2001/829/EC,ECSC: Commission Decision of 28 March 2001 on the State aid which Italy is planning to grant to Ferriere Nord SpA (Text with EEA relevance) (notified under document number C(2001) 1010)
Date: 2001-03-28
Institutions: European Commission
Subjects: Italy, State aid, control of State aid, environmental protection, infringement of EU law, iron and steel industry

L 310/22

EN

Official Journal of the European Communities

28.11.2001

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 28 March 2001

on the State aid which Italy is planning to grant to Ferriere Nord SpA

(notified under document number C(2001) 1010)

(Only the Italian text is authentic)

(Text with EEA relevance)

(2001/829/EC, ECSC)

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 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), and in particular Article 6(5) thereof,

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

Having called on interested parties to submit their comments
pursuant to the provisions cited above (2) and having regard to
their comments,

Whereas:

Regional Law No 2 of 2 January 1992 (3), which had
been approved by the Commission (letter SG(92)D
18803 of 22 December 1992). The notification
concerned aid to investments in a continuous casting
plant and a new rolling line for the production of elec-
trowelded wire mesh.

(2)

By letter dated 3 June 1999, the Commission informed
the Italian Government of
its decision to initiate
proceedings under Article 6(5) of Decision No 2496/96/
ECSC in respect of the abovementioned aid and invited
it to submit its comments. The decision was published
in the Official Journal of the European Communities (4). The
Commission invited interested parties to submit their
comments on the aid.

I. PROCEDURE

(1)

By letter dated 19 February 1999, the Italian authorities
notified the Commission in accordance with Article 6(1)
of Commission Decision No 2496/96/ECSC that they
intended to grant environmental aid to the ECSC steel
company Ferriere Nord SpA under Section VI of
Regional Law No 47 of 3 June 1978, as amended by

(1) OJ L 338, 28.12.1996, p. 42.
(2) OJ C 288, 9.10.1999, p. 39, and OJ C 315, 4.11.2000, p. 4.

(3)

The Commission received comments from Ferriere Nord
and from the European Independent Steelworks Associa-
tion (EISA). It forwarded them to the Italian Govern-

(3) Article 15(1) of the Law provides that the regional authorities may
grant aid of up to 20 % gross grant equivalent of eligible costs to
firms in operation for at least two years, that intend to introduce or
modify production installations and processes aimed at reducing not
only the quantity and danger of residuals, waste and emissions
produced but also noise levels or securing a qualitative improve-
ment of the working environment in line with new standards esta-
blished by sectoral

laws.

(4) OJ C 288, 9.10.1999, p. 39.

28.11.2001

EN

Official Journal of the European Communities

L 310/23

ment, which was given the opportunity to react;
comments were
December 1999.

received

dated

letter

by

its
24

one of the main European producers of electrowelded
wire mesh.

(4)

(5)

By letter dated 21 July 2000, Ferriere Nord informed the
Commission that it had decided to forgo the State aid
for the part relating to ECSC investments. By letter dated
25 July 2000, the Italian authorities withdrew the part
of the notification regarding aid for investments in the
plant manufacturing ECSC products but maintained the
part of the notification regarding aid for investments in
the plant for producing electrowelded wire mesh.

the Commission
By letter dated 14 August 2000,
its decision to
informed the Italian Government of
initiate the procedure in Article 88(2) of the EC Treaty in
respect of the aid to the plant for producing electro-
welded mesh. The decision was published in the Official
Journal of the European Communities (1). The Commission
invited interested parties to submit their comments on
the aid.

(6)

The Commission received comments from Ferrière Nord
and the United Kingdom Steel Association. The
comments were forwarded to Italy, which responded by
letter dated 15 January 2001.

II. DETAILED DESCRIPTION OF THE AID

(7)

(8)

Following the partial withdrawal of
the notification
referred to in point 4, the aid concerned by this decision
consists of a grant of 15 % towards some of the costs of
investment in new plant for the production of electro-
welded wire mesh, which, unlike the traditional plant,
eliminates the cold-drawing phase. According to the
application made by Ferriere Nord to the Italian authori-
ties on 27 March 1996, the construction of the plant
should be finished in March 1998. The eligible costs
amount to ITL 11 billion (EUR 5,68 million) and the
aid to ITL 1 650 million (EUR 852 154).

Ferriere Nord is owned by the Pittini Group and
produces both ECSC products (wire rods and bars) and
products covered by the EC Treaty (electrowelded wire
mesh for walls and floors, lattice girders, etc.). Its turn-
over in 1999 was ITL 408,1 billion (210,8 million), of
which 84 % was achieved in Italy, 11 % in the European
Union and 5 % in the rest of the world. Ferriere Nord is

(1) OJ C 315, 4.11.2000, p. 4.

(9)

(10)

(11)

(12)

Electrowelded wire mesh is a prefabricated reinforce-
ment product made from smooth or ribbed cold-drawn
reinforcing steel wires joined together by right-angle
spot welding to form a network. There is substantial
trade in welded mesh between Member States (2).

In its abovementioned decisions to initiate proceedings,
the Commission took the view that the new rolling line
was aimed chiefly at replacing or increasing Ferriere
Nord's production capacity for electrowelded wire mesh
in relation to the existing plant, the
and at reducing,
number of operations
required to obtain the end
product. It is a brand new line whose main objective is
to produce welded steel mesh more competitively. The
Commission accordingly concluded that the effects on
working conditions or the environment were simply side
effects of the investment. The Commission noted that
the Italian authorities had not provided any evidence
that the main objective of the new plant was environ-
mental protection or an improvement in working condi-
tions.

III. COMMENTS FROM INTERESTED PARTIES

By letter dated 5 November 1999, Ferriere Nord
submitted that the investment in the new rolling line
should not be assessed under the ECSC rules since elec-
trowelded mesh was covered by the EC Treaty rather
than the ECSC Treaty. The rest of Ferriere Nord's argu-
ments were basically the same as those advanced by the
Italian authorities in their letter of 13 August 1999 (see
recitals 18 to 20).

By letter dated 4 November 1999, the European Inde-
pendent Steelworks Association (EISA) stated that the
firm had already made huge investments in the produc-
tion of high-ductility electrowelded wire mesh (a non-
ECSC product),
this product was
increasing, that there was no overcapacity in the sector
and that it was essential to the construction industry,
particularly in high-risk seismic territory. EISA also
considered that the investments would make a signifi-
cant contribution to the protection of the environment.

that demand for

(2) See Commission Decision 89/515/EEC of 2 August 1989 relating to
the EEC Treaty (IV/31.533 —

a proceeding under Article 85 of
Welded steel mesh) (OJ L 260, 6.9.1989, p. 1).

L 310/24

EN

Official Journal of the European Communities

28.11.2001

(13)

In its letter dated 10 November 2000, Ferriere Nord submitted that, from a physical (1), industrial,
manufacturing, technological and commercial viewpoint, there was a clear dividing line between the
ECSC plant and the new plant for the manufacture of electrowelded wire mesh. It also pointed out
that there was a clear financial and accounting separation between the ECSC and the EC investments.
As to the compatibility of the aid with the Community guidelines, Ferriere Nord stated that the
previous production plant for electrowelded mesh had been built in the 1970s and that, being based
on the conventional stages of cold-wire drawing, straightening, cutting and electric welding, it had
given rise to serious environmental pollution problems. The firm claimed that, as a radical solution
to these environmental problems,
it had designed and built an innovative pilot plant using an
original production process, the only one of its kind in Europe.

(14)

The pollution caused by the new plant would remain below the limits imposed by Legislative Decree
No 372 of 4 August 1999, which transposed into Italian law Directive 96/61/EC concerning
integrated pollution prevention and control. The environmental improvements obtained using the
new process are shown in the table below:

Environmental impact: old plant

Legal limit

Environmental impact: new plant

Smoke and dust in air: 14 mg/m3
iron oxide mixed with
Dust of
stearate: 3 100 t/year

Dust: 10 mg/Nm3

Smoke and dust in air: none
Waste dust of
with stearate: none

iron oxide mixed

Noise in the workplace: 97 dBA

Noise: 85 dBA

Noise in the workplace: 85 dBA

Noise at boundary of plant,
industrial area: 80 dBA

in

Noise: 70 dBA

Noise at boundary of plant,
industrial area: 70 dBA

in

(15) According to Ferriere Nord, the Community guidelines
on State aid for environmental protection (OJ C 72,
1994) prohibit only the authorisation of investment in
new plant which does not lead to any environmental
improvement.
If a new investment does produce an
environmental improvement, the aid becomes legitimate,
in proportion of course to the expenditure for that
purpose (paragraph 3.2.1, p. 6). The firm claims that the
regional authorities have already stated that the costs of
structural works and specific items of plant
(ITL 9
billion) are ineligible, the remaining ITL 11 billion being
the environmental part of the cost of building the plant.

(16) As to the aid intensity, Ferriere Nord claims that the
grant of ITL 1 650 million is equivalent to 15 % of the
eligible costs, which is well below the maximum author-
ised for aid to encourage firms to improve on manda-
tory environmental standards or aid granted in the
absence of mandatory standards.

(17)

By letter dated 4 December 2000, the United Kingdom
Iron and Steel Association stated that the aid should be
assessed under the ECSC rules since there was no
adequate legal and accounting separation between the
EC activities and the ECSC activities. It added that the

(1) The new plant is located in an industrial area of its own, with its
own entrances for the incoming raw material (coiled steel rod) and
the outgoing finished product (electrowelded wire mesh).

purpose of the investment was clearly an economic one
and that therefore the aid should not be allowed.

IV. COMMENTS FROM ITALY

(18)

(19)

The Italian authorities noted in their letter of 3 August
1999 that the new rolling line manufactures electro-
welded wire mesh, a product not covered by the ECSC
Treaty, and that the investment in it is aimed not only at
reducing noise levels but also and essentially at cutting
the amount of waste in the form of iron oxide (about
3 000 tonnes/year).

The Italian authorities also argued that the reduction of
noise levels for the workers is in line with one of the
objectives of Community environmental policy as
defined by Article 174 of the EC Treaty, namely, the
protection of human health. They contended that,
according to Table 12 of
the European Community
programme of policy and action in relation to the envir-
onment and sustainable development (2),
‘No person
should be exposed to noise levels which endanger health
and quality of life’. They also claimed that the fact that
there is a Council Directive on the protection of workers
from the risks related to exposure to noise at work (3)
does not mean that measures to reduce the level of noise
for workers are not environmental measures.

the Council and the Representatives of

the Gover-
(2) Resolution of
nments of
the Member States, meeting within the Council of 1
February 1993, on a Community programme of policy and action
in relation to the environment and sustainable development. A
European Community programme of policy and action in relation
to the environment and sustainable development
(OJ C 138,
17.5.1993, p. 1).

(3) Council Directive 86/188/EEC of 12 May 1986 on the protection of
workers from the risks related to exposure to noise at work (OJ L
137, 24.5.1986, p. 28).

28.11.2001

EN

Official Journal of the European Communities

L 310/25

(20) As to the compatibility of the aid with the Community
rules, the Italian authorities considered that the aid is in
line with paragraph 3.2.1 of the Community guidelines
on State aid for environmental protection since the new
plant is not intended to create or replace the production
capacity of existing plant but solely to enable an innova-
tive production process which considerably reduces
noise and eliminates waste in the form of iron oxide; on
the other hand, some of the expenses (structural and
general equipment) have already been considered by the
Region of Friuli-Venezia Giulia as not being eligible for
aid.

(25)

In the present case, the Commission notes that, although
Ferriere Nord SpA is a single firm which does not keep
separate accounts for its various activities (2), the aided
investment consists of specific plant which is clearly
identified and physically separate from the other plant
used for the production of ECSC products. The products
manufactured by that unit are downstream of the ECSC
products and belong to a clearly separate market (see
recital 9).

(21)

(22)

Lastly, the Italian authorities argued in their letters of 17
November 1999 and 26 April 2000 that, under the
scheme established by Regional Law No 47/78, which
was approved by the Commission, aid aimed at a quali-
tative improvement in the working environment can be
regarded as eligible.

The Italian authorities did not submit any comments on
the decision initiating proceedings under Article 88 of
the EC Treaty referred to in recital 5. By letter of 15
January 2001, they responded only to the comments
made by the United Kingdom Iron and Steel Association,
insisting that the aid should be assessed under the EC
Treaty.

(26) Accordingly, in line with the abovementioned Decision
1999/720/ECSC (see
the Commission
considers that there is no risk that the aid might benefit
Ferriere Nord SpA's ECSC activities and that it should
therefore be assessed in the light of the EC Treaty.

recital 23),

(27)

The non-repayable grant constitutes State aid within the
meaning of Article 87(1) of
the EC Treaty since it
strengthens Ferrière Nord's position in relation to other
competitors on the intra-Community market. As for its
compatibility with the common market, the following
considerations apply.

(28) When it assesses new investments with environmental
aspects, the Commission has to take a strict approach in
order to prevent firms from receiving aid apparently
intended for environmental expenditure but which in
fact is used to finance investments which would have
been carried out in any event. As recalled above (see
recital 10), it was mainly the Commission's doubts as to
the purpose of
to
initiate the proceedings.

that prompted it

the investment

V. ASSESSMENT OF THE AID

(23) Although Ferriere Nord is an undertaking within the
meaning of Article 80 of the ECSC Treaty because it
manufactures products listed in Annex I to the ECSC
Treaty, the Commission acknowledged in Decision No
1999/720/ECSC of 8 July 1999 on State aid granted by
Germany to Gröditzer Stahlwerke GmbH and its
subsidiary Burg GmbH (1) that ‘the EC Treaty may apply
to aid to non-ECSC activities carried on by an ECSC
undertaking, provided they are clearly separate from the
same undertaking's ECSC activities’.

(24)

Electrowelded wire mesh is not covered by Annex I to
the ECSC Treaty.

(29)

In this respect, although Ferriere Nord has stated that the
old plant presented certain problems and that the new
investment would improve on environmental or
working conditions (see recital 13), simply claiming that
environmental protection was the main aim of
the
investment is not enough to dispel the Commission's
doubts, in particular as regards the fact that it is a brand
new plant
least replace Ferriere Nord's
production capacity, which dates back to the 1970s, and
enhance its competitiveness (the new line, compared
with the traditional electrowelding lines, eliminates the
increases automation, reduces the
cold-drawing phase,
number of manipulations of products and eliminates the
cost of dumping the waste).

that will at

(1) OJ L 292, 13.11.1999, p. 27, paragraph 33.

relates only to investments.

(2) The accounting separation referred to by the firm (see point 13)

L 310/26

EN

Official Journal of the European Communities

28.11.2001

(30)

in the absence of
The Commission considers that,
mandatory standards (1), the claim that environmental
or human health grounds were taken into account when
the decision to build the new line was adopted should be
substantiated by the internal documents drawn up by
Ferriere Nord when it designed the industrial-scale
prototype that it built prior to the investment for which
the aid is intended. The claim could also be substantiated
by other evidence contemporary with the decision to
carry out the investment for which the aid is intended.
However, not a single piece of such evidence has been
provided either by the Italian authorities or by Ferriere
Nord, although the Commission had pointed out that no
evidence had been provided on this matter. The
Commission therefore concludes that the positive effects
on working conditions or the environment are simply
side effects of the investment which were not even taken
into account when the investment decision was taken.

investment

structural and general equipment, this would imply that
the entire investment cost is eligible for aid. According
to point 37 of the current Community guidelines on
State aid for environmental protection,
‘eligible costs
must be confined strictly to the extra investment costs
necessary to meet the environmental objectives’. Where
the cost of
in environmental protection
cannot be easily identified in the total cost, as Ferriere
Nord claims, the Commission should take into account
‘the cost of a technically comparable investment that
does not, though, provide the same degree of environ-
mental protection’. It does not seem possible, however,
to calculate that cost as the limited environmental bene-
fits are intrinsic to this innovative and original plant and
any other electrowelding plant that eliminates the cold-
drawing phase would obtain the same environmental
results. Nor has any deduction been made for the
savings generated by the investment (not even the elimi-
nation of the costs of dumping the waste). The aid
cannot therefore be regarded as complying with the
current Community guidelines on State aid for environ-
mental protection.

(31) On this point, the current Community guidelines on
State aid for environmental protection (2) define envir-
onmental protection as ‘any action designed to remedy
or prevent damage to our physical surroundings or
natural resources’ (point 6). Accordingly, they require
that investments in buildings, plant and equipment be
intended to reduce or eliminate pollution and nuisances
(point 36) and that eligible costs be confined strictly to
the extra investment costs necessary to meet the envir-
onmental objectives (point 37) (3). As stated above, the
Commission considers that Ferriere Nord's investment
was driven only by economic considerations and that
any environmental improvement is simply a necessary
consequence of the firm's choice of production process.
For the rest,
it is normal for new plant to be more
efficient environmentally than plant that is at least 25
years older.

(33) As regards the benefits to the health and safety of
workers in the form of noise reduction, they cannot be
regarded as inherent in environmental protection as they
are mainly related to worker protection. In any event,
although action taken within plants or other production
units to improve safety or hygiene is important and may
be eligible for certain types of aid (4), in the present case
the benefits for the health and safety of workers are only
a marginal consequence of a productive investment
which would have been carried out in any event and for
which State aid does not therefore appear to be justified.

(32)

In any case, if it was accepted that the protection of the
environment was the main aim of the investment, the
argument put forward by the Italian authorities that the
aid is proportional to the improvement in the environ-
ment cannot be accepted because, with the exception of

(1) Contrary to the company's contentions in its letter of 10 November
limits exist for this kind of

2000 (see point 14), no specific legal
plant.

(2) OJ C 37, 3.2.2001, p. 3. They are applicable to the present case by

virtue of point 82.

(3) These criteria do not differ from those in paragraph 3.2 of

the
Community guidelines on State aid for environmental protection in
force when the Commission decided to initiate proceedings, which
excluded from their scope aid ostensibly intended for environmental
protection measures but which is in fact for general investment (OJ
C 72, 10.3.1994).

(34) As regards the argument put forward by the Italian
authorities that the scheme had been approved by it, the
Commission notes that, under the approved scheme, aid
can be granted in order to comply with new standards
established by sectoral laws (see footnote 3). The Italian
authorities acknowledged both in the notification and in
their letter of 4 May 2000 that there are no mandatory
environmental standards. The aid cannot therefore be
regarded as an individual application of an approved
scheme.

(4) Point 6 of the current Community guidelines on State aid for envi-

ronmental products.

28.11.2001

EN

Official Journal of the European Communities

L 310/27

(35)

Lastly, the Commission notes that the area where the
investment is carried out is not eligible for regional aid
and the firm is not an SME. The measure therefore does
not qualify for any of the exceptions in Article 87 of the
EC Treaty.

VI. CONCLUSION

(36) Accordingly, the State aid that Italy intends to grant to
Ferriere Nord for investments in a new plant for electro-
welded wire mesh is incompatible with the common
market,

The aid measure may accordingly not be implemented.

Article 2

Italy shall
inform the Commission, within two months of
notification of this Decision, of the measures taken to comply
herewith.

Article 3

The procedure initiated under Article 6(5) of Decision No
2496/96/ECSC in respect of aid C 35/99 — Italy — Ferriere
Nord is hereby terminated.

HAS ADOPTED THIS DECISION:

This Decision is addressed to the Italian Republic.

Article 4

Article 1

Done at Brussels, 28 March 2001.

The State aid of ITL 1 650 million which Italy is planning to
grant to Ferriere Nord for investments in new plant for the
production of electrowelded wire mesh is incompatible with
the common market.

For the Commission

Mario MONTI

Member of the Commission