State aid (00-002 Iceland) - EFTA Surveillance Authority notice pursuant to Article 1(2) of Protocol 3 of the Surveillance and Court Agreement, to other EFTA States, EU Member States and interested parties concerning State aid in the form of regional aid in Iceland (map of assisted areas) (Aid No 00-002)
Date: 2000-12-21
Institutions: EFTA Surveillance Authority
Subjects: Iceland, State aid, aid to undertakings, control of State aid, regional aid, restriction on competition

C 368/12

EN

Official Journal of the European Communities

21.12.2000

EFTA SURVEILLANCE AUTHORITY

STATE AID

(00-002 Iceland)

EFTA Surveillance Authority notice pursuant to Article 1(2) of Protocol 3 of the Surveillance and
Court Agreement, to other EFTA States, EU Member States and interested parties concerning State
aid in the form of regional aid in Iceland (map of assisted areas) (Aid No 00-002)

(2000/C 368/19)

By means of Decision 135/00/COL of 12 July 2000, the gist of which is reproduced below, the EFTA
Surveillance Authority initiated proceedings pursuant to Article 1(2) of Protocol 3 of the Surveillance and
Court Agreement. The Icelandic Government has been informed by means of a copy of the decision.

I. FACTS

The EFTA Surveillance Authority (hereinafter (cid:145)the Authority(cid:146))
adopted by way of a decision new guidelines on national
aid on 4 November 1998 (1). The Authority
regional
proposed in that decision, as an appropriate measure under
Article 1(1) of Protocol 3 to the Surveillance and Court
Agreement, that the EFTA States limit the validity of all lists
of assisted regions, which have been approved by the Authority
without an expiry date, or with an expiry date after 31
December 1999, to 31 December 1999. The Authority also
proposed, as an appropriate measure under Article 1(1) of
Protocol 3 to the Surveillance and Court Agreement, that the
EFTA Member States amend all existing regional aid schemes,
which would be in force after 31 December 1999, so as to
make them compatible with the guidelines applicable from 1
January 2000.

By letter of 4 November 19981999 (2) the Icelandic authorities
the Authority had adopted these new
were informed that
guidelines on national regional aid. A copy of the Authority’s
decision, including the new chapters and annexes of the State
aid guidelines, was enclosed. The Icelandic authorities were
requested to submit
relevant
proposed measures within two months, i.e. before 4 January
1999.
the Icelandic authorities were asked to
communicate to the Authority within six months of the date
of the letter, i.e. before 4 May 1999, the changes envisaged, in
order to make the existing regional aid schemes compatible
with the guidelines as from 1 January 2000.

their observations on the

In addition,

In the letter of 4 November 1998, the Authority made it clear
that should the Icelandic authorities not submit their obser-
vations within two months, and communicate the said
changes within six months, or should they not be able to
agree to the relevant measures (or certain features thereof),
the Authority would be obliged to initiate the procedure
provided for in Article 1(2) of Protocol 3 to the Surveillance
and Court Agreement with regard to the said aid schemes.

(1) Decision No 316/98/COL.
(2) Ref.: Doc. No 98-7502 D.

In a letter of 26 January 1999 (3), the Authority reminded the
the letter of 4 November 1998 and
Iceland authorities of
requested the Icelandic authorities to submit their observations
on the relevant proposed measures as soon as possible and at
the latest by 12 February 1999.

In a letter of 11 May 1999 (4), the Icelandic authorities were
again reminded that the Authority had received no answer. The
Icelandic authorities were requested to respond as soon as
possible and at the latest by 28 May 1999.

In a letter of 23 June 1999 (5), the Authority informed the
Icelandic authorities that no reply had been received. The
Authority requested the Icelandic authorities to signal
its
agreement to the Authority’s decision of 4 November 1998,
or otherwise submit its observations, within 15 working days.
Furthermore, the Icelandic authorities were requested to notify
by 1 September 1999 the amendments of all existing regional
aid schemes that would be in force after 31 December 1999.
The Authority made it clear that if no response was received
within the abovementioned deadlines, the Authority would be
obliged to initiate the procedure provided for in Article 1(2) of
Protocol 3 to the Surveillance and Court Agreement with
regard to the said aid schemes.

In a letter of 7 July 1999 from the Icelandic Mission to the
European Union, received and registered on 7 July 1999 (6), the
Icelandic authorities accepted the new guidelines on regional
aid and the appropriate measures.

In a letter dated 4 October 1999 from the Icelandic Mission to
the European Union, received and registered on 4 October
1999 (7), the Icelandic authorities informed the Authority that
it was not possible to introduce (cid:145)new legal aid measures at this
point in time(cid:146), because of reorganisation.

(3) Ref.: Doc. No 99-688 D.
(4) Ref.: Doc. No 99-3472 D.
(5) Ref.: Doc. No 99-4657 D.
(6) Ref.: Doc. No 99-5111 A.
(7) Ref.: Doc. No 99-7324 A.

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Official Journal of the European Communities

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if

the

above,

specified

deadlines mentioned

In a letter dated 6 October 1999 (8), the Authority reminded
the Icelandic authorities of the letters of 4 November 1998 and
23 June 1999, where it had been made clear that
the
Icelandic authorities did not communicate the said changes
the
within
Authority would be obliged to initiate
the procedure
provided for in Article 1(2) of Protocol 3 to the Surveillance
and Court Agreement. The Authority made it clear that the
validity of all
lists of assisted regions in Iceland, and the
existing aid scheme, were limited to 31 December 1999.
Furthermore, the Authority reminded the Icelandic authorities
that the new guidelines and the appropriate measures had been
accepted by the Icelandic authorities in the letter of 7 July
1999 and that
this was applicable regardless of whether
Icelandic institutions were being reorganised or not. Finally,
the Authority once again requested the Icelandic authorities
to notify as soon as possible the amendments of all existing
regional aid schemes that would be in force after 31 December
1999.

At a meeting in Reykjavik on 26 November 1999, between
representatives of the Icelandic authorities and the Authority,
the Icelandic authorities were again reminded of their obli-
gation to notify a map of assisted regions.

In a letter dated 6 January 2000 (9) from the Icelandic Mission
to the European Union, received and registered on 6 January
2000, the Icelandic authorities informed the Authority that a
new bill on the Regional Institute would come into force on 1
January 2000. The Icelandic authorities informed the Authority
that it was the intention of the Icelandic Government to assist
the same areas as before, and that population density would be
used as an indicator to justify the aid. The population coverage
was 38,5 %, according to the Icelandic authorities. The letter
furthermore stated that the Icelandic authorities intended to
use 20 % net grant equivalent (nge) as a ceiling for regional
aid with the possibility of adding a further 10 % for SMEs.

In a letter dated 12 January 2000 (10)
from the Icelandic
Mission to the European Union, received and registered on
12 January 2000, the Icelandic authorities informed that (cid:145)a
new legislation came into force on the Regional Institute in
Iceland on 1 January 2000. According to the new legislation
it will be the task of the Board of the Regional Institute to take
decisions on new regional aid programmes and to grant aid to
individual projects. No new decisions on regional aid will be
taken until the new Board has been elected. As soon as the
new Board has been elected the Ministry will inform the Board
about the current situation concerning notification on regional
aid to the EFTA Surveillance Authority. The Ministry will also
ask the Board not to take any decisions on new regional aid
programmes before the EFTA Surveillance Authority has
approved a proposal on regional aid from the Icelandic auth-
orities(cid:146).

In a letter dated 21 March 2000 (11) from the Icelandic Mission
to the European Union, received and registered on 21 March

(8) Ref.: Doc. No 99-7348 D.
(9) Ref.: Doc. No 00-108 A.
(10) Ref.: Doc. No 00-236 A.
(11) Ref.: Doc. No 99-2410 A.

2000, the Mission forwarded a letter from the Ministries of
Industry and Commerce stating that
(cid:145)The Ministry hereby
notifies a proposal that all areas except the area here referred
to as the Capital region will be eligible for regional aid(cid:146).
According to the Icelandic authorities, the proportion of the
total population living in the proposed assisted areas was
38,5 % on 1 December 1999.

In a letter dated 4 April 2000 (12), the Authority informed the
Icelandic authorities that the Authority did not consider the
letter of 21 March 2000 to constitute a notification, as it did
not refer to Article 1(3) of Protocol 3 to the Surveillance and
Court Agreement (13). Moreover, the Authority considered the
information submitted to be incomplete. The proposal did not
contain any information about aid intensities. Furthermore, the
proposal was lacking information about the methodology and
the quantitative indicators that the Icelandic authorities had
used to determine the eligible regions (14). The Icelandic auth-
orities were reminded that Iceland as from 1 January 2000,
and until the Authority had approved a new map, did not have
a valid map of assisted areas. Finally, the Authority made it
clear that granting of any regional aid without the approval of
the Authority would be unlawfull.

The Icelandic authorities adopted Regulation No 347/2000 of
16 May 2000 for
the Institute of Regional Development
(IRD) (15). The Regulation contains provisions, which, interalia,
allow IRD to grant loans and issue guarantees (Article 14), and
which restrict the municipalities where regional aid can be
granted (Article 17). The Regulation was adopted on the
basis of Article 19 of Parliamentary Act No 106/1999 of 27
December 1999.

II. APPRECIATION

Any regional aid in Iceland funded by State resources will
favour certain undertakings in the meaning of Article 61(1)
of the EEA Agreement. Benefiting enterprises will actually or
potentially be in competition with similar undertakings in
Iceland and other EEA States. Such aid will distort or
trade within the
threaten to distort competition and affect
EEA. Regional aid will therefore constitute State aid in the
meaning of Article 61(1) of the EEA Agreement.

The Authority is obliged to open the procedure provided for in
Article 1(2) of Protocol 3 to the Surveillance and Court
Agreement, whenever it is in any doubt about the compati-
bility of aid with the functioning of the EEA Agreement. The
types of cases, whether of
procedure is applicable in all
notified, unnotified or existing aid. The decision to open
proceedings is without prejudice to the final decision. The
purpose of proceedings under Article 1(2) of Protocol 3 to
the Surveillance and Court Agreement is to ensure a compre-
hensive examination of the case by giving all parties concerned
the right to be heard (16).

(12) Ref.: Doc. No 00-2697 D.
(13) See point 3.2.3 of the guidelines.
(14) See Chapter 25, Regional aid, of the guidelines.
(15) In Icelandic: Regluger(cid:240) frÆ 16. mai 2000 n.r. 347/2000 fyrir
Bygg(cid:240)astofnun. Heimildarl(cid:246)g: L(cid:246)g nr. 106/1999 frÆ 27. desember
1999.

(16) See State aid guidelines, chapter 5.2.

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Official Journal of the European Communities

21.12.2000

that

The Authority proposed two appropriate measures, under
Article 1(1) of Protocol 3 to the Surveillance and Court
Agreement, when the new regional aid guidelines were
adopted on 4 November 1998. First,
the EFTA States
limited the validity of all lists of assisted regions approved by
the Authority without an expiry date, or with an expiry date
after 31 December 1999, to 31 December 1999. Secondly, that
the EFTA States amend all existing regional aid schemes, which
would be in force after 31 December 1999, so as to make them
compatible with the guidelines applicable from 1 January
2000. The Icelandic authorities accepted these appropriate
measures in their letter of 7 July 1999.

The Authority has on several occasions (see point I above)
reminded the Icelandic authorities that the Authority would
be obliged to initiate the procedure provided for in Article
1(2) of Protocol 3 to the Surveillance and Court Agreement
if the Authority did not receive a notification. The Authority
has also made it clear to the Icelandic authorities that Iceland
did not have a valid map of assisted areas after 1 January 2000
and that any regional aid granted after this date without the
approval of the Authority would be unlawful aid (17).

Regulation for IRD is thus in violation of Article 1(3) of
Protocol 3 to the Surveillance and Court Agreement.

Against this background the Authority is obliged to open the
proceedings provided for in Article 1(2) of Protocol 3 to the
Surveillance and Court Agreement.

that

the Icelandic authorities

The Authority reminds
the
Authority may request Iceland to suspend payment of the aid
pending the outcome of the investigation (19). In cases where a
suspension order does not go far enough, the Authority can
also order Iceland to recover any aid which has been disbursed
in infringement of the procedural requirements. If Iceland fails
to suspend payment of the aid or to recover the aid after a
suspension order has been adopted, the Authority is entitled,
while carrying out the examination on the substance of the
matter, to bring the matter directly before the EFTA Court and
apply for a declaration that such payments constitute an
infringement of the EEA Agreement.

Icelandic

authorities

The
the
are
Authority is empowered to proceed and to take a decision
on the basis of
the information available, even in the
absence of any submission to it from Iceland.

finally reminded that

The Icelandic authorities have put forward legislation on IRD
(see last paragraph of point I above) without any notification
being submitted to the Authority. The last sentence of Article
1(3) of Protocol 3 to the Surveillance and Court Agreement
provides that the EFTA State shall not put a proposed aid
the Article 1(2) procedure has
measure into effect until
resulted in a final decision. This provision implies a general
prohibition to implement
the aid before the Authority has
taken a decision (also in cases where formal proceedings are
not opened). Not only does (cid:145)putting into effect(cid:146) mean the action
of granting aid to the recipient, but it is sufficient that the
conferment of powers enabling the aid to be granted without
further formality having taken place (18). The adoption of the

The EFTA Surveillance Authority hereby gives the EFTA States,
EU Member States and interested parties notice to submit their
comments on the measures in question within one month from
the date of publication of this notice to:

EFTA Surveillance Authority,
Rue de TrŁves/Trierstraat 74,
B-1040 Brussels.

The Comments will be
Government.

communicated to the

Icelandic

(17) (cid:145)Aid unlawful on procedural grounds(cid:146), see State aid guidelines,

chapter 6.

(19) The procedure is described in chapter 6.2.1 of

the State aid

(18) See State aid guidelines, chapter 3.3.

guidelines.