2002/132/EC: Commission Decision of 25 April 2001 on State aid granted by France to the shipyard ACHCN (Text with EEA relevance) (notified under document number C(2001) 1143)
Date: 2001-04-25
Institutions: European Commission
Subjects: France, State aid, application of EU law, cessation of trading, control of State aid, shipbuilding

19.2.2002

EN

Official Journal of the European Communities

L 47/37

COMMISSION

COMMISSION DECISION

of 25 April 2001

on State aid granted by France to the shipyard ACHCN

(notified under document number C(2001) 1143)

(Only the French text is authentic)

(Text with EEA relevance)

(2002/132/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 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 88 of the Treaty, and in particular Article 7 thereof (2),

Having called on the interested parties
comments pursuant to that Article (3),

to submit

their

Whereas:

I. PROCEDURE

(1)

(2)

At the beginning of 1998, following persistent and alar-
mist reports on the situation at Ateliers et Chantiers du
Havre Constructions Navales (hereinafter ACHCN), the
Commission sent the French authorities a request for
information, initially by letter dated 12 June 1998. This
request was answered with a holding letter. Eventually,
in October, following another request from the Commis-
sion, the French authorities sent a reply by letter dated
30 November 1998.

The information stated that ACHCN had not been in
control of the industrial process and had been unable to
assess the financial impact of the difficulties, which had
prompted the authorities to release additional emergency

(1) OJ L 202, 18.7.1998, p. 1.
(2) OJ L 83, 27.3.1999, p. 1.
(3) OJ C 113, 24.4.1999, p. 7.

(3)

(4)

(5)

aid in order to ensure that the orders were completed.
The total amount of aid that the French Government
was preparing to grant ACHCN was estimated at
FRF 1 868 million.

the Commission
By letter dated 4 February 1999,
informed France of its decision to initiate proceedings
under Article 88(2) of the EC Treaty in respect of the
aid.

The Commission decision to initiate proceedings 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.

II. BACKGROUND

tankers
In carrying out an order for three chemical
obtained from Stolt Nielsen in 1995 for a total amount
of FRF 1 126 million, the shipyard ACHCN encountered
serious difficulties at the beginning of 1997. The firm
had hoped to overcome its organisational difficulties by
reducing its workforce by 15 % and cutting capacity by
reducing the size of its building berths. At the financial
level, cash flow was to have been maintained by the
immediate release by the French Government of aid for
the order for the three chemical tankers, pursuant to
Article 4 of Council Directive 90/684/EEC of 21
December 1990 on aid to shipbuilding (4) in force at the
time, and the aid provided for in the plan for upgrading
the French shipbuilding industry, approved by the
Commission in July 1995. In addition, aid to cover the
social aspects of the restructuring was to have been
granted,
following a notification in February 1997
which the Commission approved in December 1997.

(4) OJ L 380, 31.12.1990, p. 27.

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(6)

The three aid packages for which the shipyard was
eligible at the time of the order, i.e. at the end of 1995,
amounted to a total of FRF 318 million, broken down
as follows:

steel sheet and quality specifications imposed by the
shipowner with which the yard had never previously
had to deal.

(i) contract-related aid: FRF 111,4 million (9 % of

contract price before aid);

(11)

(ii) aid to upgrade French shipyards, authorised by the
Commission in July 1995: FRF 207,5 million.

There was also restructuring aid of FRF 21,8 million,
provided that it was allocated to the social plan.

The authorities considered, however, that there was no
early warning of a subsequent deterioration, a view
supported by the accounts payable which show that at
in control of the
the end of 1996 the yard was still
situation and, even in 1997, when the restructuring plan
referred to in recital 5 was notified, productivity gains at
the yard should have helped to restore the situation
since the building delays could be attributed to tempo-
rary hitches. They also stated that their intervention had
been intended to prevent
the sudden bankruptcy of
ACHCN which could have caused serious social unrest,
given the yard's importance to the industrial fabric of Le
Havre.

(12) As the situation had altered since the French authorities'
first reply to the Commission in November 1998, they
also supplied the following information:

(i) the first vessel, which should have been delivered
originally in July 1997, a deadline which was then
postponed by agreement to 31 October 1998, was
eventually delivered only in June 1999. Because of
the delay, the owner was able to apply the rejection
clause. In the absence of another buyer, the price
paid was the current market price at the time of
delivery, i.e. USD 53 million instead of the contract
price of USD 73 million;

(ii) as regards the other two vessels, the yard decided in
January 1999 to halt the construction of the third
tanker of which only a few hull sections had been
manufactured. The cost of completing the tanker,
given productivity in the yard, would have exceeded
the possible price paid by the owner; ACHCN
accordingly concluded that it was industrially impos-
sible to build the vessel. As regards the second
tanker, it was decided to carry on building it to the
launch stage and to find a yard outside France which
could complete it. At 1 June 1999, the hull was
90 % completed and its launch was planned for
October 1999. The decision was based on the need
to remove an incomplete hull from a patent slip
located right in the centre of the port of Le Havre
since it would otherwise have had to be demolished,
at a price.

(13) As the total loss on the order suspended in June 1999
would thus have totalled FRF 2 033 million, ACHCN
decided to halt
shipbuilding activities and ask the
authorities to finance a total and irreversible closure
plan, consisting of three parts.

III. DESCRIPTION

(7)

In initiating the Article 88(3) procedure in January
1999, on the grounds that the shipyard estimated that
its losses on the order would be FRF 1 868 million and
that the loss would be covered by public resources well
in excess of the amounts already authorised by it, the
Commission considered that such aid constituted oper-
ating aid not offset by any factor that could have justi-
fied it under the provisions in force on aid to ship-
building.

(8)

The Commission asked the French authorities
to
provide, in addition to their comments, the following
information:

(i) a complete breakdown of the company accounts,
including all aid payments made since the signing of
the contract with Stolt Nielsen;

(ii) a copy of the contract in question;

(iii) details of the construction of the last two tankers in

terms of value and progress of work.

IV. COMMENTS FROM THE FRENCH AUTHORITIES

(9)

(10)

The French authorities
supplied detailed company
accounts for the years up to and including 1997,
accounts payable at 30 June 1999 and a copy of the
contracts and their amendments. As regards the progress
of work on the tankers, the first was being completed,
the hull of the second was 80 % completed and only a
few components of the third had been assembled.

the

In their comments, the French authorities detailed the
events that had resulted in ACHCN not being in control
of the industrial process or the financial position. In
shipyard, despite having considerable
essence,
know-how in the field of shipbuilding, had been unable
to meet an overly ambitious challenge, having launched
itself into building a type of vessel of which it had no
experience. In addition to the lack of experience there
had been external problems such as delays in supplies of

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(14)

(15)

the first part,

For
covering the losses as follows:

the French authorities suggested

(i) FRF 111,4 million accounting for 9 % of contract-
related aid (already authorised under the aid scheme
in force) and FRF 207,5 million accounting for
other aid approved by the Commission (1995
upgrading plan and 1998 restructuring plan);

(ii) FRF 1 714,1 million of closure aid. The aid was
intended to finance the completion of
the first
tanker and work on the second tanker up to the
launch stage.

The second part concerns social aid and consists in the
implementing of a social plan for the entire ACHCN
workforce, i.e. 692 employees on open-ended contracts.
The statutory redundancy procedure under the Labour
Code was initiated in August 1999. The State provided
the firm with the necessary funds to cover the expendi-
ture which the latter would normally have borne,
ACHCN being in a state of virtual bankruptcy and hence
incapable of financing the plan. The measures included
redundancy benefit, compensation in lieu of notice,
mobility aid, recruitment aid, retraining leave,
imple-
mentation of retraining and early retirement agreements,
financing of a retraining cell and other possible benefits.
The initial budget was FRF 270 million, adjusted
according to the number of workers benefiting from
each measure. Out of a total workforce of 692 persons,
the departures were staggered as follows:

Date

Redundancies

August 1999

October 1999

November 1999

December 1999

June 2000

400

100

100

50

42

(16)

the direct and indirect

The third part provides for reindustrialisation measures
designed to offset
job losses
caused in Le Havre by the closure of the shipyard. As
major industrial development programmes were due to
start very shortly in the Le Havre area, especially in the
port of Le Havre (Port 2000 project), the main task was
to ensure the urgent allocation to the Le Havre area of
the appropriations earmarked for small firms and indus-
tries in SME and SMI development funds (FDPMI) and
the PAT grant scheme for assisting employment in small

firms. All
schemes already authorised by the Commission.

the proposed measures are covered by

(17)

Lastly, the French authorities reported that ACHCN had
undertaken to sell all its assets in step with the reduction
in the workforce and to transfer the proceeds to the
French Treasury in repayment, albeit
inevitably only
partial, of the restructuring aid granted by the State.
Thus the entire production facilities of the shipyard will
be disposed of.

V. ASSESSMENT OF THE AID

(18)

The measures in question constitute aid within the
meaning of Article 87(1) of the EC Treaty inasmuch as
they distort competition by favouring ACHCN and ship
production.

(19) As they concern a shipyard, they must be assessed under
Regulation (EC) No 1540/98, Article 4 of which
provides that aid to defray the normal costs resulting
from the total or partial closure of shipbuilding, ship
repair or ship conversion yards may be considered
compatible with the common market provided that the
resulting capacity reduction is of a genuine and irrever-
sible nature.

(20)

In view of
the commitments given by the French
Government regarding the definitive closure of the yard,
which has in the meantime become a reality with the
complete cessation of business, the departure of workers
according to schedule and the auctioning of the firm's
entire installations, it must be concluded that there has
been a complete and irreversible closure and the aid
should be considered in that light.

(21)

From a social standpoint, the costs possibly eligible for
aid include the following:

(i) benefits paid to workers made redundant or retired

before legal retirement age;

taking early retirement,

(ii) the costs of counselling services for workers made
redundant or
including
payments made by the yard to facilitate the
setting-up of small businesses which are indepen-
dent of the shipyards in question and whose activi-
ties are not principally shipbuilding, ship repair or
ship conversion;

(iii) payments to workers for retraining.

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(22)

the

allocated,

The budget of FRF 270 million provided for in the
social aid section communicated by the French authori-
ties covers the type of expenditure referred to in recital
21, whilst
average
amount
FRF 390 000 per worker,
is in line with amounts
already granted in France in similar circumstances.
When the three Normed shipyards were closed in 1987,
the level of aid to cover the social plan, entirely financed
by the French Government and approved by the
Commission, was practically identical. Accordingly, the
measures contained in the social plan can be regarded as
compatible with the common market.

on

(23) Article 4(2) of Regulation No 1540/98 states that expen-
diture incurred for the redevelopment of the yard, its
buildings, installations and infrastructure for use other
than shipbuilding, ship repair and ship conversion are
among the costs eligible for closure aid.

(24) Accordingly, provided that, as the French authorities
stated, the industrial development programme for the Le
Havre region receives support under schemes already
authorised by the Commission, the proposed reindus-
trialisation measures are also compatible with the
common market.

(25) Article 4(3) of Regulation No 1540/98 specifies that, in
the case of firms which totally cease shipbuilding, ship
repair or ship conversion, loans or loan guarantees for
working capital needed to enable the firm to complete
unfinished work may also be deemed compatible with
the common market, provided that this is kept to the
minimum necessary and a significant proportion of the
work has already been done.

(26) Article 4(4) states that the amount and intensity of aid
must be justified by the extent of the closures involved,
account being taken of the structural problems of the
region concerned.

(27)

(28)

The final balance of non-notified aid intended to offset
to
the
the
FRF 1 714,1 million.

shipyard amounts

incurred by

loss

The Commission notes that the State aid complies with
Article 4(3) and (4) of the Regulation, primarily because
the aid was used only as working capital to allow the
yard to complete unfinished work. Only one of the
tankers had been completely finished and the construc-
tion of the second was strictly limited to what was
necessary to allow the vessel to leave the yard. Thus the
shipyard was able to remove a partially built vessel
which would otherwise have had to be broken up; at the

(29)

(30)

(31)

same time it allowed the workforce of the firm, which
held a key position in the industrial fabric of Le Havre,
to be cut back gradually.

The aid granted cannot be regarded as non-repayable aid
as the French Government granted it only on condition
that the entire proceeds from the liquidation of the yard
at public auction should be paid into the public purse.

It must therefore be concluded that the aid constituted
an advance subordinated to the payment of the entire
proceeds from the liquidation of the firm and, to the
extent that the proceeds from the sale of the installations
failed to match the full amount of the advance, the aid
may be justified by the fact that the yard will be irrever-
sibly closed without any possibility of reactivation as all
the equipment will have been sold.

VI. CONCLUSION

The Commission concludes that the assistance granted
by the French Government for the closure of Ateliers et
Chantiers du Havre Constructions Navales, comprising
aid for a social plan amounting to FRF 270 million and
aid to complete ongoing work amounting to FRF 1 714
is compatible with the common market. The
million,
Commission has already noted that the French Govern-
ment will be refunded part of the aid granted by trans-
ferring to the public purse the proceeds from the sale of
the yard's installations,

HAS ADOPTED THIS DECISION:

Article 1

The State aid of FRF 270 million granted by France to ACHCN
to enable it to carry out the social plan and the closure aid of
FRF 1 714 million are compatible with the common market.

This Decision is addressed to the French Republic.

Article 2

Done at Brussels, 25 April 2001.

For the Commission

Mario MONTI

Member of the Commission