2001/521/EC: Commission Decision of 13 December 2000 on the aid scheme implemented by the Kingdom of the Netherlands for six manure-processing companies (Text with EEA relevance) (notified under document number C(2000) 4070)
Date: 2000-12-13
Institutions: European Commission
Subjects: Netherlands, State aid, aid to undertakings, control of State aid, organic fertiliser, waste management

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 13 December 2000

on the aid scheme implemented by the Kingdom of the Netherlands for six manure-processing
companies

(notified under document number C(2000) 4070)

(Only the Dutch version is authentic)

(Text with EEA relevance)

(2001/521/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

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

Having regard to the Agreement on the European Economic Area, and in particular Article 62(1)(a) thereof,

Having regard to Council Regulation (EC) No 659/1999 of 22 March 1999 laying down dtailed rules for
the application of Article 93 of the EC Treaty,

Having called on interested parties to submit their comments pursuant to the provisions cited above (1),

Whereas:

I. PROCEDURE

(1)

(2)

(3)

Since 1994 various complaints have drawn the Commission's attention to cases of aid granted to
manure-processing projects in the Netherlands under the ‘Bijdrageregeling Proefprojecten Mestver-
werking’ (BPM) scheme. With the Commission's approval, the scheme had operated until 1994 (2).
The complainants allege that aid was granted after that date.

By letter dated 15 July 1999 (SG (99) D/5241), the Commission enjoined the Dutch authorities to
provide, within 20 working days of receiving the injunction, all relevant information enabling it to
determine whether the aid measures concerned were covered by the BPM scheme, as approved by
the Commission, and to disclose if any other aid had been granted to such projects.

By letters dated 15 October (A/37878) and 26 October 1999 (A/38181), the Dutch authorities
forwarded a number of documents. However, they did not answer the questions raised in the
Commission's injunction.

(1) OJ C 272, 23.9.2000, p. 22.
(2) Scheme approved on 6 July 1989.

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(4)

(5)

By letter dated 17 May 2000 (SG (2000) D/103702), the Commission informed the Dutch authori-
ties that it had decided to initiate the procedure laid down in Article 88(2) of the EC Treaty in respect
of six cases in which aid had been paid after the scheme had expired.

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

(6)

The Commission received no comments from interested parties.

II. DETAILED DESCRIPTION OF THE AID

(7)

(8)

(9)

The Commission approved the BPM scheme (N 137/89) on 6 July 1989 for one year (1989 to
1990). By Decision of 14 December 1990, the scheme was extended until the end of 1994 (C 17/90,
ex N 88/90). The Dutch authorities were thus authorised to grant investment aid of up to 35 % of
eligible costs for about 20 large-scale manure-processing plants.

The scheme was designed to stimulate the creation of useful outlets for the manure surplus in the
Netherlands. The Dutch authorities focused mainly on aid to prevent overproduction of manure and
on environmentally friendly ways of disposal of surplus manure.

As regards manure processing,
investment aid was allocated to pilot installations (where new
manure-processing methods are tested), test plants (comprising all the processing phases, from
manure to a saleable product), pre-purification installations (where relatively pure effluents are
extracted), and large-scale storage and processing facilities for poultry dung (which is often piled up
in the open, emitting ammonia).

(10) After the BPM scheme had expired,

the Dutch authorities granted State aid amounting to
EUR 2 501 089 to the manure-processing companies Ferm-o-Feed BV, Fleuren Compost BV, Vloet
Oploo BV, Smith Markelo, Arev Venhorst and Memon KPI.

(11)

Lastly, one company, Ferm-o-Feed, benefited twice from State aid; there is no evidence that the aid
was for two different pilot projects.

Amounts granted after expiry of BPM scheme

Company

Aid granted
on

Eligible costs
(in EUR)

Total amount granted
(in EUR)

Aid intensity

Ferm-o-Feed BV

27.7.1995

360 755

126 264

35 %

Fleuren Compost BV

21.12.1995

10 739 250

487 326

4,5 %

Vloet Oploo

21.12.1995

528 654

158 596

Smith Markelo

21.12.1995

1 502 013

426 553

Arev Venhorst

21.12.1995

648 906

213 277

Memon KPI

21.12.1995

4 428 895

1 089 073

30 %

28 %

33 %

25 %

Total

18 208 473

2 501 089

(3) See footnote 1.

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(12)

The Commission initiated the procedure laid down in Article 88(2) of the EC Treaty because it had
serious doubts as to whether the six cases were covered by the BPM scheme and whether they were
caught by Article 87(2) and (3) given that neither of the exceptions set out there appeared to apply.
With regard to the first part of the derogation in Article 87(3)(c), the Commission took the view that
the Community guidelines on State aid for environmental protection (4), hereinafter referred to as the
‘environmental guidelines’, did not apply since no evidence had been produced that the investment
aid had made it possible to achieve significantly higher levels of environmental protection and since
the planned aid intensities were in excess of
the thresholds indicated in the guidelines. The
Community guidelines on State aid for small and medium-sized enterprises (5) (referred to hereinafter
as the ‘SME guidelines’) did not appear to apply either, given that aid for large enterprises in excess of
the aid intensity thresholds indicated in the guidelines had not been ruled out.

III. COMMENTS FROM THE NETHERLANDS

(13) According to the Dutch authorities, the ‘steunverlening’ (grant) or the ‘beslissing omtrent toekenning
van een bijdrage’ (decision to grant a contribution) is the legally binding act whereby State aid is
granted. By this decision the government undertakes to pay aid to the applicant for the specified
maximum amount, on condition that the recipient complies with all the conditions of the scheme.
The decision had to be taken before 31 December 1994 and the recipients were informed of it by a
‘toekenningsbrief’ (grant letter).

(14) At a later stage in the proceedings the Dutch authorities argued that the State aid granted after the
BPM scheme had expired also formed part of the scheme in so far as the (‘bevestigingsbrief’ (i.e.
confirmation letter) to confirm the receipt of the application for a grant had been issued before the
scheme expired.

(15) Moreover, the Dutch Government held that only large-scale manure-processing projects required

individual notification and that it had not notified the projects in question for that reason.

(16)

Finally, regarding Ferm-o-Feed, the Dutch Government pointed out that the scheme did not prevent
the authorities from providing aid to two different projects proposed by the same company.

IV. ASSESSMENT OF THE AID

A. Applicability of the BPM scheme

(17)

(18)

In order to determine whether the aid for the six companies in question had to be classified as
existing aid, the Commission first examined to what extent the BPM scheme applied to the
aforementioned projects.

The main legal question in these six cases is the difference in interpretation as to what constitutes the
legally binding act granting the aid. Although the Dutch Government argues that the legally binding
act by which the competent authorities undertake to grant aid is the grant letter, it takes the view
that all the grants for which a grant letter was issued after 31 December 1994 are covered by the
scheme because the letter of confirmation was sent before that deadline.

(19) Having scrutinised the documentation on the administrative procedure in the relevant cases, the
Commission takes the view that the legally binding act is the grant letter. The letter of confirmation
was merely an acknow1edgement of receipt of the aid application without any prior examination of
whether the conditions of the aid scheme had been met. Furthermore, the granting of aid was
conditional on an evaluation by an advisory committee comprising representatives of various
ministries. Only after this committee had made an assessment at national level did the Ministry of
Agriculture, Nature Management and Fisheries, which is competent in this matter, issue a grant letter
indicating the amount of the eligible costs, the amount of the aid and the conditions under which it
was granted. The analysis of the procedural steps showed that the aid was not granted automatically
to all applicants, but on the basis of a discretionary decision by the competent authorities.

(4) OJ C 72, 10.3.1994, p. 3.
(5) OJ C 213, 23.7.1996.

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(20)

The Commission therefore considers that the date on which the aid was granted is the date on which
the grant letter was sent, as confirmed by the Dutch authorities in the first instance. Accordingly, the
aid granted to the six manure-processing companies was not covered by the scheme and should be
regarded as unlawful aid which was implemented in breach of Article 88(3).

B. Aid within the meaning of Article 87 of the EC Treaty

(21)

The investment aid granted by the Dutch Government was designed to allow and promote invest-
ment in manure facilities and hence favoured the companies in question. Processed animal manure is
sold primarily as dry organic fertiliser in the form of manure pellets. The manure-processing plants
are in competition with other manufacturers of organic and chemical
fertilisers. Because this
financial incentive strengthens those plants' financial position, it threatens to distort competition
within the European Union in that farmyard manure used as fertiliser competes with other organic
fertilisers.

(22) According to a study on the sales potential in other countries for Dutch processed animal manure (6)
carried out for the Dutch ministry in question in 1990, animal and vegetable fertilisers compete not
only on a local basis but also on the French, Spanish, Portuguese, Italian and Greek markets. From
1988 to 1990 the Dutch share of total intra-Community trade in those products amounted to
between 44 % and 60 %. Dutch exports of processed animal manure to other Member States can be
expected to increase, primarily as a result of the aforementioned projects.

(23)

In spite of the information injunction, the Dutch authorities failed to provide the requisite details on
the market situation of the individual companies. Such details would have made it possible to assess
each company's impact on the manure-processing and fertiliser markets. For that reason, the
Commission based its assessment on data for the market as a whole, as indicated above.

(24)

Consequently, the aid is likely to affect trade between Member States in the sector concerned and
thus constitutes State aid within the meaning of Article 87(1).

C. Compatibility of the aid with Article 87 of the EC Treaty

(25)

(26)

(27)

(28)

The aid has not been covered by an approved and currently applicable aid scheme since the BPM
scheme expired in 1994. Therefore,
in contrast to the arguments put forward by the Dutch
Government, the aid granted to the manure-processing companies in question required individual
notification, regardless of their size. The Dutch authorities failed to meet their obligations pursuant
to Article 88(3). The Commission considered the measure to be new aid pursuant to Article 88 (3)
and applied the principles set out in Article 87.

The proposed aid could be regarded as compatible with the common market only if either Article
87(2) or Article 87(3) applied.

For the following reasons, the derogations in Article 87(2) and (3) (a), (b), (c) (7) and (d) do not apply
in the present case:

The aid does not have a social character, was not granted to individual consumers, was not used to
make good the damage caused by natural disasters and was not granted to the economy of certain
areas of the Federal Republic of Germany affected by the division of Germany. The derogations in
Articles 87(3)(a) do not apply to the present case either, because the aid was not designed to
promote the economic development of areas where the standard of living is abnormally low or
where there is serious underemployment. As far as the derogation in Article 87(3)(b) is concerned,
the Commission takes the view that the aid was clearly not intended to promote an important
project of common European interest or to remedy serious disturbance in the economy of a Member
State. The regional aspect of the derogation in Article 87(3)(c) does not apply since the companies
are not located in assisted areas. Nor is the aid designed to promote cultural and heritage conserva-
tion within the meaning of Article 87(3)(d).

(6) Booz-Allen & Hamilton:
(7) Derogation for regional aid.

‘Afzetmogelijkheden voor verwerkte dierlijke mest’, The Hague, 1990.

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(29)

The Dutch authorities did not attempt to justify the aid on the grounds enumerated above.

D. Compatibility of the aid with Article 87(3)(c) of the EC Treaty

(30) As regards the first part of Article 87(3)(c), namely aid to facilitate the development of certain
economic activities, the Commission based its assessment on the fact that the 1989/90 BPM scheme
was designed primarily to help medium-sized companies set up pilot manure-processing facilities so
as to provide for the environmentally friendly disposal of manure surpluses in accordance with
Dutch legislation, which has restricted manure production since 1987, and with Council Directive
91/676/EEC of 12 December 1991 concerning the protection of waters against pollution caused by
nitrates from agricultural sources (8) (the ‘Nitrates Directive’).

(31)

The Commission approved the extension of the BPM scheme in 1990 on an exceptional basis to
allow the Dutch Government to provide incentives for the introduction of innovative technology.
The successful outcome of these projects depended on the willingness of farmers to pay for the
manure produced on their farms to be processed. When it gave its approval, the Commission
pointed out that, if these projects turned out not to be viable, it would a priori take a negative
attitude towards further aid for manure processing in the Netherlands (9). It was thus made clear to
the Dutch authorities that the Commission had fundamentally reviewed its approach to the BPM
scheme. The Dutch authorities could not,
therefore, expect new projects based on the same
conditions as the BPM scheme to be regarded as being compatible with Article 87.

(32)

The Commission first assessed the compatibility of the aid in the light of the SME guidelines.

(33)

Pursuant to point 4.2.1 of these guidelines, the Commission may approve aid for SMEs outside areas
qualifying for domestic regional aid on condition that the aid intensity does not exceed 15 % in the
case of small enterprises or 7,5 % in the case of medium-sized enterprises. This means that the SME
guidelines do not apply in five of these cases. Even if the companies meet the criteria set out in point
3.2 of the guidelines, the aid granted far exceeds the authorised ceilings.

(34) Only in the case of Fleuren Compost BV was the aid intensity below the ceiling laid down in the
SME guidelines. However, in spite of the doubts expressed by the Commission regarding the size of
the companies concerned in the information injunction which accompanied its decision to initiate
proceedings, the Dutch authorities failed to show that the company complied with the criteria set
out in point 3.2 of those guidelines.

(35)

The Dutch authorities did not therefore provide evidence that the six companies complied with the
SME criteria laid down in the guidelines or justify the aid on that basis. Nor did they provide
evidence that the general principles enshrined in point 4.1 of the guidelines had been respected. The
Commission therefore takes the view that the SME guidelines do not apply.

(36)

The Commission also assessed the projects in the light of the environmental guidelines.

(37)

Firstly, the Commission examined whether the measures in question complied with the conditions
governing the granting of investment aid set out in point 3.2 of the guidelines.

(38)

is not applicable because the environmental
The Commission takes the view that
obligations resulting from the Nitrates Directive apply to farmers with a view to limiting manure
production, whereas the aid recipients are not the parties concerned by these obligations.

this point

(8) OJ L 375, 31.12.1991.
(9) Aid C 17/90 (OJ C 82, 27.3.1991, p. 3).

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(39) However, even if the environmental guidelines were to apply, aid may, pursuant to point 3.2.3(B)
concerning aid to encourage firms to improve on mandatory environmental standards, be authorised
only for investment that allows significantly higher levels of environmental protection to be attained
than those required by mandatory standards. The Dutch authorities did not produce any evidence
that this was the case for the measures in question. The Commission doubts whether the manure-
processing plants can help to attain higher targets than those set out in Directive 91/676/EEC, given
that at least four of the pilot plants which received aid when the scheme was still operating have
since been closed. The Commission does not therefore believe that the aid paid out after the scheme
expired can be justified on the same grounds as those that led to its exceptional extension.

(40)

The Commission also scrutinised the measures as aid to help firms adapt to new mandatory
standards. On the basis of the information available, it takes the view that the requirements set out in
point 3.2.3(A) of the environmental guidelines have not been met. The guidelines indicate that aid
may be authorised up to a level of 15 % gross of the eligible costs, for a limited period and only in
respect of a plant which has been in operation for at least two years when the new standards enter
into force. In violation of these conditions, aid was granted to new manure-processing plants with an
aid intensity of up to 35 %.

(41) With regard to the two grants of aid to Ferm-o-Feed BV, the Commission considers that the granting
of aid the second time was at variance with the principle laid down in the BPM scheme that aid
should be granted only to pilot projects aimed at promoting environmentally friendly processing of
manure. It bases its assessment on the fact that, according to an article published in Agrarisch
Dagblad on 26 November 1997, Ferm-o-Feed BV's environmental permit was withdrawn by the
competent Dutch authorities on the ground that the company did not comply with Dutch environ-
mental legislation. Aid was nevertheless paid out without checking whether the conditions set out in
the grant letter were still met.

(42)

In addition, according to the relevant files, the second grant of aid was designed to enable the pilot
plants built with the aid granted in 1988 to renew and expand their production capacity. The Dutch
authorities were unable to produce any evidence that the second project represented an innovation
in comparison with the first one.

(43) Accordingly, the Commission takes the view that the second grant of aid to Ferm-o-Feed BV is not
compatible with the environmental guidelines for the same reasons as already elaborated with regard
to the other cases in which aid was paid out after the scheme had expired.

(44)

Secondly, the Commission examined whether point 3.4 of the environmental guidelines applied. One
of the conditions for approving operating aid for environmental protection is that it should
compensate for extra production costs by comparison with traditional costs. In addition, aid should
be temporary and in principle degressive. When the Commission decided in December 1990 not to
raise any objection to the Dutch authorities' plan to grant investment aid of 35 % for the construc-
tion of large-scale manure-processing plants up to the end of 1994, this decision was based on the
environmental objectives and the high commercial risks associated with the project.

(45) As regards the commercial risks, the Commission points out that the investments in large-scale
manure-processing plants were regarded as pilot projects designed to provide a special incentive for
those plants to be built within the time-frame laid down and to demonstrate their viability.

(46)

The Commission is aware of the fact that the Dutch authorities' most important objective in granting
aid to the manure-processing plants in question related to environmentally friendly processing of
manure with a view to avoiding external costs — mainly in the form of water pollution, gas
emissions and residual heavy metals. The mere fact that not enough projects could be approved
during the life of the BPM scheme highlights the difficulties associated with setting up viable
manure-processing plants. It should be noted here that manure processing is not in itself a profitable
activity and that the viability of such plants depends on the willingness of farmers to supply the
manure and to pay for it to be processed. These uncertainties in connection with the economic
viability of large-scale manure-processing plants have been confirmed by a complaint (10) and written
questions by a member of the European Parliament (11). The suggestion is that manure processing is
too costly and is permanently dependent on subsidies.

(10) ‘Stichting Natuur en Milieu’ (Foundation for Nature and the Environment) lodged a complaint in a letter dated 30

November 1994.

(11) Written questions E-2746/94 and E-2782/94 by Nel van Dijk (OJ C 103, 24.3.1994).

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(47) A number of plants met with financial difficulties which could be overcome only with the help of
In line with its well-established negative view on operating aid, the

additional operating aid.
Commission in 1992 took a final decision prohibiting such aid for manure processing (12).

(48)

Four manure-processing plants subsidised under the BPM scheme had to be closed because they were
not viable. The Commission therefore considers that projects to which aid was granted after the
scheme expired for the purpose of introducing the same technology as under the scheme are
dependent on ongoing aid in order to sustain production, which means that the aid cannot be
temporary and degressive. Accordingly, neither of the conditions laid down in point 3.4 of the
environmental guidelines is met.

(49) Given that the measures in question did not comply with the SME guidelines or with the environ-
mental guidelines, they cannot be regarded as contributing to the development of economic activities
without affecting trade between Member States to an extent contrary to the common interest. In so
far as the derogation in Article 87(3)(c) is not relevant, the principle of prohibition of Article 87(1) is
fully applicable. The Dutch authorities have not provided any evidence that the aid is compatible
with the EC Treaty.

(50)

(51)

If aid is deemed incompatible with the common market, the Commission is obliged, under the
judgments handed down by the Court of Justice in Case 70/72 (13), upheld in Cases 310/85 (14) and
C-5/89 (15), to require the Member State to recover from the recipient all aid granted unlawfully.
Repayment is necessary in order to revert to the previous situation by withdrawing all the financial
benefits which the firm receiving the unlawful aid has improperly enjoyed since the date on which
the aid was paid. Recovery of the incompatible and unlawful aid is an obligation imposed on the
Commission by Regulation (EC) No 659/1999.

The aid must be repaid without delay and in accordance with the procedures laid down by Dutch
law,
in so far as they allow the immediate and effective implementation of the Commission's
decision. The amount repayable includes interest calculated from the date on which the aid was
granted until the date on which it is actually recovered. Interest is calculated on the basis of the
reference rate used to calculate the grant equivalent of regional aid.

E. Conclusions

(52)

The aid paid out to the six manure-processing companies in question constitutes aid which distorted
competition and affected trade within the meaning of Article 87(1). The derogation in Article
87(3)(c) is not applicable because the conditions laid down in the Community guidelines on State aid
for environmental protection or in the Community guidelines on State aid for small and medium-
sized enterprises are not met.

(53)

The aid is therefore incompatible with the common market. The Commission finds that the
Kingdom of the Netherlands has unlawfully implemented the aid in breach of Article 88(3). The aid
must be recovered,

HAS ADOPTED THIS DECISION:

Article 1

The State aid which the Kingdom of the Netherlands has implemented in favour of the manure-processing
companies Ferm-o-Feed BV, Fleuren Compost BV, Vloet Oploo BV, Smith Markelo, Arev Venhorst and
Memon KPI, amounting to EUR 2 501 089,

is incompatible with the common market.

(12) Decision 92/316/EEC (OJ L 170, 25.6.1992, p. 34).
(13) Case 70/72 Commission v Germany [1973] ECR 813.
(14) Case 310/85 Deufil v Commission [1987] ECR 901.
(15) Case C-5/89 Commission v Germany [1990] ECR I-3437.

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Article 2

The Kingdom of the Netherlands shall take all necessary measures to recover from the recipients the

1.
aid referred to in Article 1 and unlawfully made available to them.

2.
Recovery shall be effected without delay and in accordance with the procedures of national law
provided that they allow the immediate and effective execution of the decision. The aid to be recovered
shall include interest from the date on which it was at the disposal of the recipients 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.

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

Article 3

This Decision is addressed to the Kingdom of the Netherlands.

Article 4

Done at Brussels, 13 December 2000.

For the Commission

Mario MONTI

Member of the Commission