to obtain the funds, the
parties are to examine the situation and the poss-
ibility of implementing the agreement.

2. It is also claimed that lower social security contribu-
tions do not entail any financial benefits for Cockerill
Sambre. This is due to the fact that the money saved
in federal contributions has been paid over in full to
the workforce, and has merely transited through the
firm without reducing its burdens by comparison
with the past. The regional funds do not even go
through the firm.

3. The total number of hours worked by the established
employees before the reduction in working time
continues to be paid for, at the same statutory and
contractual rate, by Cockerill Sambre. The hourly
wage cost incurred by the firm is exactly the same
after the reduction as before, because, as stated
above, Cockerill authorised the new working time
only on condition that it did not incur any extra
costs.

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4. Cockerill has

to bear

extra disadvantages

and
burdens, such as additional training costs,
loss of
availability, higher fixed unit costs, extra adminis-
trative costs, organisational difficulties, etc. The extra
costs are relatively high, it is argued, and are borne
by Cockerill.

5. Cockerill commissioned reports from two auditing
firms, which find that the calculation method used by
is reasonable and that the financial and
Cockerill
accounting data relating to reduced working time in
1999 can be endorsed. Belgium concludes that all the
financial
including the assistance
from the State, are of sole benefit to the workforce,
and that Cockerill does not benefit from any public
funds at all.

flows concerned,

Belgium considers that the fact that the aid was granted
to workers in their capacity as employees of a particular
firm is not enough to disqualify it from being regarded
as aid to persons. The Belgian authorities state that they
base their position on a Commission Decision on
Belgian financial aid to SA Duferco Clabecq (5), in which
the Commission took the view that the additional unem-
ployment benefit paid to former employees of Forges de
Clabecq until the age of 65 constituted aid to persons
rather than aid to the firm.

Belgium also claims that the Belgian State aid constitutes
social assistance for the established employees of Cock-
erill Sambre. The Commission, it claims, has in the past
approved similar measures, in particular aid which the
French authorities granted to the fishing industry in view
immediate
of
needs, with no economic impact that might affect free
competition.

the concrete circumstances and their

(15)

(16)

V. ASSESSMENT

Legal basis for the assessment

(17)

Cockerill Sambre SA is an integrated steel company
located in the Walloon Region of Belgium. Until early
1999 it was a publicly owned company, in which the
Walloon Region held a majority stake. It was privatised
in that year, and has since been owned by the French
steel group Usinor. As it is an integrated steel company
it is covered by the ECSC Treaty, and therefore the aid
granted to it must be examined in relation to the steel
aid code.

(18) Article 6 of the steel aid code requires Member States to
notify the Commission of all transfers of State resources
to steel undertakings. They must also notify any plans to
grant aid to the steel industry under schemes which the
Commission has approved in accordance with the EC
Treaty. The Commission determines whether the meas-
ures constitute aid under Article 1(2) of the code and, if
so, whether they are compatible with the common
market.

(19)

The Commission guidelines on aid to employment (6) set
out the criteria the Commission applies to determine
whether State measures to assist employment constitute
State aid. The guidelines apply to the present case; if the
measures do constitute State aid, however, it has still to
be determined whether they are compatible with the
common market under the ECSC Treaty and the steel aid
code. The latter makes no provision for employment aid
or operating aid related to wage costs.

Analysis of
Belgian authorities

the arguments put

forward by the

(20) As the Belgian authorities have stated, State aid must
indeed give the recipient an edge over its competitors.
However, contrary to the claim made by Belgium, Cock-
erill Sambre has in fact enjoyed financial and economic
benefits from the aid received. The benefits must be
determined by comparing the present situation with the
position of the firm if it had not received (or could not
expect to receive) such aid, and not with its position in
the past, for the following reasons.

1. The fact that the initiative came from the workforce
and was accepted by the firm only on condition that
it did not have to pay the resulting additional costs
does not in any way affect the classification of the
public intervention as State aid. The charges resulting
from collective agreements have to be borne by the
firm, irrespective of which party initiated the process.
If the State acts to bear the expense, either as a direct
party to the negotiations or afterwards, the firm has
that Cockerill
benefited from State aid. The fact
Sambre insisted from the start of the negotiations
that
the agreement be
financed by the public authorities, and included that
position in the collective agreement, does not mean
that it was no longer liable for the wage costs of its
workforce. Its behaviour shows that, on the contrary,
it
the
advantage acquired.

the financial burdens of

is very much aware of

the importance of

(5) OJ C 20, 22.1.1998, p. 3.

(6) OJ C 334, 12.12.1995, p. 4.

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2. Similarly, the fact that the public funds were only
channelled through the firm, or did not pass through
it at all, and that
their final destination was the
workforce, does not alter the fact that they constitute
State aid. The point
is that public resources are
financing part of the wages of a group of Cockerill
Sambre employees. The important factor in defining
these resources as State aid is not the way the funds
are organised and managed, but the nature of the
expenditure they finance.

3. Belgium also argues that the firm's hourly wage cost
remains exactly the same. In fact, it is the hourly cost
borne by the firm that stays the same, the additional
costs resulting from the reduction in working time
being financed by the public authorities. Unit wage
costs borne by businesses would never change if the
State were to pay for the extra costs resulting from
new wage agreements that included financial advan-
tages for workers. The advantage for Cockerill resides
precisely in the fact that it has not assumed financial
liability for the increase in wage costs agreed with its
established employees.

4. The fact that Cockerill did not refuse to pay the
indirect additional costs relating to the reduction in
working time is not relevant either, since, as stated
above, its refusal to pay other costs does not help to
determine whether the public resources it received
constitute State aid, even though they may have been
tied to such a refusal. Work-related costs are part of
any firm's essential costs, and cannot be passed on to
the public authorities.

5. As stated above, a firm's management and organ-
isation of public funds is not relevant to the decision
whether such funds constitute State aid. Thus the fact
that the auditors concluded that the financial flows
relating to the public funds in question were normal
is not relevant
in determining whether the State
measures constitute State aid.

(21) According to the Belgian authorities, the fact that the aid
was paid to the workers in question only because they
were employed by Cockerill Sambre does not mean that
the aid is to be regarded as aid to the firm rather than
aid to persons. Belgium considers that the Commission
took this view in its decision on the former employees
of Forges de Clabecq. But the aid granted by the State to
the former workers of Forges de Clabecq could be
regarded as aid to persons because Forges de Clabecq

had gone bankrupt. At the time the aid was granted the
workers were no longer employed by Forges de Clabecq.

(22)

In addition, Belgium states that it regards the State aid in
question as social assistance for that group of workers. It
claims that the Commission took a decision along these
lines in a similar case of aid granted by France in the
fisheries sector. As it has not provided details of the
the Commission has been unable to find the
case,
decision in question and cannot comment on it.
It
would point out, however, that the fisheries sector is
covered by the EC Treaty and qualifies for certain forms
of aid under conditions that are not permitted under the
ECSC Treaty, which covers Cockerill Sambre.

Assessment of the compatibility of the aid

(23) As stated above, the Commission cannot accept the
arguments put forward by Belgium. It must conclude, on
the basis of the guidelines on aid to employment, that
the aid in question constitutes aid to the firm and not
aid to persons, and that it finances the costs of the work
provided by Cockerill Sambre employees. Such costs
form an essential part of
the operating costs of all
businesses and, if their financing receives support from
the State, any such support certainly constitutes State aid
to the firm.

(24)

The Commission also notes, as already stated in the
decision initiating the procedure, and repeated above,
that the State aid was granted under a law which was
approved by the Commission as compatible with the EC
Treaty in a decision which required Belgium to grant
federal aid only in accordance with specific sectoral
rules. This part of the aid was therefore granted in
breach of
the Commission decision approving the
federal aid scheme. The regional aid was granted as a
one-off measure. That aid does not therefore constitute a
general measure, but aid which benefited a specific firm.

VI. CONCLUSION

(25)

The Commission concludes that Belgium granted the aid
to Cockerill Sambre SA unlawfully, in breach of Article
6(1) and (2) of the steel aid code.

(26)

The measure in question constitutes State aid within the
meaning of Article 1 of the steel aid code. It does not fit
the description of any of the aid measures in Articles 2
to 5 of the code, and is therefore incompatible with the
ECSC Treaty and the proper functioning of the common
market,

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HAS ADOPTED THIS DECISION:

Article 1

The State aid totalling BEF 553,3 million (EUR 13,7 million)
granted by Belgium to the steel company Cockerill Sambre SA
constitutes State aid under Article 1 of the steel aid code and is
incompatible with the common market.

Article 2

Belgium shall take all the necessary steps to recover from
1.
Cockerill Sambre SA the aid referred to in Article 1 which has
already been unlawfully paid, and to suspend payment of the
balance.

Recovery shall be effected without delay in accordance
2.
with the procedures of national law, provided that they allow
the immediate and effective execution of this Decision. The aid
to be recovered shall bear interest from the date on which it
was paid to the recipient until the date of its recovery. The
interest shall be based on the reference rate used to calculate

the grant equivalent of regional aid, in force at the time the aid
was granted.

Article 3

Belgium shall inform the Commission within two months of
the date of notification of this Decision of the measures it has
taken to comply herewith.

Article 4

This Decision is addressed to the Kingdom of Belgium.

Done at Brussels, 15 November 2000.

For the Commission

Mario MONTI

Member of the Commission