2001/522/EC: Commission Decision of 7 February 2001 on the State aid which the Netherlands intends to grant to China in the form of development assistance for the construction of a high-technology dredger (Text with EEA relevance) (notified under document number C(2001) 333)
Date: 2001-02-07
Institutions: European Commission
Subjects: China, Netherlands, State aid, control of State aid, development aid, shipbuilding

11.7.2001

EN

Official Journal of the European Communities

L 189/21

COMMISSION DECISION

of 7 February 2001

on the State aid which the Netherlands intends to grant to China in the form of development
assistance for the construction of a high-technology dredger

(notified under document number C(2001) 333)

(Only the Dutch text is authentic)

(Text with EEA relevance)

(2001/522/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

(4)

The Commission did not receive any comments from
interested parties.

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 1540/98 of 29
June 1998 establishing new rules on aid to shipbuilding (1),

Having regard to Council Regulation (EC) No 659/1999 of 22
March 1999 laying down detailed rules for the application of
Article 93 of the EC Treaty (2), and in particular Article 7
thereof,

Having called on interested parties to submit their comments
pursuant to the provision(s) cited above and having regard to
their comments (3),

Whereas:

I. PROCEDURE

(1)

(2)

(3)

By letter dated 17 August 1999 the Netherlands authori-
ties notified the Commission of a development assis-
tance they were planning to grant to China for the
purchase of a 12 000 m3 dredger. Further information
was provided on 6 October and 16 December 1999.

By letter dated 20 March 2000 the Commission notified
the Netherlands authorities of its decision to initiate the
procedure laid down in Article 88(2) of the EC Treaty in
respect of the aid. The Netherlands authorities submitted
their comments to the Commission by letters from their
Permanent Representative dated 26 May and 23 October
2000.

The Commission's decision to initiate the procedure was
published in the Official Journal of the European Communi-
ties. The Commission invited interested parties to submit
their comments on the aid in question.

(1) OJ L 202, 18.7.1998, p. 1.
(2) OJ L 83, 27.3.1999, p. 1.
(3) OJ C 148, 27.5.2000, p. 14.

(5)

(6)

(7)

(8)

(9)

II. DETAILED DESCRIPTION OF THE AID

The project, which provides for development assistance
under a general scheme for aid to developing countries,
concerns the sale of a 12 000 m3 dredger costing
NLG 160 million (EUR 72,6 million) to China Harbour
Engineering Company (CHEC). The aid takes the form of
a 14-year subsidised loan of 100 % with a three-year
grace period at the rate of 4,17 %, i.e. a grant-equivalent
of 31,25 %. The vessel is to be built at the IHC Holland
shipyard at Kinderdijk. According to the Netherlands
authorities, CHEC would be unable to purchase the
dredger without the aid.

The Commission decided to initiate the Article 88(2)
procedure because it doubted that the project complied
fully with the conditions laid down in Article 3(5) of
Regulation (EC) No 1540/98 concerning the compati-
bility of aid related to shipbuilding granted as develop-
ment assistance.

New provisions concerning aid for shipbuilding have
been incorporated into Article 3(5) of Regulation (EC)
No 1540/98 in cases where the aid is granted in the
form of development assistance to a developing country.
The Article states that such aid may be deemed compat-
ible with the common market if it complies with the
terms laid down for that purpose by OECD Working
Party 6 in its Agreement concerning the interpretation
of Articles 6 to 8 of the OECD Understanding on Export
Credits for Ships. The Commission must verify the
particular development content of the proposed aid and
satisfy itself that it falls within the scope of the OECD
Understanding on Export Credits and that the offer of
development assistance is open to bids from different
yards.

On the basis of
Commission,
with the OECD criteria.

the information available to the
the project complied

it concluded that

However, the Commission doubted whether the devel-
opment assistance was open to bids from different yards.

L 189/22

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Official Journal of the European Communities

11.7.2001

(10)

It also had doubts about the development assistance
aspect of the project given that Chinese companies also
carry out dredger activities outside China. Although
there was sufficient evidence that the dredger in question
would initially be used in a major Shanghai project, it
was not clear at that stage that it would not be used
outside China once the work in the Shanghai area had
been completed. In view of the size of the new ship, it
was also possible that CHEC might be able to release
smaller vessels from its fleet for use on foreign projects.

III. COMMENTS FROM THE NETHERLANDS

(11)

(12)

The Netherlands authorities provided further informa-
tion by letters dated 30 May, 3 July and 3 October
2000. The
information
provided in the course of bilateral meetings held with
the Commission on 25 July and on 4 and 15 September
2000.

confirmed the

letter

final

The Netherlands authorities point out that notification
was given of the Netherlands provisions on development
assistance and that the information provided on the
various instruments was extremely comprehensive. The
information had been published in the Netherlands Offi-
cial Gazette (‘Staatscourant’) and in brochures drawn up
in English and Dutch which had been disseminated in
the Netherlands and abroad. It had also been posted on
the website of the Ministry of Economic Affairs. Regular
briefings on developing countries had also been held.

(13) As the Netherlands authorities have made clear,

the
development assistance system is available to all Nether-
lands companies, but responsibility for processing bids
and awarding contracts lies with the developing country.
They stress that, in general, contacts between the Neth-
erlands shipyards and their foreign customers take place
without government
involvement. When negotiations
are started with a customer from a developing country,
an application is lodged for development assistance. In
general, the authorities take the view that the Nether-
lands Government should not
intervene in business
negotiations.

their

(14) However, with a view to accommodating the Commis-
sion's position that a guarantee should be given that aid
the
is not used for other than its original purpose,
Netherlands authorities have since amended certain
aspects of
to ensure the
internal procedures
greatest possible transparency for shipbuilding projects
while also maintaining their policy of non-intervention
regarding project selection and the decision-making
process. In future they will take steps to bring the poss-
ibility of development assistance for specific projects to
the attention of various shipyards. Under this new
procedure (which cannot be applied retroactively in this
case) a shipyard inquiring about the possibility of devel-

opment assistance for a given contract will have to
notify the authorities of its intentions at least one month
before a formal application is made. Within 48 hours of
receiving this ‘prior notification’, the Netherlands author-
ities must provide all shipyards with the capacity to
build the type of vessel in question with a fax detailing
the vessel's main characteristics,
the price and the
address of the prospective purchaser in the developing
country. After receiving the formal aid application, the
Ministry of Foreign Affairs must send confirmation of
the application to the relevant country. The letter should
clearly state that the aid is available to all Netherlands
shipyards. An explanatory brochure in English should be
attached setting out the development assistance proce-
dure in force in the Netherlands. Lastly, the Netherlands
authorities have undertaken not to take an aid award
decision less than two months after the formal applica-
tion has been lodged.

(15)

The Netherlands authorities take the view that, in view
of
the time that has elapsed since IHC lodged the
application, it is not possible to apply the new proce-
dure in this instance. They have put forward a number
of elements in support of their case. The shipyard's
results have been positive for a number of years and
profits are steady or increasing. The transaction with
CHEC came about following a restricted international
call for tender in which German and Japanese shipyards
had taken part, but the contract was awarded to IHC
because of its record of cooperation over several years.
In addition, the Chinese authorities were well aware that
they could work with other Netherlands yards and still
qualify for development assistance. However, VNSI, the
Netherlands
confirmed in
writing that, at that time, IHC was the only shipyard in
the Netherlands capable of building a dredger of that
type.

shipbuilding association,

(16) With regard to development content, the Netherlands
authorities have indicated that
they contacted the
Chinese authorities in connection with the use to be
made of
the dredger. The Chinese authorities have
undertaken in writing that the vessel will be used exclu-
sively in Chinese waters for at least five years, and have
confirmed that
the existing vessels which may be
replaced by the new vessel will also be deployed exclu-
sively in the same waters.

IV. ASSESSMENT OF THE AID

(17) As explained in the decision to initiate the procedure,
the aid for the contract must be tested against the provi-
sions of Article 3(5) of Regulation (EC) No 1540/98,
which lays down new rules on development assistance
for shipbuilding.

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Official Journal of the European Communities

L 189/23

(18)

That Article states that such aid may be deemed compat-
ible with the common market if it complies with the
terms laid down for that purpose by OECD Working
Party 6 in its Agreement concerning the interpretation
of Articles 6 to 8 of the OECD Understanding on Export
Credits for Ships. The Commission must verify the
particular development content of the proposed aid and
satisfy itself that it falls within the scope of the OECD
Understanding and that the offer of development assis-
tance is open to bids from different yards.

(19)

The OECD criteria with which the Member States must
comply were laid down by the Commission in its letter
SG(89) D/311 dated 3 January 1989, amended by letter
SG(97) D 4345 dated 10 June 1997. These criteria are
as follows:

(i) aid must not be granted for the building of vessels
intended to operate under flags of convenience;

(ii) if

the aid cannot be classified as OECD official
development assistance, the aid donor must confirm
that it is granted under an intergovernmental agree-
ment;

(iii) the aid donor must give appropriate assurances that
the real owner is resident in the beneficiary country
and that the beneficiary company is not a non-
operational subsidiary of a foreign company;

(21)

In view of the above, and the commitments entered into
in writing by the Chinese authorities, the project must
be regarded as having real development content.

(22) As regards whether the offer of development assistance
was open to bids from different yards, the Commission
would point out that these are new provisions which
have been incorporated into Regulation (EC) No 1540/
98. In addition, they do not clarify how the Commission
should check whether the criterion is met, and therefore
it can therefore be interpreted in a number of ways. The
Commission takes the view that the criterion should be
strictly applied and that the offer of assistance should
have been open to bids from other shipyards. In the case
in point, which is one of the first to be notified since
Regulation (EC) No 1540/98 entered into force,
although the general instrument governing development
assistance to China in the Netherlands is well known, it
would seem that no specific publicity measure was
undertaken. Clearly, the procedure applied was the one
followed for many years, and the Netherlands authorities
failed to apply Article 3(5) in full. This is confirmed by
the Netherlands authorities' willingness to review their
procedure in future cases.

(23)

It should also be borne in mind that IHC is the only
Netherlands shipyard capable of building a vessel of this
type, that it obtained the contract in spite of bids from
other well-known yards outside the Netherlands and that
it does not have any financial difficulties.

(iv) the beneficiary must undertake not to sell the ship

without prior government approval;

V. CONCLUSION

(v) the aid granted must also include a grant element of
at least 25 %, calculated in accordance with the
OECD method.

(20)

The Commission takes the view that the development
project meets the OECD criteria in so far as:

(i) the ship will operate under the Chinese flag, which

is not a flag of convenience;

(24)

In the light of the above, and in view of the measures
taken by the Netherlands authorities regarding similar
cases in future, the doubts underlying the Commission's
decision to initiate the Article 88(2) procedure have
been resolved. It can therefore be concluded that the
project complies with the conditions laid down in
Article 3(5) of Regulation (EC) No 1540/98 and that it is
compatible with the common market,

(ii) China is featured on the list of countries eligible for
development assistance annexed to the aforemen-
tioned letter from the Commission;

HAS ADOPTED THIS DECISION:

(iii) the owner of the vessel in question is a public body
which comes under the Chinese Ministry of Finance;

Article 1

(iv) the Chinese authorities have undertaken not to sell

the vessel for at least five years;

The development assistance with an intensity of 31,25 % which
the Netherlands intends to grant to China for the purchase of a
dredger from IHC is compatible with the common market.

(v) the aid intensity is 25 %.

Implementation of this aid is accordingly authorised.

L 189/24

EN

Official Journal of the European Communities

11.7.2001

This Decision is addressed to the Kingdom of the Netherlands.

Article 2

Done at Brussels, 7 February 2001.

For the Commission

Mario MONTI

Member of the Commission